For UPSC CSE aspirants, analyzing editorials from The Indian Express is essential to build a comprehensive understanding of current affairs, policy debates, and socio-economic challenges. Here’s a structured breakdown of the editorial themes covered on February 06, 2025, tailored for UPSC preparation:
1. Justice Shekhar Yadav’s defiance, a challenge to the Supreme Court Collegium
Controversial Remarks & Judicial Responsibility
- Justice Shekhar Kumar Yadav of the Allahabad High Court made communal and objectionable remarks against Muslims at a VHP event (Dec 8, 2024, Prayagraj).
- His speech questioned Muslim personal laws, drawing comparisons with Hindu reforms.
- Judgeship is not a blank cheque—it demands constitutional responsibility and impartiality.
Supreme Court’s Response & Institutional Reactions
- His remarks caused uproar in Parliament, leading 55 Rajya Sabha MPs to seek impeachment proceedings.
- The Supreme Court Collegium reportedly summoned him, asking for a public apology.
- The Allahabad High Court Chief Justice, on instructions from the CJI, sought his explanation.
- Justice Yadav refused to back down, claiming he had not violated judicial conduct.
Constitutional Breach & Majoritarianism
- He allegedly stated that India should function as per the majority community’s wishes.
- His rhetoric aligns with Hindu Rashtra advocates, directly contradicting the Constitution’s secular principles.
- The Constitution demands equality, liberty, and fraternity, but his comments fuel division.
- His oath binds him to uphold constitutional values, not religious or ideological biases.
The Supreme Court’s Dilemma & Judicial Integrity
- Justice Yadav’s defiance challenges the Supreme Court’s authority.
- Options before the judiciary include internal inquiry, curtailing his judicial work, or impeachment.
- Former SC Justice Hrishikesh Roy highlighted the need for accountability in such cases.
- If left unchecked, such incidents risk politicizing the judiciary, undermining public trust.
Conclusion: The Judiciary Must Act
- Justice Yadav’s statements violate constitutional ethics and judicial neutrality.
- The Supreme Court must take decisive action to uphold judicial integrity.
- As Baron de Montesquieu warned: “There is no tyranny crueller than that which is perpetuated under the shield of law and in the name of justice.”
2. The case for easing banking regulations
India’s GDP is expected to grow from $3.7 trillion in 2023-24 to $7 trillion by 2030-31. Achieving this goal will require an investment of approximately $2.5 trillion, which translates to an investment-to-GDP ratio of 34%. The government’s deficits limit investment capabilities, while the private sector and households remain net savers.
Lack of Private Sector Investment
Private sector investment has slowed, with the investment-to-operating cash flow ratio dropping to 56% in 2023-24 from 114% in 2008-09. This slowdown is attributed to factors like uncertainty caused by geopolitics and a lack of confidence in future demand.
Role of Personal Savings and Investments
Personal savings, including overseas investments, need to be incentivized. With overseas flows muted, there is a need to improve capital and financial intermediation efficiency.
Credit Disparities: MSMEs vs. Large Corporates
While large corporates use their surplus, equity markets, bond markets, and bank credit, MSMEs have not received their fair share of credit. This is exacerbated by the shift of household savings away from banks, which now receive less than 40% of deposits compared to 50% previously.
Preemptions in Banking Regulations
Over the past two years, banks have purchased Rs 13 trillion of G-Secs against a deposit inflow of Rs 40 trillion, driven by regulatory requirements like the Liquidity Coverage Ratio (LCR) and Statutory Liquidity Ratio (SLR). These regulations tie up a significant portion of bank resources, reducing the lendable funds available and increasing lending rates.
Examination of LCR and SLR
There is a question of whether both LCR and SLR are necessary. Globally, only LCR exists, with most countries treating the Cash Reserve Ratio (CRR) as High-Quality Liquid Assets (HQLA). A re-examination of these regulations is needed on a bank-specific basis.
Impact of Government Liquidity Management
More efficient cash management by the government has reduced overall liquidity in the banking system. Variations in government surpluses can lead to significant swings in systemic liquidity, impacting banks’ operations.
Priority Sector Lending (PSL) Framework
The PSL framework, drafted years ago, needs to be updated to reflect changes in GDP composition and new priorities. It is also important to ensure that PSL pricing reflects credit risk and not simply the need to meet regulatory targets.
Cash-flow-Based Lending and Risk-Based Pricing
Shifting to cash-flow-based lending and risk-based pricing could help bring large sections of the population into organized finance. Technological advancements and AI could support supervision, allowing better monitoring of risks and lending practices.
Credit Growth and Review of Banking Regulations
The slower credit growth compared to nominal GDP growth is a concern. An in-depth review of banking regulations, market liquidity, and credit policies is required to foster growth and ensure the efficiency of the banking sector.
Easing Banking Regulations for Liquidity and Currency Management
Defending the rupee when its weakness is due to the strength of the dollar can result in reduced liquidity and an overvalued currency. The banking system’s regulatory preemptions need to be revisited to ensure better liquidity management and growth potential.
Credit-to-Deposit Ratio and Pricing for Risk
The credit-to-deposit ratio and its purpose should be examined. Banks need to raise both debt and equity to fund growth and should be allowed to price risk appropriately, which would provide them with the resources to lend effectively.
Investment in Technology and Recovery of Costs
Technology investments by global and Indian banks are substantial, with banks spending around 5% of annual expenditures on tech. Moreover, banks need to recover costs related to their social responsibilities, such as not charging for UPI transactions and maintaining infrastructure for their services.
The Government Bond Market
India’s government bond market is ranked third in emerging markets but has a smaller share in global indices compared to countries like Indonesia. This makes the case for easing banking regulations to stimulate growth in this sector.
Enhancing Liquidity in the Derivatives Market
Although the cash market has adequate liquidity across the yield curve, the derivatives market needs more liquidity. A nudge from regulators to large investors to incorporate derivatives alongside cash instruments would foster market development.
3. In India, a turning point for innovation
Shift in Innovation Policy: India is transitioning towards allocating public funds to private universities and firms for cutting-edge research, as this model promises better utilization of taxpayer money.
Historical Background: Initially, innovation in India was largely centered around the state, with organizations like Tata Institute of Fundamental Research (TIFR) and Bhabha Atomic Research Centre (BARC) being brought under government control. This approach delivered some successes, such as the 1974 nuclear test.
Need for Intellectual Capabilities: There is a growing realization that intellectual power should reside in both individuals and private organizations, not just government entities. Private firms’ intellectual capabilities are essential for India’s economic growth and high GDP, with engineers and researchers in these organizations contributing to national progress.
Global Examples: The article draws comparisons with other countries, like the US and France, where private firms play a significant role in research funded by the government. For instance, NASA contracts out 80% of its budget to private firms and universities, and the Jet Propulsion Laboratory (JPL) plays a crucial role in NASA’s space exploration.
Indian Pride and Societal Benefits: While Indians take pride in their contribution to ISRO’s moon missions, the article argues that placing knowledge in private firms will have even greater societal benefits.
Foundations of Science Policy: A paper published in December 2024 by the authors outlines the importance of directing taxpayer resources to private firms and universities. It draws from public economics, public administration, and law to suggest how this contracting-out model can be successfully implemented in India.
Benefits of Private Firms in Research: Private firms, like those working on automobile components, are motivated to conduct high-quality research because their success depends on it. The knowledge they generate spills over into their business success, benefiting the economy.
New Developments in Indian Science Policy:
- Anusandhan National Research Foundation (ANRF) is set to allocate Rs 2,800 crore annually for research grants to private organizations.
- The Indian government has committed Rs 20,000 crore for private sector-driven research, as announced in the 2024 budget.
- ISRO is moving towards purchasing launch vehicles made by private firms, with taxpayer money supporting cutting-edge engineering for global competitiveness.
Support for AI and Technology: The Ministry of Electronics and Information Technology (MEITY) has procured 18,693 GPUs to deepen AI knowledge in India. Instead of investing in government-run organizations like IITs, the equipment is being provided to private IT infrastructure firms for research at a nominal cost.
A Turning Point for Indian Science Policy: With these significant developments, 2025 is poised to be a transformative year for India’s innovation ecosystem. The focus is shifting from hiring civil servants for research to directing public funds to private universities and firms where innovative knowledge is produced.
Challenges in Implementation: Contracting out public resources for research is not straightforward. Unlike purchasing tangible goods, research funding involves inherent risks. As the article concludes, the puzzle lies in finding ways to implement this new paradigm effectively, requiring legal changes, strategic thinking, and proper planning.
In summary, India is on the brink of a major shift in how it supports innovation, by embracing private sector participation in research, which is expected to lead to greater societal gains and global competitiveness.
4. Trump, tariffs and a trade war with China
The United States has embarked on a path of muscular nationalism, with its opening salvo being the unleashing of a trade war. The focus of this battle has been on two of the US’s biggest trading partners—Canada and Mexico. The Trump administration has announced 25 percent tariffs on all imports from these countries, with a 10 percent lower rate on energy imports from Canada. These tariffs were initially scheduled to take effect on February 4 but have been postponed for 30 days.
Why is the US Doing This? The reason behind these tariffs is multi-faceted:
- Security Concerns: The ostensible reason for imposing tariffs on Canada and Mexico is to push them to reduce the flow of illegal drugs and immigrants across their borders into the US. However, this reasoning is questionable. Canada has a very small share of illegal drugs and immigrants entering the US compared to Mexico. Canadian officials have expressed frustration over the lack of clarity from the US about what actions would lead to the withdrawal of the tariffs.
- Economic Power and Revenue Needs: The more likely reasons are President Trump’s longstanding preference for tariffs as a marker of economic power and the federal government’s desperation for additional revenues. With the expiration of tax cuts in 2025 and the need for funds to extend them, tariffs could play a key role in addressing the revenue shortfall.
The Role of Tariffs in the US Budget President Trump’s administration has set a goal of extending the tax cuts from the Tax Cuts and Jobs Act of 2018. However, doing so would add a hefty $4.6 trillion to the US federal budget deficit over 10 years. To make up for the revenue gap, tariffs could generate significant income. The US imports around $4 trillion worth of goods annually, with Mexico, Canada, and China making up almost 42 percent of total imports. With tariffs in place on imports from these countries, the US could raise over $320 billion annually. Additionally, President Trump has hinted at imposing tariffs on the European Union, potentially bringing the total tariff revenue up to $480 billion.
Potential Risks and Challenges While the tariff strategy could raise significant revenue, several factors could undermine it:
- Consumer Impact: If the tariffs are passed on to consumers, demand for goods could fall, reducing tariff revenue. This is especially likely as importers and exporters find alternative sources and destinations for goods.
- Rising Prices: Due to extensive supply chain links between the US, Canada, and Mexico, tariffs could lead to higher prices for consumers. This could become a political issue, especially as the cost of living was a major concern in the 2024 election. If tariffs persist, political opposition may increase.
- Retaliation: Countries subjected to tariffs typically retaliate. Canada and Mexico have already imposed tariffs on US exports, and this could harm US exporters, as these countries account for over 33 percent of total US exports. Retaliation could make the situation politically difficult to sustain.
The Likely Outcome Given the factors at play, the most likely scenario is that President Trump will keep the threat of tariffs alive for the next few months to project optimistic budget revenues that can “finance” the extension of tax cuts. Once Congress passes the budget bill, the administration will likely look for ways to de-escalate, possibly by pointing to symbolic concessions from Canada and Mexico. However, the trade war with China is expected to be a longer affair, and this issue will likely persist in the years to come.
In summary, while the tariffs imposed on Canada and Mexico may be part of a short-term strategy to project strong revenue figures, the longer-term consequences, including potential political and economic costs, may lead to changes in the US’s approach. The China trade war, however, is likely to remain a more enduring conflict.
Disclaimer:
This analysis is based on the editorial content published in Indian Express and is intended solely for informational and educational purposes. The views, opinions, and interpretations expressed herein are those of the author of original article. Readers are encouraged to refer to the original article for complete context and to exercise their own judgment while interpreting the analysis. The analysis does not constitute professional advice or endorsement of any political, economic, or social perspective.
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