Stress in Microfinance

For Prelims: Microfinance institutions, Non-performing assets, Reserve Bank of India, Self Employed Women's Association, National Bank for Agriculture and Rural Development  

For Mains: Challenges and reforms in the Microfinance Sector, Financial Inclusion and its role in rural development 

Source:FE 

Why in News?  

India’s microfinance institutions (MFIs) are facing a major crisis as gross non-performing assets (NPAs) surged to 16% by March 2025, nearly doubling from 8.8% in 2024. As defaults rise, lenders are pulling back, and regulatory interventions are raising concerns about the sector’s sustainability. 

What are the Factors that led to Rise in NPAs in MFIs? 

• Cyclical Nature of Microfinance: MFIs have traditionally followed a cyclical pattern, with crises occurring every 3-5 years, and the current situation fits this historical trend. 
  • However, deeper structural issues like rising loan defaults driven by economic slowdown (GDP at a 4-year low of 6.4% in 2024–25), natural disasters (heatwaves, floods), and election-related disruptions, impacted borrowers’ repayment capacity. 
• Over-Leveraging of Borrowers: In an effort to expand rapidly, MFIs have increasingly sanctioned loans to borrowers with already high levels of debt. This has led to an over-leveraged customer base, unable to keep up with repayments. 
  • Many MFIs have been lenient in evaluating the borrowers' repayment capacity, focusing more on volume rather than assessing the financial health of individual borrowers. 
  • Borrowers, particularly in rural areas, often take loans from multiple MFIs and other sources, compounding their debt burden and heightening the likelihood of defaults. 
    • The rise in credit card outstanding, from Rs 2.30 lakh crore in 2023 to Rs 2.71 lakh crore in 2024, highlights a broader trend of rising consumer debt.  
• Weakening of the Joint Liability Group (JLG) Model: The JLG model, central to microfinance operations, relies on social pressure and collective responsibility for loan repayment.  
  • However, it is becoming less effective due to changing borrower profiles, weakened group cohesion, and rising individual defaults. 
• Rising Regulatory Pressure: The Reserve Bank of India (RBI) has imposed stricter lending norms and restrictions, such as curbing aggressive lending practices. While these actions aim to stabilize the sector, they have also led to short-term liquidity crunches for MFIs. 
  • State governments have started passing laws to curb coercive recovery methods by microfinance lenders, including harsh penalties for non-compliance. 
    • For instance, the Tamil Nadu Assembly passed the Money Lending Entities (Prevention of Coercive Actions) Act, while Karnataka proposed severe punishments for lenders causing undue hardship to borrowers. 
  • Additionally, Campaigns like Karja Mukti Abhiyan (loan waiver schemes) have weakened the repayment culture, as borrowers anticipate government debt forgiveness, leading to higher defaults.

What is Microfinance?

• About: Microfinance, also known as microcredit, refers to the provision of financial services such as small loans, savings accounts, insurance, and fund transfers to underserved populations, particularly in rural and remote areas. 
  • It is aimed at empowering marginalized and low-income communities, particularly women, to become financially self-sufficient and contribute to socio-economic development. 
• Importance of Microfinance: It is a tool for reducing poverty by providing access to financial resources for income-generating activities.  
  • Microfinance supports small-scale businesses, boosting local economies and employment, especially in rural areas.  
    • Over the past three decades, it has improved living standards for nearly 100 million rural households in India. 
  • Microfinance promotes gender equality by empowering women financially.  
    • In 2022-23, India’s microfinance sector added 80 lakh new women clients, reaching a total of 6.64 crore women with 12.96 crore active loans by 2023, as per the India Microfinance Review FY23 report. 
• Microfinance in India: Microfinance in India began with the establishment of the Self Employed Women's Association (SEWA) Bank in 1974 in Gujarat, which aimed to provide financial services to low-income women excluded from formal banking.  
  • In 1992, National Bank for Agriculture and Rural Development (NABARD) introduced the Self-Help Group (SHG)-Bank Linkage Programme, enhancing small-scale savings and access to credit for women.  
  • In 2011, the RBI recognized microfinance as a priority sector, granting policy support to MFIs.  
  • However, the Andhra Pradesh microfinance crisis in 2010, caused by aggressive lending practices, led to increased scrutiny and the formation of the Malegam Committee (2010) to regulate Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs).  
  • In 2015, the launch of MUDRA Bank under the Pradhan Mantri Mudra Yojana (PMMY) further strengthened the microfinance ecosystem by providing credit to small, non-corporate enterprises. 
• Current Status Microfinance in India: MFIs currently operate in 28 states, 8 Union Territories and 730 districts in India. 
  • The microfinance industry grew 16% in FY 2023-24, compared to 21% in 2022-23. By March 2024, the sector's combined portfolio reached Rs 4.08 lakh crore. 
  • As of 2024, the top five states with the highest loan outstanding in the microfinance sector are Bihar, Tamil Nadu, Uttar Pradesh, Karnataka, and West Bengal. These states collectively account for approximately 58% of the industry's total portfolio.  

 

How Can Microfinance Institutions Address the Crisis and Ensure Long-Term Sustainability? 

• Adopt Holistic Triad Model: MFIs should adopt holistic models like Basix's Triad Model, which integrates livelihood promotion, financial services, and institutional development.  
  • It focuses on providing skills training, market linkages, and insurance, key elements missing in credit-only models. 
  • The Triad Model ensures microloans are used for income-generating activities, not for non-productive purposes, which can help prevent over-indebtedness and ensure financial progress. 
• Improve Credit Rating: Improve credit scoring systems by prioritizing outcomes such as economic stability and household income improvement, rather than just repayment rates and portfolio growth.  
  • This shift will ensure that financial institutions not only remain financially sound but also contribute meaningfully to borrowers' lives. 
• Shift Towards Individual Credit Appraisals: Moving away from the group-based JLG model and introducing individual credit assessments could reduce NPAs. 
• Use of Technology for Risk Mitigation: Adoption of real-time data tracking, KYC (Know Your Customer) verification, and secure loan management platforms such as end-to-end Loan Origination Systems (LOS), Loan Management Systems (LMS) through open APIs will significantly improve service delivery.  
  • The adoption of big data analytics can enhance risk assessment and improve credit underwriting, potentially reducing defaults. 
• Revamping Collection Practices: While legal measures to prevent coercive practices are necessary, MFIs must also focus on improving customer relationships and collections strategies. 
  • Engaging borrowers through communication and support services—rather than intimidation, can build trust and improve repayment rates. 
  • Providing flexible loan products, such as income-based repayments, may help borrowers manage their repayments better. 
• Promoting Financial Literacy: Financial literacy programs for borrowers can help them understand the consequences of non-repayment and improve their ability to manage loans. 

Conclusion

The rise in NPAs in the microfinance sector signals a challenging but cyclical phase driven by internal missteps rather than systemic shocks. With major lenders like SBI continuing to back the sector and pushing for better governance, the sector's resilience will depend on self-correction, regulatory discipline, and continued institutional support. The road to recovery may be long but remains achievable with collective effort. 

Drishti Mains Question: 

“The surge in non-performing assets among Microfinance Institutions reflects deeper structural issues in India’s rural credit delivery model.” Critically examine.

UPSC Civil Services Examination Previous Year Questions (PYQ)  

Prelims:

Q. Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed. The service/ services rendered under microfinance is/are (2011)

1. Credit facilities 
2. Savings facilities 
3. Insurance facilities 
4. Fund Transfer facilities 

Select the correct answer using the codes given below the lists:  

(a) 1 only  

(b) 1 and 4 only  

(c) 2 and 3 only  

(d) 1, 2, 3 and 4  

Ans: (d) 

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Mains:

Q. Can the vicious cycle of gender inequality, poverty and malnutrition be broken through microfinancing of women SHGs? Explain with examples. (2021)

Strengthening India-West Asia Ties

For Prelims: Iran and Israel, West Asian region, United Nations, Strait of Hormuz, Palestinian-Israeli conflict, Gulf Cooperation Council, Comprehensive Economic Partnership Agreements, Belt and Road Initiative, Organization of Islamic Cooperation.   

For Mains: India’s Relation with West Asian Countries, Challenges Related to India-West Asia Relations, Measures can India Adopt to Balance its Relations to Western Asian Countries 

Source: HT 

Why in News? 

West Asia holds major strategic and economic importance for India under the ‘Link West’ policy. India's deepening ties with the countries like UAE, Saudi Arabia, Iran, and Israel reflect its strategic shift to secure energy, enhance trade, and assert its role in West Asian geopolitics. 

How is West Asia Geographically Classified? 

• West Asia is a subregion of Asia, located West of Central and South Asia, South of Eastern Europe, and North of Africa.  
  • It is bordered by major water bodies including the Mediterranean Sea, Persian Gulf, Red Sea, Caspian Sea, and the Gulf of Oman.  
• The region comprises 18 countries, with key subregions like the Arabian Peninsula (e.g., Saudi Arabia, UAE), the Fertile Crescent (e.g., Iraq, Syria), the Caucasus (e.g., Armenia, Azerbaijan), and Anatolia (Turkey).  
• Home to around 283 million people, the region is geopolitically significant due to its vast oil reserves, particularly in the Arabian Peninsula.  
  • Saudi Arabia, with 35 million people, has the region’s largest economy, while Bahrain is the smallest by population. 

India’s Look West Policy: 

Launched in 2005, It aims to enhance India’s political, economic, and security cooperation with West Asia, focusing on energy security, trade, and regional stability, while maintaining neutrality in regional political conflicts. 

• India views the Gulf as part of its extended neighbourhood, with Iran being a key part of its proximate neighbourhood, emphasizing geographic, economic, and cultural ties. 

What is the Significance of West Asia for India? 

• Energy and Economic Ties: West Asia is vital for India’s energy security, supplying nearly 50% of its crude oil. With over 40% of global natural gas reserves and more than 50% of global oil reserves, the region is crucial for India’s oil-dependent economy. 
  • Iraq, a key oil supplier, was India’s fifth-largest trading partner in 2021–22, while Qatar, providing 41% of India’s natural gas imports, plays a vital role in India’s security strategy. 
    • The UAE is India’s 3rd largest trading partner, with trade bolstered by the CEPA, while Saudi Arabia ranks 4th, formalized through the 2019 Strategic Partnership Council.  
• Connectivity & Trade Corridors: West Asia is key to enhancing India’s strategic connectivity. Initiatives like the India-Middle East-Europe Economic Corridor (IMEEC) connect India to Europe, countering China's Belt and Road Initiative.  
  • The International North-South Transport Corridor (INSTC) links India to Central Asia and Russia via Iran's Chabahar Port, supporting India's Central Asia policy.  
  • Vital maritime chokepoints like the Strait of Hormuz and Bab el-Mandeb ensure secure trade and energy flow for India. 

 

• Security & Counterterrorism Cooperation: West Asia is vital for India’s defense, security, and counterterrorism cooperation. India has strengthened ties with nations like Saudi Arabia and the UAE in defense, IT, and counterterrorism efforts.  
  • The rising missile and drone threats from Yemen’s Houthi rebels underscore the region's security vulnerabilities, as demonstrated by the recent Red Sea Crisis. 
  • India's joint military exercises, Desert Cyclone with the UAE and Naseem Al Bahr with Oman, underscore its deepening strategic ties and enhanced interoperability with key Gulf partners. 
• Balanced Multilateral Diplomacy: India-Israel cooperation spans defence, cybersecurity, agriculture, and water management. 
  • India’s participation in mini-lateral initiatives like I2U2 (India, Israel, UAE, US) reflects its focus on interest-based coalitions.  
  • India’s continued engagement in Afghanistan through infrastructure, education, and humanitarian aid supports its regional stability objectives, countering China and Pakistan’s influence in the region. 
• Diaspora and Remittance: West Asia is home to over 9 million Indian expatriates, whose remittances play a vital role in supporting India’s economy.  
  • In 2021, India received around USD 87 billion in remittances, with a major share coming from Gulf Cooperation Council (GCC) countries.  
  • Additionally, the large Indian diaspora enhances India’s soft power and socio-cultural engagement in the region. Eg: BAPS Hindu Temple in Abu Dhabi is the first traditional Hindu stone temple in the Middle East. 

What are the Challenges to India-West Asia Relations? 

• Limited Economic Ties: Although efforts have been made to expand economic relations, trade between India and West Asia remains relatively limited compared to other regions.  
  • For instance, in 2019, India’s total trade with West Asia accounted for only 7.5% of its global trade. 
• Geopolitical Tensions: West Asia is a politically volatile region, and India faces the challenge of navigating these complex geopolitical dynamics, such as maintaining ties with both Israel and Palestine, as well as managing strategic relationships with regional rivals like Iran and Saudi Arabia. 
  • Also, political instability in several West Asian countries, including Syria, Iraq, and Yemen, has had a negative impact on India’s strategic and economic interests in the region.  
• Competition with Other Major Powers: India’s interests in West Asia are influenced by the competing interests of global powers, particularly China, which has been increasing its regional influence. 
  • India’s interests in West Asia are shaped by the growing presence of global powers, particularly China, which has expanded its regional influence through strategic investments in infrastructure and ports, such as the development of the Jebel Ali Port in the UAE and partnerships in Oman’s Duqm Port, posing a challenge to India’s own maritime and economic outreach in the region. 
• Energy Diplomacy Issues: West Asia supplies a significant share of India’s crude oil and natural gas, making it vital to India’s energy security.  
  • Geopolitical instability or conflict in the region could disrupt supplies, impacting India’s economy.  
    • While India is steadily transitioning to renewable energy, maintaining stable traditional energy ties with West Asia remains crucial during this transition phase.

What Measures can India Adopt to Balance its Ties to West Asia?  

• Balanced Diplomatic Approach: India should uphold its strategic autonomy and non-alignment policy in West Asia, fostering strong bilateral ties with key players like Saudi Arabia, Iran, Israel, and the UAE.  
  • By avoiding overt alignment with any particular faction, India can navigate regional rivalries while safeguarding its national interests.  
  • By supporting and engaging in diplomatic efforts like Abraham Accords 2.0 between Israel, Saudi Arabia, and Iran, India can strengthen its role as a constructive partner, fostering regional stability and peace. 
• Strengthen Economic and Energy Ties: India should diversify its energy imports to reduce dependency on West Asia. Enhancing renewable energy capabilities will help reduce reliance on West Asian oil over time.  
  • Strengthening trade and investment relations with GCC countries is essential, focusing on sectors like technology, defense, and infrastructure. 
  •  The India-UAE Comprehensive Economic Partnership Agreement (CEPA) can significantly boost trade, and similar agreements with other GCC nations will safeguard India’s economic interests, fostering sustained growth and diversification of commercial ties. 
• Countering Terrorism and Security Cooperation: India should collaborate with Israel, Saudi Arabia and Bahrain through a mutual security and military pact with focus on intelligence sharing, counter-terrorism operations, and joint military exercises to address regional security concerns and combat common threats like extremism.  
  • Enhancing defense cooperation with these countries will help India ensure the safety of its interests in the region. 
• Climate Change Resilience and Sustainable Development: India should enhance regional cooperation on climate change through frameworks like I2U2, expanding it to include more West Asian countries.  
  • As West Asia faces desertification, India can assist by sharing expertise in desertification management, water conservation strategies, and Desalination. Collaborative initiatives can enhance the resilience of arid landscapes. Knowledge exchange and joint efforts in sustainable agriculture and water management will be key. 
• Enhanced Cultural Exchange and People-to-People Ties:  India should strengthen academic partnerships, cultural diplomacy, and tourism, while engaging with the region’s youth and academic institutions to build long-term cooperation.  
  • Cultural ties can be further deepened through digital collaborations, media co-productions, youth diplomacy, and sports engagement, exemplified by IPL matches in the UAE and the IPL Auction in Saudi Arabia, fostering mutual understanding and shared experiences.

Conclusion 

India’s strategic interests in West Asia require a balanced approach to navigate regional tensions. By prioritizing issue-based diplomacy and multilateral cooperation, India can position itself as a stabilizing force in the region, safeguarding its national interests while contributing to peace and stability. 

Drishti Mains Question

Discuss the factors behind the persistent instability in West Asia and how India can maintain a balanced approach in its relations with the region. 

UPSC Civil Services Examination, Previous Year Question (PYQ) 

Prelims

Q. Which one of the following countries of South-West Asia does not open out to the Mediterranean Sea? (2015)

(a) Syria  

(b) Jordan  

(c) Lebanon  

(d) Israel  

Ans: B  

Q. The term “two-state solution” is sometimes mentioned in the news in the context of the affairs of (2018)

(a) China  

(b) Israel  

(c) Iraq  

(d) Yemen  

Ans: B 

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Mains

Q. “India’s relations with Israel have, of late, acquired a depth and diversity, which cannot be rolled back.” Discuss. (2018)

Foreign Aid and India

For Prelims: United States Agency for International Development (USAID), Official Development Assistance (ODA), FCRA, NGOs, STEM Education, World Bank, Quad, BRI.  

For Mains: Role of foreign funding in India’s development. 

Source: TH 

Why in News? 

US President Donald Trump's decision to impose a 90-day freeze on foreign assistance, halting United States Agency for International Development (USAID) personnel from disbursing aid globally, has sparked discussions on the role of foreign aid and its impact on India. 

What is USAID? 

• About: The USAID was established in 1961 as an independent agency to unify all US efforts in providing civilian foreign aid and development assistance. 
• Objectives: It aims to promote democratic values and contribute to a free, peaceful, and prosperous world.  
  • It also aims to advance US national security and economic prosperity through international development initiatives. 
• Coverage: It operates in over 100 countries around the world.  The top countries the USAID engages with are Ukraine, Ethiopia, Jordan, Somalia, Congo (Kinshasa), Afghanistan, Nigeria, Syria, Yemen and South Sudan. 
  •  In 2024, USAID accounted for 42% of all humanitarian aid tracked by the United Nations. 
• Key Sectors of Engagement: USAID works across multiple development sectors, including economic development, global health, education, food security, humanitarian assistance, climate change, and democracy and governance. 
• Major Flagship Programs: President’s Emergency Plan for AIDS Relief (PEPFAR) aims at preventing Human Immunodeficiency Virus (HIV) infections, and saves lives.  
  • Power Africa aims to expand access to electricity across Africa 
• USAID's Engagement in India: India's association with USAID began in 1951 with the India Emergency Food Aid Act, evolving over decades from food aid to infrastructure, capacity building, and economic reforms. 
  • As per the Ministry of Finance, USAID funded seven projects worth USD 750 million in 2023-24, focusing on agriculture and food security, water, sanitation, and hygiene (WASH), renewable energy, disaster management, and health. 
    • USAID supported Swachh Bharat Abhiyan by enabling toilet access for 3 lakh people and helping 25,000 communities become open defecation free, while also promoting WASH practices in rural areas. 
  • USAID has saved over 2 million children in India since 1990 by reducing deaths from pneumonia and diarrhoea. It supported education through the Padhe Bharat Badhe Bharat initiative and trained over 61,000 teachers.  
    • It has also strengthened rural healthcare via support for HIV/AIDS (under PEPFAR), maternal health, and disease surveillance.  
    • Programs like Feed the Future enhanced crop yields, post-harvest practices, and climate-resilient farming for smallholders. 
  • USAID supports India’s Conference of Parties (COP) 26 goals through initiatives in solar energy, forest conservation, and disaster resilience.  
    • For example, it partnered with the Ministry of Environment, Forest and Climate Change (MoEFCC) on Forest-PLUS 3.0 to restore forests, aid farmers, and assist conservationists. 

 

How will the Freeze on USAID Affect India? 

• Health Sector: USAID allocated USD 79.3 million to India’s health initiatives in 2024, and its suspension may slow pandemic recovery and health infrastructure progress. 
• Economic Development: USAID contributed USD 34.4 million in 2024 to support poverty alleviation and sustainable livelihoods in India. A halt in funding could slow progress in poverty reduction and disrupt livelihood programs. 
• Loss of Flexible Funding: Unlike rigid government grants, USAID aid offers flexibility for grassroots needs; its withdrawal may limit NGOs’ innovation and response to local challenges. 
• Hamper Capacity Building: Foreign funding has historically supported capacity building, skill development, and global best practices; its suspension may stall knowledge transfer and weaken NGOs' global linkages. 
• Unemployment and Project Disruptions: Many NGOs rely on foreign aid to hire trained professionals and run social development projects; its halt could cause job losses, stalled new initiatives, and incomplete programmes. 
• Weakening of Accountability Role: Foreign-aided NGOs often act as watchdogs, challenging government overreach and market excesses to protect the marginalised; reduced financial independence may weaken their voice and policy advocacy.  

How has India’s Relationship with Foreign Aid Evolved? 

• Early Dependence: Post-Independence, India sought aid to bridge development gaps and reduce poverty, with most assistance coming from Western nations, especially between 1955 and 1965. 
• Decline in Official Aid (Post-1970s): From the 1970s, India focused on self-reliance through policies like the Green Revolution and industrialization. This led to a steady decline in Official Development Assistance (ODA). 
  • The Foreign Contributions Regulation Act, 1976 (FCRA) imposed restrictions on foreign aid to NGOs, reflecting the government’s suspicion of foreign aid as a potential source of foreign influence in domestic affairs. 
• Shift Towards FDI and Global Cooperation (Post-1990): : Liberalization shifted India’s focus to Foreign Direct Investment (FDI) and economic growth. 
  • FDI grew at a Compounded Annual Growth Rate (CAGR) of 19.05% pre-liberalization and 24.28% post-liberalization, indicating liberalization’s positive impact on FDI. Since 1991, FDI inflows in India have increased by over 165 times. 
  • India continues to receive foreign aid for targeted sectors like health, education, and rural development, especially through NGOs. 
  • India prioritized global partnerships in trade, climate, and technology over foreign aid, focusing on sustainable development. 
• Transition from From Aid Recipient to Donor ( Post 2020s): India allocated USD 6,750 crore in the 2025 Budget as aid to developing countries, mainly in Asia and Africa.  
  • It uses aid strategically to counter regional powers like China, as seen in the USD100 million credit to Maldives (2022), and accepts bilateral aid only from key partners to safeguard sovereignty. 
  • India focuses on capacity building through programmes like Indian Technical and Economic Cooperation Programme, and plays a key humanitarian role, exemplified by Vaccine Maitri, which sent Covid-19 vaccines to 95 nations. 

What are India’s Concerns with Foreign Aid? 

• Sovereignty and Policy Interference: Foreign funds often come with policy prescriptions (e.g., patent reforms, environmental regulations) that may conflict with India’s domestic priorities. 
  • Donors like USAID or World Bank may push structural adjustment programs, impacting subsidy regimes (e.g., farm laws, food security). 
• Threat to Internal Security: The FCRA was tightened in 2020 to curb misuse by NGOs, amid concerns over foreign-funded groups like Greenpeace and Amnesty fueling protests (e.g., anti-Kudankulam, farm laws) and the risk of funding separatist or anti-national activities (e.g., Khalistan groups). 
• Diplomatic Leverage: Foreign aid can influence India’s geopolitical stance (e.g., Russia-Ukraine war, Quad vs. BRI), and over-reliance on Western aid may affect India’s strategic autonomy in Global South forums. 
• Cultural Imperialism: Foreign-funded NGOs may promote ideologies (e.g., LGBTQ+, evangelicalism) conflicting with Indian traditions, while aid programs may prioritize donor interests (e.g., climate adaptation over poverty alleviation). 
• Lack of Transparency and Accountability: Absence of standardized reporting mechanisms has led to public mistrust and inefficiencies in aid utilization. 

How can India Balance Foreign Aid with Progress? 

• Prioritize Strategic Partnerships: Ensure that foreign aid aligns with national priorities such as climate resilience, health, and rural development by focusing it on areas where it complements and fills critical gaps, rather than replacing domestic efforts. 
  • Prefer untied aid (e.g., Japan’s Official Development Assistance for metro projects). 
• Geopolitical Neutrality: Maintain strategic autonomy by accepting aid without compromising foreign policy sovereignty, while balancing engagement across multiple donors and institutions. 
• Strengthen South-South Cooperation: Strengthen the Development Partnership Administration (DPA) under India’s MEA for more structured engagement. 
  • The Indian  government allocated Rs 6,750 crore in the 2025 Union Budget for overseas development via Lines of Credit, Concessional Finance Scheme, and Grant-in-Aid projects. 
• Transparency & Accountability: India should monitor aid effectiveness through audit mechanisms (e.g., CAG reports on World Bank-funded schemes) and public dashboards for real-time tracking. 

Conclusion 

India must use foreign aid strategically complementing domestic goals without compromising sovereignty. Strengthening transparency, building local capacity, and fostering South-South cooperation are key. A balanced approach will ensure aid serves India’s progress, not dependence. 

Drishti Mains Question:

What role do NGOs play in India’s development, and how would their work be affected by the suspension of foreign aid?

UPSC Civil Services Examination Previous Year’s Questions (PYQs) 

Mains

Q. Can Civil Society and Non-Governmental Organisations present an alternative model of public service delivery to benefit the common citizen? Discuss the challenges of this alternative model. (2021)

Q. Examine critically the recent changes in the rules governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976. (2015)

Self-Defence Clause Under UN Charter

Source: PR 

Why in News?

India has carried out Operation Sindoor in self-defense after the Pahalgam terrorist attack , raising questions about the justification of India’s response and its alignment with Article 51 of Right to Self-Defence under UN Charter. 

What is Article 51 of the UN Charter?

• The UN Charter generally prohibits the use of force under Article 2(4), which bars member states from using force against the territorial integrity or political independence of any state, except in cases of self-defence as permitted by Article 51. 
• Under this, self-defence is permitted only after an "armed attack" and must comply with 2 principles: necessity (force must be essential to respond to the attack) and proportionality (response must not exceed what is required to repel it). 
• The Charter governs state conduct and state-sponsored uses of force. However, in the Nicaragua v. U.S. case (1986), the ICJ held that an armed attack under Article 51 includes acts by non-state actors like Al-Qaeda only if carried out "by or on behalf of a state. 
• India attributed the attack to Pakistan-trained and supported terrorists and partially fulfilled its duty under Article 51 by briefing the majority of UNSC members as required. 

 

What is Unwilling or Unable Doctrine Related to Article 51 of the UN Charter?

• It permits a state to use self-defense against non-state actors (NSAs) in another state’s territory when that state is unwilling or unable to act, invoking an exception under the UN Charter. 
  • The US invoked the doctrine in the 2011 operation against Osama bin Laden in Pakistan but Russia and China criticize it for undermining state sovereignty and the UN system. 
• India’s Position: At the UNSC Arria Formula meeting in February 2021, India outlined 3 conditions for using the doctrine: 
  • The non-state actor has repeatedly attacked the state. 
  • The host state is unwilling to neutralize the threat. 
  • The host state actively supports or sponsors the non-state actor. 
• Following the Pahalgam attack, India accused Pakistan of inaction and implied the use of the "unwilling or unable" doctrine.

Read More: Pahalgam Terror Attack and Suspension of the Indus Waters Treaty 

Semaglutide for Fatty Liver Treatment

Source: IE 

Why in News? 

A new study found that semaglutide (used in weight-loss and diabetes drugs like Ozempic and Wegovy) is also effective in treating fatty liver disease, also known as Metabolic Dysfunction Associated Steatohepatitis (MASH). 

What is Semaglutide? 

• About: Semaglutide is a glucagon-like peptide-1 (GLP-1) receptor agonist. It is primarily used to manage type 2 diabetes and obesity. 
  • Semaglutide mimics the action of GLP-1, a hormone that helps lower blood sugar levels by increasing insulin secretion in response to meals, inhibiting glucagon release, and delaying gastric emptying. 
• Side Effects: Semaglutide is associated with common side effects such as nausea, vomiting, diarrhea, constipation, and abdominal discomfort. 
  • It is contraindicated (not medically advised) for individuals with a personal or family history of medullary thyroid cancer or Multiple Endocrine Neoplasia type 2. 

What is Non-Alcoholic Fatty Liver Disease? 

• About Fatty Liver Disease: Fatty liver disease (hepatic steatosis) is the buildup of excess fat in liver cells. 
  • It becomes unhealthy when fat exceeds 5% of liver cells (hepatocytes), affecting liver function and metabolism. 
  • It is of 2 types- NAFLD (Non-Alcoholic Fatty Liver Disease) & Alcoholic Fatty Liver Disease (AFLD).  
• Non-Alcoholic Fatty Liver Disease (NAFLD) or Metabolic Dysfunction-Associated Steatotic Liver Disease (MASLD): Metabolic Dysfunction-Associated Steatotic Liver Disease (MASLD) (earlier known as NAFLD (Non-Alcoholic Fatty Liver Disease) is a condition where fat accumulates in the liver without excessive alcohol intake and may cause serious liver damage over time.  
  • Its prevalence in India is estimated at 9–32%. 
  • 4 Stages of MASLD: 
    • Non-Alcoholic Fatty Liver (NAFL): Fat builds up in the liver without causing damage or inflammation, usually leading to mild discomfort from an enlarged liver. 
    • Non-Alcoholic Steatohepatitis (NASH) or Metabolic Dysfunction-Associated Steatohepatitis (MASH): A more serious form with liver inflammation, scarring, and links to heart and kidney issues. Around 25% may progress to cirrhosis or liver cancer. 
    • Fibrosis: Long-term inflammation creates scar tissue in the liver, which affects its ability to function. 
    • Cirrhosis: The most severe stage with permanent liver scarring, shrinking, and possible liver failure or cancer. 

 

• Alcoholic Fatty Liver Disease (AFLD): AFLD, or alcoholic steatohepatitis, is caused by excessive alcohol intake (≥ 40g/day in males, ≥ 20g/day in females), leading to fat accumulation in the liver.  
  • Alcohol metabolism in the liver generates toxic compounds that damage liver cells, trigger inflammation, and impair natural defences. 
• Treatment for Fatty Liver Disease: The primary treatment is weight loss through diet, exercise, or medication.  
  • GLP-1 Receptor Agonists: These medications aid in weight loss by regulating gut hormones that control appetite and fat storage. 
  • Resmetirom: A thyroid hormone-based drug that specifically targets liver fat, though it is costly. 
  • FGF21 Drugs: These drugs focus on adipose tissue to reduce fat accumulation and enhance metabolic health. 
  • Tirzepatide: A dual-action medication that promotes weight loss, assists in diabetes management, and shows potential benefits in treating sleep apnea. 

What are India's Key Initiatives to Promote Healthy Lifestyle?  

• Eat Right Mela  
• Fit India Movement  
• Eat Right Station Certification  
• Mission Poshan 2.0  
• Poshan Vatikas  
• Unified India Organic  

UPSC Civil Services Examination, Previous Year Questions (PYQs)  

Prelims:

Q. Which one of the following statements is not correct? (2019)

(a) Hepatitis B virus is transmitted much like HIV.  
(b) Hepatitis B unlike Hepatitis C, does not have a vaccine.  
(c) Globally, the number of people infected with Hepatitis B and C viruses arc several times more than those infected with HIV.  
(d) Some of those infected with Hepatitis B and C viruses do not show the symptoms for many years.  

Ans: (b)  

Q. Which of the following diseases can be transmitted from one person to another through tattooing? (2013)

1. Chikungunya  
2. Hepatitis B  
3. HIV-AIDS  

Select the correct answer using the codes given below:  

(a) 1 only  
(b) 2 and 3 only  
(c) 1 and 3 only  
(d) 1, 2 and 3  

Ans: (b)

Bhimgad Wildlife Sanctuary

Source: TOI 

Public intrusion into the eco-sensitive zone of Bhimgad Wildlife Sanctuary (BWS) has triggered serious concern among conservationists, highlighting threats to the region’s fragile ecosystem and biodiversity. 

• Eco-Sensitive Zones (ESZs) are buffer areas (up to 10 km) around national parks and wildlife sanctuaries, declared to reduce harmful human activities and are notified under the Environment (Protection) Act, 1986 as per the National Wildlife Action Plan (2002–2016). 
  • Prohibited: Commercial mining, polluting industries, major hydro projects, sawmills, commercial wood use, etc. 
  • Regulated: Tree felling, construction of hotels/resorts, commercial water use, pesticide based farming etc. 
  • Permitted: Traditional farming, rainwater harvesting, organic farming, use of renewable energy, and green technologies. 
• About Bhimgad Wildlife Sanctuary: BWS is located in Belgaum district, Karnataka near the Goa border. It spans over the Western Ghats and was declared as a wildlife sanctuary in December 2011. 
  • It is named after Bhimgad Fort, built by Shivaji in the 17th century to defend against Portuguese forces. 
  • It is home to diverse avifauna including the Velvet-fronted Nuthatch, Malabar Grey Hornbill, Imperial Pigeon, Emerald Dove, and the rare Malabar Trogon. 
    • It is known as the only known breeding site of Wroughton’s Free-tailed Bat, found in the Barapede Caves. 
  • The sanctuary includes the Vajrapoha Waterfalls and forms part of the Mahadayi River’s catchment area.

Read More: Invasive Species and Food Crisis in Karnataka’s Western Ghats 

Predatory Pricing

Source: TH

The Competition Commission of India (CCI) has notified the Determination of Cost of Production Regulations, 2025, to regulate predatory pricing, particularly targeting e-commerce and quick commerce platforms. 

• Predatory pricing, defined under the Competition Act, 2002, refers to a strategy where a company deliberately lowers its prices below the cost of production to reduce competition and eliminate competitors.   
  • Once competitor firms are weakened or eliminated, the company typically raises prices to recoup its losses and consolidate market control (monopoly). 
• New regulations replaced the 2009 rules by removing market value as a benchmark and redefining total cost to include depreciation and exclude financing overheads (daily business expenses) for greater clarity. 
  • It uses a sector-agnostic (neutral), case-by-case approach, better suited for dynamic digital markets. 
• CCI is a statutory body established under the Competition Act, 2002 to promote fair competition, prevent anti-competitive practices, and protect consumer interests. 

Terms Related to Anti-Competitive Practices
Cartels	Associations of independent businesses or countries to regulate pricing and production (typically illegal).
Mergers	Mergers combine companies into one entity, potentially reducing competition and attracting regulatory scrutiny.
Price Discrimination	Charging different prices to different customers for the same product/service.
Price Fixing Agreements	Competitors agreeing to set a fixed price for their products/services, eliminating competition and inflating prices.

Read More: Market Monopoly and Anti-Competitive Practices 

Saola

Source: DTE 

Scientists have mapped the genome of the Saola (Pseudoryx nghetinhensis) to aid conservation and found that the species split into two populations 5,000 to 20,000 years ago, coinciding with habitat changes during and after the Last Glacial Maximum (about 20,000 years ago). Agricultural expansion in Vietnam further isolated the populations.Saola: 

• Saola: Often called the "Asian unicorn," it is the rarest large land mammal and belongs to the bovid genus. It has a dark, antelope-like body, soft fur, white facial markings, and long parallel horns present in both sexes.  
  • Its name, "Saola," in Lao means "spinning wheel posts," referencing the shape of its horns. 
• Habitat and Survival Threats: The saola is found in the misty highland forests of the Annamite mountain range between Vietnam and Laos.  
  • It is classified as Critically Endangered (IUCN Status) and is primarily threatened by habitat loss, poaching, and indiscriminate snaring. 
• Behavior: Saola are diurnal (active during daylight hours) and are herbivores (folivores).  
  • They are mostly solitary, although small groups of 2–3 individuals have been observed. Males are territorial and mark their territory by rubbing secretions from their maxillary glands on rocks and vegetation. 
• Reproduction: Females give birth to a single calf after a gestation period of 7–8 months. The saola's lifespan is estimated to be 8–11 years in the wild. 

Read More: Bishnoi, Blackbuck and Chinkara 

Geostrategic Passes Connecting Kailash Mansarovar Yatra

Source: TH 

India announced the resumption of the Kailash Mansarovar Yatra (KMY)  after a 5-year pause, halted by China in 2020 due to Covid-19 and Line of Actual Control (LAC) tensions. KMY has been operational since 1981. 

• About KMY: KMY is a pilgrimage organized by the Ministry of External Affairs (India) to Mount Kailash (6,638 m) and Lake Mansarovar (4,600 m) in the Tibet Autonomous Region (TAR)  of China. 
• Official Operational Routes (as of 2025):  
  • Lipulekh Pass (Uttarakhand): It is the shortest route to Mansarovar (50 km from the border), but rough terrain extends the trek to 200 km.  
    • It was the first Indian border post opened for trade with China in 1992, followed by Shipki La (1994) and Nathu La (2006). 
  • Nathu La Pass (Sikkim): This 1,500 km fully motorable route (it is one of the world's highest motorable roads) opened in 2015; easier for pilgrims, no trekking needed.  
    • Nathu La connects Sikkim with China's TAR and is part of the ancient Silk Road. 
• Mount Kailash: Mount Kailash, a diamond-shaped black rock peak in Tibet, is sacred to Hindus, Buddhists, Jains, and Bons, and is the source of major Asian rivers like the Brahmaputra, Sutlej, Indus, and Karnali. 

Read More: Kailash Mansarovar Yatra