CURRENT-AFFAIRS

Context

India has taken a significant step by fulfilling its financial commitments ahead of schedule regarding the strategically important Chabahar Port located in Iran. On February 06, 2026, the Government of India clarified in Parliament that the total amount of $120 million has been paid, demonstrating India's 'strategic readiness' before the potential return of U.S. sanctions.

Chabahar Port:

• Geographical Location: It is situated on the coast of the Gulf of Oman in the Sistan-Baluchestan province of Iran.
• Significance: It is the only sea route providing India direct access to Afghanistan and Central Asian countries by bypassing Pakistan.
• Indian Role: India is operating and developing its 'Shahid Beheshti' terminal through 'India Global Ports Limited' (IGPL).

Key Reasons for Discussion

• Full Payment: India has completed the payment of its total commitment of $120 million well before April 26, 2026 (the final date of the U.S. waiver).
• Budget Cut: No new funds have been allocated for Chabahar in the Central Budget 2026-27, which the Opposition views as a sign of 'opting out' of the project.
• Statement from Iran: Iranian Ambassador Mohammad Fathali stated that India has not yet provided any official information regarding future management, but Chabahar is a 'permanent geographical truth' that cannot be changed.

Reasons for Rapid Payment and Global Pressure

• Fear of Sanctions: Following the return of the Trump administration in the U.S., the threat of strict sanctions on Iran is looming. India completed the payment early to ensure no legal or banking hurdles arise after April.
• U.S. Stand: The U.S. had provided a conditional waiver to Chabahar for humanitarian aid and regional connectivity, which is set to expire on April 26, 2026.
• Iran-U.S. Tension: Rising military tensions in West Asia and the deployment of aircraft carriers have made the operation of Chabahar risky for India.

Importance of Chabahar for India

• Economic Importance: It is a key point of the INSTC (International North-South Transport Corridor), which will reduce trade time and costs to Russia and Europe by 30-40%.
• Strategic Importance: It is India’s primary tool to counter Pakistan's Gwadar Port (developed by China) and to balance China’s 'Belt and Road' influence in Central Asia.
• Afghanistan Connectivity: It is the most reliable route for India to deliver humanitarian aid and food grains to Afghanistan.

Analysis

India's statement in Parliament that "payment is complete" alongside "zero allocation" in the budget points towards a deliberate 'strategic withdrawal.' India has settled its formal liabilities so that if the U.S. imposes strict sanctions, India cannot be accused of financial default. However, physically abandoning the port would be a major strategic loss for India.

Way Forward

• Trilateral Diplomacy: India must negotiate with the U.S. to highlight the 'humanitarian' and 'non-Iranian' interests of Chabahar so that the waiver continues.
• Regional Cooperation: Countries like Uzbekistan and Kazakhstan should be integrated into this project so that it becomes a regional economic necessity rather than just an India-Iran issue.
• Private Sector Participation: Consideration can be given to moving operations away from the government sector to a more flexible international consortium.

Conclusion

Chabahar Port is not merely an infrastructure project but a symbol of India's 'strategic autonomy.' By making the full payment, India has proved its sincerity, but the real challenge now lies at the diplomatic level. India must choose a middle path where it remains safe from the heat of U.S. sanctions while securing this 'gateway' for its reach into Eurasia.

Context

The recent visit of India's Chief of Defence Staff (CDS) General Anil Chauhan to Armenia in February 2026 and the signed 'Defence Cooperation Programme 2026' between India and Armenia have created a new stir in global diplomacy. This visit not only strengthens bilateral ties but also underscores India's growing strategic role in the South Caucasus region.

About Armenia

• Geographical Location: Armenia is a landlocked country situated at the crossroads of West Asia and Europe. Its borders are shared with Turkey, Azerbaijan, Iran, and Georgia.
• Historical Background: Formerly a part of the Soviet Union, Armenia has traditionally relied on Russia for its security.
• Recent Conflict: Following its defeat by Azerbaijan in the 2020 Nagorno-Karabakh war, Armenia has begun a re-evaluation of its security strategy.

Reasons for Discussion:

Armenia's inclination toward India and France is in the news due to the following key reasons:

• Import Diversification: Following Russia's failure to provide security guarantees, Armenia is now making India and France its primary partners for its defense needs.
• India-Armenia Defence Deals: Armenia has become a major country purchasing the Pinaka rocket system, Akash missile defense, and ATAGS howitzers from India. (43% of Armenia's total arms imports now come from India).
• Turkey-Pakistan-Azerbaijan Axis: The growing military alliance between these three countries has compelled Armenia to form an alternative "counter-balance" bloc (along with India and France).

Importance of this News

• Strategic Importance: For India, Armenia is a crucial link in the INSTC (International North-South Transport Corridor), providing commercial access to Central Asia and Europe.
• Defence Export: This is a major achievement for India's defense industry, establishing India as a global arms exporter.
• Regional Stability: The presence of France and India acts as a 'deterrent' to prevent unilateral military action by Azerbaijan.

Analysis

• Balance of Power: The center of power in Eurasia is shifting. While Turkey is expanding its influence on one side, "Middle Powers" like India and France are stepping forward to protect the sovereignty of small nations.
• India vs. Pakistan: Pakistan's provision of JF-17 fighter jets to Azerbaijan and Azerbaijan's support against India on the Kashmir issue provide a strategic reason for India to stand with Armenia.
• The Role of France: France is adopting a policy of 'Deterrence by Denial' in this region to prevent the status quo from being changed by force.

Way Forward

• Institutional Cooperation: Instead of being limited only to selling weapons, India should increase cooperation in Armenia's military training, cyber security, and intelligence sharing.
• Economic Engagement: Along with defense, there is a need to make relations multi-dimensional by increasing investment in IT, Pharma, and infrastructure projects.
• Mixed Diplomacy: India should further activate trilateral cooperation (India-Iran-Armenia) in collaboration with Iran.

Conclusion

This shift in Armenia's security architecture is not merely a reaction to war, but a well-thought-out geopolitical strategy. Armenia's partnership with India and France proves that in a multipolar world, small states are no longer solely dependent on superpowers. For India, this is an opportunity to emerge as a Global Security Provider by combining its "Soft Power" with "Hard Power."

Context

Amidst global geopolitical instability and the imperatives of energy security, India is redefining its oil import strategy. The recent 'India-US Interim Bilateral Trade Agreement' and increasing international sanctions on Russia have placed India's energy market at the center of a new diplomatic debate.

India's Oil Import:

• Energy Dependence: India imports approximately 85% of its crude oil requirements, making it the world's third-largest oil consumer.
• Import Volume: India imports about 300 million tonnes of crude oil annually, with Russia's share currently accounting for nearly one-third (32.7%).
• Economic Burden: Crude oil constitutes the largest portion of India's import bill, directly impacting the trade deficit and the value of the Rupee.

Why in the News?

• Russian Oil vs. American Demand: An executive order by US President Donald Trump claimed that India has agreed to reduce Russian oil imports to 'zero,' although the Indian official machinery has not confirmed this.
• Sanctions and Tariffs: Amidst strict sanctions imposed by the US on Russia and threats of trade tariffs, there is heavy pressure on India to 'diversify' its energy sources.
• Strategic Autonomy: India's decision to continue trade with Russia while prioritizing its energy security remains a subject of international discussion.

Import Policy and Economic Challenges

• Price Comparison: According to data from December 2025, Russian oil averaged $469 per tonne. In contrast, US oil was at a 7.9% premium, Saudi Arabian oil at a 7.2% premium, and UAE oil was 12.8% more expensive.
• Potential for Rising Import Bill: If India abandons Russian oil (which is 7-12% cheaper) under US pressure, India's annual oil bill could increase by $6-8 billion. This additional financial burden would directly lead to domestic inflation and a fiscal deficit.
• Policy Shifts: India has kept its import policy 'flexible.' Alternatives like heavy crude oil from countries such as Venezuela and Colombia are being explored, but replacing Russia remains economically challenging.

Impact and Government of India’s Diplomacy

• Energy Security vs. Diplomacy: The Indian government has made it clear that its priority is to provide affordable energy to its citizens. This 'India First' policy balances relations with the West and a long-standing friendship with Russia.
• Rupee-Rouble Trade: Despite sanctions, India has worked on alternative payment systems, reflecting India's growing self-reliance in the global financial system.
• Supply Chain Restructuring: India is now expanding its supply chain globally rather than relying solely on Gulf countries to avoid crises in any single region.

Analysis

Current data shows that oil imports from Russia have dropped from a peak of 2 million bpd in June 2025 to 1.1 million bpd in January 2026. This decline reflects India's attempt to strike a trade balance with the US, yet economically, Russia remains the most viable option.

Way Forward

• Increase in Domestic Production: India must reduce foreign dependence by increasing investment in the Exploration and Production (E&P) sector.
• Strategic Reserves: Storing oil during price drops will provide security against future shocks.
• Transition to Green Energy: In the long term, promoting Electric Vehicles (EV) and Green Hydrogen is the only permanent solution to the compulsion of oil imports.

Conclusion

India's oil import strategy is currently at a complex crossroads. While cheap oil from Russia serves as oxygen for the Indian economy, bilateral relations with the US are strategically indispensable. India must adopt a middle path that maintains its 'Strategic Autonomy,' ensuring economic stability while strengthening its credentials for an independent foreign policy on the global stage.

Context

Amidst global market volatility, the Reserve Bank of India has demonstrated the strength of the Indian economy through its first monetary policy review. Under the leadership of Governor Sanjay Malhotra, the future economic direction has been set by striking a precise balance between 'growth and stability.'

What is the Monetary Policy Committee (MPC)?

The Monetary Policy Committee (MPC) is a 6-member statutory body responsible for fixing interest rates in India. It consists of 3 members from the RBI and 3 external experts (appointed by the Government of India). Its primary objective is to drive economic growth while maintaining inflation (CPI) within the target of 4% (±2%).

Why in the News?

• Repo Rate Stable at 5.25%
  • In this meeting held under the chairmanship of the new RBI Governor Sanjay Malhotra, the committee unanimously decided to maintain the repo rate at 5.25%.
  • Lending rates for banks will not increase, which is expected to keep EMIs for home loans and car loans stable for now.
• Projections for Economic Growth and Inflation
  • GDP Growth: The RBI has raised India's growth forecast for the fiscal year 2025-26 to 7.4% (up from the previous 7.3%). India remains the fastest-growing major economy in the world.
  • Inflation: The retail inflation (CPI) forecast for the fiscal year 2025-26 is set at 2.1%. The Governor stated that inflation is now under control and close to the target.
  • Foreign Exchange Reserves: As of the end of January 2026, India's foreign exchange reserves stood at a healthy level of $723.8 billion.

What does a 'Neutral' Stance mean?

The RBI has maintained its policy stance as 'Neutral.' This means the central bank can either increase or decrease interest rates in the future based on economic data. This is a flexible approach that prioritizes stability.

Major Announcements for the Common Man and Small Industries

• Relief for MSMEs: The limit for collateral-free loans for micro and small enterprises (MSEs) has been increased from ₹10 lakh to ₹20 lakh.
• Compensation for Digital Fraud: A proposal has been made to provide customers with compensation up to ₹25,000 in case of fraud in digital transactions.
• Loans to REITs: Commercial banks will now be able to provide loans to 'Real Estate Investment Trusts' (REITs), which will increase investment in the real estate sector.
• Ease for NBFCs: Rules for opening branches for Non-Banking Financial Companies (NBFCs) have been simplified.

Impact

• On the Common Man: As there is no change in the repo rate, EMIs for home, car, and personal loans will remain stable for now.
• MSME Sector: Increasing the limit for collateral-free loans from ₹10 lakh to ₹20 lakh will prove to be a 'game changer' for small industries.
• Banking and Digital Sector: The proposal of ₹25,000 compensation for digital fraud will increase customer confidence in digital banking.
• Real Estate: Allowing bank loans to REITs will increase the flow of liquidity in the construction sector.

Analysis

• The RBI's decision is based on a "Wait and Watch" strategy. Following a 125 basis point cut in interest rates last year (2025), Governor Malhotra is now giving time for the actual effects of those cuts to be absorbed into the economy.
• The low inflation rate of 2.1% indicates that India has nearly won the 'war against inflation,' allowing the focus to now shift entirely toward 'growth.'

Way Forward

• Monitoring Inflation: It is necessary to keep an eye on global food prices and crude oil volatility so that inflation does not rise again.
• Credit Delivery: Banks must ensure that the benefits of the concessions provided by the RBI reach consumers and small traders directly.
• Cyber Security: Given the increasing volume of digital transactions, the cyber security framework must be further strengthened.

Conclusion

This monetary policy of the RBI is a reflection of confidence and maturity toward the Indian economy. A stable repo rate at 5.25% and an estimated growth rate of 7.4% establish India as a 'bright spot' amidst the global slowdown. This policy will not only boost investor morale but also maintain the country on a high growth path without putting an additional burden on the pocket of the common citizen.