Supplementary Grant: Article 115 and Economic Stabilisation Fund Explained for UPSC

Context

Amid rising crude prices and West Asia-linked disruptions, the Centre created an Economic Stabilisation Fund (₹57,381 crore) through the Second Supplementary Demand for Grants to maintain fiscal flexibility against external shocks.

Constitutional Angle

Article 115 — Types of Grants (with examples)

Supplementary Grant

• Extra funds for an existing service when allocation falls short.

Example:
Fertiliser subsidy rises from ₹10,000 crore to ₹13,000 crore due to price surge.

Additional Grant

• Funds for a completely new service not included in the Budget.

Example:
New emergency evacuation mission abroad not earlier planned.

Excess Grant

• Post-facto approval when spending exceeds sanctioned amount.

Example:
Defence overspends ₹5,000 crore beyond approved outlay.

Why this case

Treated as a Supplementary Grant since spending expands existing fiscal heads
(energy, stabilisation, macro-management), not a wholly new service.

Key Points

• Gross additional spending sought: ~₹2.81 lakh crore
• Savings/receipts: ~₹80,000 crore
• Net outgo: ~₹2.01 lakh crore

Purpose of the fund:

• Cushion energy volatility
• Manage supply-chain stress
• Address sectoral shocks

Government maintains alignment with FY 2025–26 fiscal deficit target.

Rupee Depreciation: Why Rupee Hit Record Low Against US Dollar and Its Impact for UPSC

Context

The rupee hit a fresh record low of ₹92.3 per U.S. dollar, amid West Asia tensions and rising crude prices linked to concerns over the Strait of Hormuz.

Reasons for Rupee Depreciation

• Rising crude oil prices
  
  • Brent near $102/bbl
  • WTI above $97/bbl
  • Increased India’s import bill and dollar demand.
• Geopolitical tensions
  
  • West Asia conflict
  • Hormuz-related uncertainty affecting global markets.
• Higher domestic dollar demand
  
  • Oil companies and importers seeking dollars for payments.
• Capital market pressures
  
  • Weak equity sentiment (Nifty fall)
  • Capital outflows.
• Global risk aversion
  
  • Safe-haven shift toward the U.S. dollar strengthened it globally.

Washington Consensus: Meaning, Origin, Criticism and Relevance in Global Economy for UPSC

Context (Core Argument)

Washington Consensus prescriptions have lost centrality.
Today’s world demands context-based policy mixing markets, state intervention, and strategic protection.

Key Points

1. Origin (1989)
John Williamson’s 10 reforms:

• Fiscal discipline
• Liberalisation
• Privatisation
• Deregulation

Backed by IMF–World Bank during debt crises.

2. Expansion (1980s–90s)
Structural Adjustment Programmes and WTO-era rules (TRIPS/TRIMS) narrowed industrial policy space in developing states.

3. Backlash (late 1990s–2000s)

• Uneven outcomes.
• East Asia blended state-market models.
• Others faced crises and inequality.
• WTO setbacks:
  • Seattle (1999)
  • Cancún (2003)
• 2008 financial crisis eroded faith.

4. Shift (2010s–2020s)
Rise of:

• Protectionism
• Nationalism
• Tariffs
• Subsidies
• Supply-chain security

Trade became politically strategic.

5. Present Situation

No single model dominates.

Focus areas now include:

• Welfare
• Industrial policy
• Climate resilience
• Digital governance
• Strategic autonomy

TRIPS & TRIMS

TRIPS

• WTO pact setting minimum global IP standards.
• Includes flexibilities such as compulsory licensing.

TRIMSWTO pact banning trade-distorting investment measures
(e.g., local content requirements, trade-balancing requirements).