Why in the News?

• The RBI has extended the export realisation timeline and credit period to support exporters amid global disruptions and West Asia tensions.

What’s in Today’s Article?

• Export Realisation (Background, Export Credit, Role of RBI, etc.)
• News Summary (RBI’s Guidelines, Implications for India’s Economy)

Export Realisation and Export Credit in India

• Export realisation refers to the process by which Indian exporters receive payment in foreign exchange for goods and services exported.
• Timely realisation is critical for maintaining foreign exchange inflows and ensuring external sector stability.
• Under the Foreign Exchange Management Act (FEMA), exporters are required to realise and repatriate export proceeds within a specified time frame.
• Export credit is another key component of trade finance. It includes:

• Pre-shipment credit, which is provided before goods are exported to finance production and packaging.
• Post-shipment credit, which supports exporters after goods are shipped until payment is received.

• The Reserve Bank of India regulates both timelines and credit conditions to ensure liquidity, financial stability, and export competitiveness.

Role of RBI in Export Regulation

• The RBI plays a central role in managing India’s external sector.

• It sets timelines for export realisation and repatriation.
• It regulates export credit duration and interest norms.
• It intervenes in foreign exchange markets to maintain stability.

• These measures help balance export promotion with macroeconomic stability, especially during global uncertainties.

Need for Relaxation in Export Timelines

• Global disruptions, especially geopolitical tensions, have significantly affected international trade flows.

• Shipping routes have become riskier and costlier.
• Logistics delays have increased transit time.
• Payment cycles have lengthened due to uncertainty.

• In such a scenario, strict timelines for export realisation can create liquidity stress for exporters.
• Therefore, policy flexibility becomes essential to sustain export momentum.

News Summary

• The Reserve Bank of India has extended relief measures for exporters in response to ongoing global disruptions, particularly arising from geopolitical tensions in West Asia.
• The central bank noted that exporters have been facing difficulties in meeting payment realisation deadlines due to supply chain bottlenecks and logistical uncertainties.
• To address this, the RBI had earlier increased the permissible period for realisation and repatriation of export proceeds from nine months to 15 months. This relaxation continues to remain in force.
• Further, the RBI has extended the enhanced export credit period of 450 days. Initially applicable for disbursals up to March 31, 2026, this benefit will now be available for all disbursals made until June 30, 2026.
• The decision reflects the RBI’s intent to provide liquidity support and operational flexibility to exporters during uncertain global conditions.
• The disruptions are largely linked to the West Asia conflict, which has affected key shipping routes such as the Strait of Hormuz. This has led to delays, increased freight costs, higher insurance premiums, and, in some cases, diversion or suspension of shipments.
• Despite these challenges, India’s exports have shown resilience. Total exports (goods and services) were estimated at $76.13 billion in February 2026, registering a growth of 11.05% compared to the previous year.
• The RBI has also taken steps to stabilise the foreign exchange market. Banks have been instructed to limit their net open exposure in the forex market to $100 million by the end of each day.
• This move is aimed at reducing currency volatility amid rising oil prices and global uncertainty.

Implications for India’s Economy

• The extension of export timelines has several important implications.

• Liquidity Support: Exporters get more time to realise payments, reducing financial stress.
• Trade Continuity: Helps sustain exports despite logistical disruptions.
• Forex Stability: Ensures a steady inflow of foreign exchange in the long term.
• Cost Management: Allows exporters to manage higher freight and insurance costs.

• However, prolonged delays in realisation may temporarily affect foreign exchange inflows and balance of payments dynamics.

Why in the News?

• Rising geopolitical instability in West Asia is impacting India’s economy through oil prices, currency depreciation, and fiscal stress.

What’s in Today’s Article?

• Global Tensions (Background, Channels of Transmission, Oil Price Volatility, Investment Trends, Way Forward, etc.)

Global Tensions and India’s Economy

• Geopolitical tensions, especially in energy-rich regions like West Asia, significantly influence India’s macroeconomic stability.
• India imports over 85% of its crude oil, making it highly vulnerable to external shocks.
• Recent developments show how global conflicts can directly affect domestic indicators such as inflation, fiscal deficit, and exchange rates.

Channels of Transmission

• Energy Prices
  • Oil prices act as the primary transmission channel of global shocks.
  • The Indian crude basket touched $156.29 per barrel recently.
  • A $10 rise in crude prices can increase inflation and widen the current account deficit.
  • Higher oil prices increase transport costs, production expenses, and overall inflation in the economy.

• Exchange Rate Pressure

• The rupee depreciated to a record Rs 95 per dollar.
• The Reserve Bank of India has used foreign exchange reserves to control volatility.
• Currency depreciation increases import costs and worsens inflationary pressures.

• External Sector Stress

• Foreign exchange reserves declined to around $709 billion.
• Foreign portfolio outflows have intensified due to global uncertainty.
• This weakens India’s external stability and increases vulnerability to global shocks.

Fiscal Impact of Oil Price Volatility

• India’s fiscal system is structurally exposed to oil price fluctuations.

• The country imports around 85-87% of its crude oil.
• Oil price increases lead to higher subsidies on fertilisers and LPG.
• Governments often reduce fuel taxes to control inflation.

• For example, earlier excise duty cuts led to significant revenue losses, while subsidies expanded sharply.
• If oil prices remain high, government expenditure may rise substantially, while revenues may decline due to reduced consumption.

Changing Revenue Structure

• India’s revenue system is increasingly dependent on transaction-based taxes.

• GST collections have risen significantly, reaching Rs. 22.8 lakh crore.
• Revenue growth is driven more by economic activity than income growth.

• This makes fiscal stability vulnerable to shocks that reduce consumption and transactions.
• During crises, lower consumption reduces GST collections, affecting government finances.

Impact on Households

• Households are a key channel through which economic shocks are transmitted.

• Private consumption accounts for about 61.4% of GDP.
• Household liabilities have increased to over 41% of GDP.

• Rising debt levels make households more sensitive to inflation and income shocks.
• Higher energy prices increase household expenses, reduce disposable income, and weaken consumption demand.
• Additionally, disruptions in LPG supply chains have led to higher costs and shortages.

Industrial and Investment Trends

• India’s industrial growth shows a mixed pattern.

• Manufacturing growth remains strong, especially in capital-intensive sectors.
• Labour-intensive sectors remain weak.

• Private investment continues to lag despite increased government capital expenditure.
• Only a small proportion of announced projects are completed, indicating cautious investment behaviour.
• Small businesses and informal sectors are more vulnerable to shocks, as seen in reduced demand and closures during recent disruptions.

Macroeconomic Contradiction

• India’s economy currently reflects a dual reality.

• Strong GDP growth (around 8.1%) and high capital expenditure.
• Weak income growth, rising debt, and external vulnerabilities.

• This divergence highlights structural weaknesses in the growth model.
• While infrastructure-led growth boosts long-term capacity, it may not immediately strengthen household incomes or consumption.

Way Forward

• India needs to recalibrate its economic strategy to reduce vulnerability to global shocks.

• Diversify energy sources to reduce dependence on crude oil imports.
• Strengthen income-led demand through employment and wage growth.
• Broaden the tax base to reduce reliance on transaction-based revenues.
• Maintain adequate fiscal buffers for crisis management.

• A balanced approach between growth, stability, and resilience is essential in an uncertain global environment.

Why in news?

India currently has strong food security buffers despite the Iran conflict. Government warehouses held 23.6 million tonnes of wheat on March 1—much higher than in the previous two years—and 36.5 million tonnes of rice.

Similar to the Covid period, good crop output and ample stocks provide a cushion against immediate food inflation pressures.

What’s in Today’s Article?

• Strong Rabi Crop Prospects
• Crop-wise Performance
• Comfortable Fertiliser Stocks — For Now
• Pesticides Also Face Supply Risks
• Uncertain Impact on Agriculture and Prices

Strong Rabi Crop Prospects

• India’s food situation remains comfortable not just due to high stocks, but also because of a promising rabi harvest.
• Good monsoon rains in 2025 encouraged farmers to increase acreage under crops like wheat, mustard, maize, chana, masoor, potato, and onion.
• Favorable weather, including cooler temperatures from western disturbances, has supported better grain filling and higher yields, especially for wheat.

Crop-wise Performance

• Wheat harvesting has begun in central India and will expand to northern regions by mid-April.
• Mustard harvest has largely been completed with minimal damage despite unseasonal rains.
• Potato production is estimated to be 8–10% higher due to increased acreage, while maize yields in Bihar are expected to match or exceed last year’s levels.
• However, some seed spices like jeera and isabgol may see lower output due to unsuitable weather conditions.
• Despite slightly lower projected sugar stocks for 2025-26, prices remain stable, with no significant increase compared to last year. This indicates a balanced supply-demand situation.

Comfortable Fertiliser Stocks — For Now

• India currently has adequate fertiliser stocks, with higher year-on-year availability of urea (6.1 mt), DAP (2.4 mt), complex fertilisers (5.7 mt), and SSP (2.5 mt).
• Only potash stocks are slightly lower. These reserves can meet immediate needs.
• Emerging Risk for Kharif Season
  • The concern lies ahead. The Iran conflict has disrupted imports from Gulf countries, which are key suppliers of fertilisers and inputs like LNG, ammonia, and sulphur.
  • As a result, global prices have surged sharply—ammonia prices have risen to $725–750 per tonne, sulphur to over $700, and DAP to about $825 per tonne.
• Supply-Demand Pressure Ahead
  • India’s annual fertiliser demand is substantial—about 40 mt urea, 10 mt DAP, 14 mt complex fertilisers, and 5 mt SSP.
  • Current stocks may only cover the first half of the kharif season, making timely imports and domestic production critical.
  • Experts suggest recalibrating subsidy rates to reflect rising global prices and a weaker rupee.
  • There is also a push to increase domestic production and shift farmers towards complex fertilisers and SSP, which are more nutrient-efficient than urea and DAP.
• Turning Crisis into Opportunity
  • The situation presents an opportunity to promote balanced fertilisation and nutrient efficiency.
  • For instance, the same raw material can produce more complex fertilisers than DAP, improving both supply management and soil health.

Pesticides Also Face Supply Risks

• Along with fertilisers, crop protection chemicals—such as insecticides, fungicides, and herbicides—are also vulnerable to supply disruptions caused by the West Asia conflict.
• These chemicals are essential to protect crops from pests, diseases, and weeds.
• Dependence on Petrochemical Inputs
  • About 55% of global naphtha supply, a key raw material for agrochemicals, comes from or passes through West Asia.
  • Naphtha is processed into base chemicals like ethylene, propylene, and benzene, which are crucial for manufacturing pesticide ingredients and formulations.
  • Disruptions in naphtha and propylene supply have led to higher prices of intermediate chemicals.
  • For example, the cost of isopropylamine, used in glyphosate herbicide, has increased due to higher prices from Chinese suppliers.
  • Other base chemicals like sulphur and methanol are also becoming costlier.
  • The crisis has also driven up packaging costs by 30–40%, including materials like HDPE and PET bottles, pouches, cartons, and labels—all linked to petrochemical supply chains.

Uncertain Impact on Agriculture and Prices

• While the immediate impact is on production costs, the final effect on farmers and food prices is still uncertain, depending on how long the disruption continues and how costs are passed on.

Why in news?

NASA’s Artemis II mission will send four astronauts on a 10-day journey around the Moon, marking the first human mission to the Moon’s vicinity since 1972.

The mission is a flyby and will not land on the Moon. A future mission, planned for 2028, aims to land astronauts on the lunar surface.

What’s in Today’s Article?

• NASA’s Plan for a Permanent Moon Base
• Travel Time: Fast vs Fuel-Efficient Routes
• Artemis II Flight Path and Mission Significance
• India’s Rise in the New Lunar Race

NASA’s Plan for a Permanent Moon Base

• NASA has unveiled a long-term roadmap to establish a permanent human presence on the Moon, aiming to support frequent and extended astronaut stays over the next decade. This marks a shift from short visits to sustained exploration.
• The plan comes alongside preparations for the Artemis II mission, which will send astronauts around the Moon and mark humanity’s return to lunar space after more than 50 years.
  • Unlike the Apollo missions (1969–1972), which focused on brief landings, the new objective is long-term habitation.
• Role of Artemis Missions
  • The Artemis programme is central to this effort. Artemis I (2022) tested an uncrewed mission around the Moon.
  • Artemis II will carry astronauts on a similar path, followed by another test mission and a planned human Moon landing in 2028.
  • NASA aims for regular lunar missions every six months, involving international partners and private companies.

Travel Time: Fast vs Fuel-Efficient Routes

• The Artemis II mission will reach the Moon’s vicinity in 3–4 days, similar to the Apollo missions.
  • More than 50 years ago, America's Apollo missions made history when the first people set foot on the lunar surface. 
• In contrast, recent uncrewed missions like Chandrayaan-3 took weeks or months, using slower but more fuel-efficient routes.
• Faster travel requires more powerful rockets. Artemis II uses NASA’s Space Launch System (SLS), currently its most powerful rocket, while Apollo missions used the Saturn V, the most powerful ever built.
• Both the SLS rocket and Orion spacecraft are relatively new and were first tested in the uncrewed Artemis I mission in 2022, which lasted about 25 days.
• Artemis II marks the first time these systems will carry astronauts on a lunar mission.

Artemis II Flight Path and Mission Significance

• 
• The Artemis II mission will first orbit Earth twice before heading toward the Moon.
• It will circle the Moon and travel up to 6,500 km beyond its far side, marking the farthest distance humans have ever reached in space—far beyond Apollo missions, which stayed about 110 km above the lunar surface.
• This mission is a test flight to validate systems ahead of a planned Moon landing in 2028.

India’s Rise in the New Lunar Race

• When Apollo 11 landed on the Moon in 1969, ISRO had not yet been established—it was created just a month later.
• Today, India has emerged as both a collaborator and competitor in the new era of lunar exploration, reflecting a shift from the earlier US–USSR dominance to a multi-country space race involving China, Japan, and others.
• India’s Moon Mission Ambitions
  • India is planning a human landing on the Moon by 2040, while China is targeting 2030.
  • Although Russia has been less active recently, multiple countries and European partners are expected to play significant collaborative roles in upcoming lunar missions.
• Strategic Alignment with NASA
  • India is a signatory to the Artemis Accords, aligning it with NASA’s framework for peaceful and sustainable space exploration.
  • This opens avenues for closer cooperation between ISRO and NASA in lunar and deep-space missions.
  • The strong partnership between ISRO and NASA is already visible in projects like the NISAR Earth observation mission.
  • NASA’s plans also involve private players, academia, and international partners, giving India opportunities to gain practical experience and technological exposure as it prepares for its own long-term lunar goals.

Context

• India is one of the most disaster-prone countries in the world, with varying degrees of vulnerability across its States; Odisha stands out due to its long coastline and repeated exposure to severe cyclones.
• Over the past two decades, Odisha has significantly improved its disaster preparedness, reducing cyclone-related deaths to near zero through investments in early warning systems, evacuation mechanisms, and infrastructure.
• Despite this progress and high exposure to natural hazards, the 16th Finance Commission has reduced Odisha’s share in disaster funding.
• This paradox highlights deeper structural issues in the Commission’s allocation formula, raising concerns about the effectiveness and fairness of disaster risk assessment in India.

The Revised Disaster Risk Framework

• Shift from Additive to Multiplicative Model
  • The 16th Finance Commission introduced a Disaster Risk Index (DRI) based on a multiplicative formula
• DRI = Hazard × Exposure × Vulnerability
  • This marks a departure from the additive approach used by the 15th Finance Commission.
  • The new model is theoretically sound, as it reflects the idea that disasters occur only when hazards intersect with exposed and vulnerable populations.
  • This new model is consistent with frameworks proposed by the Intergovernmental Panel on Climate Change.
• Increase in Overall Allocation
  • The Commission allocated ₹2,04,401 crore to State Disaster Response Funds, representing a 59.5% increase compared to the previous Commission.
  • While this increase is significant, the distribution methodology has produced uneven and controversial outcomes.

Key Flaws in the Allocation Formula

• Misrepresentation of Exposure
  • The Commission measures exposure using total State population, scaled linearly. This approach is flawed because:
    • Exposure, as defined by the IPCC, refers to populations in hazard-prone areas, not total population.
    • It ignores geographical distribution and concentration of risk.
  • As a result, populous States such as Uttar Pradesh and Bihar receive disproportionately high exposure scores, even if large portions of their populations are relatively safe.
  • Impact on Smaller but High-Risk States
    • Despite having the highest hazard score, Odisha receives a lower Disaster Risk Index due to its smaller population.
    • This demonstrates that the formula prioritizes demographic size over actual risk exposure.
• Oversimplified Measurement of Vulnerability
  • Vulnerability is calculated using per capita Net State Domestic Product (NSDP), inverted so that poorer States rank higher.
  • While this captures fiscal capacity, it fails to account for:
    • Housing quality
    • Healthcare infrastructure
    • Early warning systems
    • Livelihood dependence on climate-sensitive sectors
  • Case Example: Kerala
    • Kerala, despite experiencing devastating floods in 2018, receives a low vulnerability score due to its relatively high per capita income.
    • This highlights how economic averages mask real disaster vulnerability.
  • Case Example: Jharkhand
    • Jharkhand, though highly vulnerable due to poverty and structural fragility, loses funding share because its population size does not sufficiently boost its overall risk score.
• Bias Toward Population Size
  • The multiplicative nature of the formula amplifies the influence of population:
  • Larger States gain disproportionately higher DRI scores
  • Smaller or moderately populated States are penalized
  • Twenty States have lost funding share despite facing real risks
  • This outcome contradicts the objective of a risk-based allocation system.

Consequences of the Current Framework

• The flaws in the formula lead to several critical issues:
  • Misallocation of disaster funds
  • Underserving high-risk but less populous States
  • Ignoring intra-state inequalities
  • Weak alignment with real-world disaster patterns
• Ultimately, the current model reduces disaster risk assessment to a population-based calculation rather than a scientifically grounded evaluation.

Proposed Reforms

• Redefining Exposure
  • Exposure should be measured as the population residing in hazard-prone areas, such as:
  • Coastal cyclone zones
  • Floodplains
  • Earthquake-prone regions
  • Data from the Building Materials and Technology Promotion Council Vulnerability Atlas and Census records can enable precise mapping.
• Developing a Composite Vulnerability Index
  • Vulnerability should include multiple indicators, such as:
    • Housing conditions
    • Health infrastructure
    • Agricultural dependence
    • Insurance coverage
    • Effectiveness of early warning systems
  • These can be derived from national datasets and surveys.
• Institutionalising Risk Assessment
  • The National Disaster Management Authority should be mandated to develop and publish a standardized Disaster Vulnerability Index.
  • This would ensure consistency, transparency, and scientific accuracy in future allocations.

Conclusion

• As climate change intensifies the frequency and severity of natural disasters, the need for an accurate and equitable disaster funding framework becomes increasingly urgent.
• States like Odisha, which face high hazard exposure and have invested heavily in preparedness, must not be penalized by flawed methodologies.
• The current allocation model of the 16th Finance Commission, while theoretically sound, fails in its execution.
• A meaningful reform must prioritise real exposure and multidimensional vulnerability over simplistic metrics.
• Only then can disaster finance in India move beyond a mere headcount to become a true reflection of risk and resilience.