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October 1st Current Affairs

Home / UPSC / Current affairs / UPSC Current Affairs – October 1st

Table of Contents

Green Crackers — Supreme Court permits specified next-generation crackers

Why in News?

The Supreme Court has permitted the use of specified next-generation joint green crackers (commonly called laris) while rejecting a complete blanket ban on firecrackers. The Court has emphasised a balance between environmental protection and the public’s interest in celebrating festivals. It has also given the Centre and expert bodies time until October 15, 2026, to assess the impact of barium-containing variants on ambient air quality.

What are Green Crackers?

Green crackers are fireworks designed to cause less air pollution and particulate emissions than conventional fireworks.

In India, their development was initiated by CSIR–National Environmental Engineering Research Institute (CSIR-NEERI) in 2018.

They use modified chemical formulations and additives such as zeolite/functionalised zeolites to reduce particulate emissions. NEERI-developed formulations have been reported to reduce particulate emissions by at least 30%, with some formulations achieving substantially higher reductions.

Important: Green crackers are not pollution-free. They are only designed to be less polluting than conventional crackers.

What are the key features?

Feature

Green Crackers

Main objective

Reduce air pollution from fireworks

Developed with

CSIR-NEERI and other scientific institutions

Pollutants

Lower particulate emissions

Certification

Approved formulations must meet prescribed standards

Identification

Certified products use traceability mechanisms such as QR codes

Noise

Must comply with prescribed noise limits

Barium

Use of prohibited/banned formulations remains a major regulatory issue

What is the present Supreme Court issue?

The Court is dealing with the long-running dispute over firecracker use in Delhi-NCR, particularly because Diwali coincides with the period of severe winter air pollution.

The present approach involves:

  • No blanket ban on all firecrackers.
  • No unrestricted use throughout the day.
  • Permission for specified next-generation green crackers subject to conditions.
  • Further assessment of the environmental impact of barium-containing variants.
  • Regulatory agencies are expected to ensure compliance with emission, noise and safety standards.

Why is this important for UPSC?

  1. Environment — Air Pollution

Firecrackers contribute to:

  • PM₂.₅ and PM₁₀
  • gaseous pollutants
  • short-term deterioration of air quality
  • noise pollution
  • solid waste generation.

This becomes particularly significant in Delhi-NCR, where winter meteorological conditions can trap pollutants close to the ground.

  1. Science & Technology

Green crackers demonstrate how technological modification of chemical formulations can reduce environmental impacts.

  1. Governance

The issue highlights the difficulty of balancing:

  • environmental protection,
  • public health,
  • cultural/religious practices,
  • livelihood of the fireworks industry, and
  • effective enforcement.
  1. Judiciary & Environment

The Supreme Court has been dealing with firecracker-related environmental concerns for several years, including through the Arjun Gopal case and subsequent orders. In 2025, the Court permitted only specified NEERI-approved green crackers for a limited period in NCR, with restrictions on timing, sale and certification.

India–EFTA Partnership: From Trade Agreement to Strategic Economic Partnership

Why in News?

The India–EFTA Trade and Economic Partnership Agreement (TEPA) completed one year of implementation on 1 October 2026. The agreement, signed in March 2024, entered into force on 1 October 2025. The partnership is being discussed not merely in terms of tariff reduction, but also for investment, employment, technology transfer, clean energy and value-chain integration.

What is EFTA?

EFTA = European Free Trade Association

It is an intergovernmental organisation comprising four European countries:

  • 🇮🇸 Iceland
  • 🇱🇮 Liechtenstein
  • 🇳🇴 Norway
  • 🇨🇭 Switzerland

Important: EFTA is not the European Union (EU).

What is TEPA?

TEPA = Trade and Economic Partnership Agreement

India and EFTA signed TEPA in March 2024, and it came into force on 1 October 2025. It seeks to promote:

  • Trade in goods
  • Trade in services
  • Investment
  • Technology cooperation
  • Employment
  • Supply-chain integration
  • Regulatory and standards cooperation

The agreement is particularly significant because it links trade liberalisation with investment and employment commitments.

Major Features of India–EFTA TEPA

  1. Investment commitment — $100 billion

The EFTA countries have committed to facilitate $100 billion of investment in India over 15 years.

The commitment is structured as:

  • $50 billion during the first 10 years
  • Additional $50 billion during the following 5 years

It is linked to the objective of facilitating 1 million direct jobs in India.

  1. Market access

EFTA has offered concessions on 92.2% of its tariff lines, covering about 99.6% of the value of India’s exports to EFTA countries.

India has also provided tariff concessions on a large proportion of EFTA imports.

This can help Indian exporters gain better access to high-income European markets.

  1. Services

The agreement provides opportunities for Indian service providers in areas such as:

  • IT and IT-enabled services
  • Business services
  • Education
  • Professional services
  • Cultural and recreational services

It also provides scope for Mutual Recognition Agreements (MRAs) for selected professions, which can make professional mobility easier.

  1. Technology and industrial cooperation

The partnership can facilitate cooperation in:

  • Advanced manufacturing
  • Precision engineering
  • Clean technologies
  • Renewable energy
  • Life sciences
  • Digital technologies
  • Research and development

This is important for India’s attempt to move from simply exporting goods towards participation in global value chains.

  1. Iceland — Important area of cooperation

A particularly interesting aspect highlighted in the current discussion is cooperation with Iceland.

Geothermal energy

Iceland has extensive experience in the use of geothermal energy, including direct use of geothermal heat.

For India, this has potential relevance for:

  • Himalayan regions
  • Renewable energy
  • Cold-chain and food processing
  • Energy security

The partnership also provides opportunities for cooperation in carbon capture, utilisation and storage (CCUS) and other clean technologies.

  1. Fisheries and blue economy

Iceland has considerable expertise in:

  • Sustainable fisheries
  • Seafood processing
  • Cold-chain logistics
  • Value addition
  • Efficient utilisation of fish resources

Such expertise can be relevant to India’s Blue Economy and fisheries sector.

Why is India–EFTA Partnership Important for India?

Economic significance

Market access → exports → investment → technology → employment

It can help India:

  • Diversify export destinations
  • Attract long-term investment
  • Integrate into global supply chains
  • Improve manufacturing capabilities
  • Expand services exports
  • Generate employment
  • Access advanced technologies

The agreement is therefore broader than a conventional tariff-reduction arrangement.

Challenges

Despite its opportunities, implementation requires attention to:

  1. Investment commitments

The announced $100-billion investment commitment is a long-term facilitation target, so actual investment flows and job creation need to be monitored.

  1. Domestic competitiveness

Indian firms need to improve:

  • productivity,
  • quality,
  • technology,
  • logistics and
  • compliance with international standards.
  1. Trade imbalance

Greater market access can increase both exports and imports. India needs to ensure that domestic industries can compete effectively.

  1. Implementation of standards

Differences in technical and regulatory standards can act as non-tariff barriers even when tariffs are reduced.

India–EFTA vs European Union

India–EFTA

India–EU

EFTA has 4 members

EU has 27 members

TEPA signed in 2024

India–EU FTA is a separate arrangement

TEPA entered into force in Oct. 2025

Separate EU–India trade framework

Focus includes trade, investment and employment

Much larger overall market

EFTA members: Iceland, Liechtenstein, Norway, Switzerland

EU member states

Prelims trap: EFTA ≠ EU.

 

Good Foundation: On India’s Strong Industrial Growth Performance

Why in News?

India’s Index of Industrial Production (IIP) recorded 8% growth in August 2026. This followed 8.8% growth in June, while cumulative IIP growth during April–August 2026-27 was 6.8%. The editorial views the sustained industrial expansion as a positive foundation for stronger economic activity during the festive season.

What is IIP?

The Index of Industrial Production (IIP) is a major indicator used to measure the short-term changes in the volume of industrial production in India.

It covers three broad sectors:

  1. Mining
  2. Manufacturing
  3. Electricity

The IIP is compiled and released by the Ministry of Statistics and Programme Implementation (MoSPI).

Important Change: New IIP Series

A major development is the introduction of the new IIP series with 2022-23 as the base year, replacing the earlier 2011-12 base year.

The new series was released on 1 June 2026. The revision was undertaken to make the index more representative of the current structure of the Indian economy and to align its base year with other major economic statistics such as GDP and WPI.

Why is the base year changed?

The structure of an economy changes over time.

For example:

  • Some industries become more important.
  • New products emerge.
  • Consumption and production patterns change.
  • Older industries may lose relative importance.

Therefore, periodically updating the base year makes an index more relevant to the current economic structure.

Key Features of the New IIP Series

Feature

New IIP Series

Base year

2022-23

Previous base year

2011-12

Released by

MoSPI

New item groups

120 added

Total item groups

463

Manufacturing weight

76.062%

Mining weight

11.053%

Electricity & Gas Supply

10.865%

Water Supply, Sewerage & Waste Management

2.020%

The new series also expands coverage of mining to include minor minerals and rare earth minerals, while adding Water Supply, Sewerage and Waste Management as a new sector.

Recent Industrial Performance

The recent trend is significant:

  • June 2026: IIP growth – 8.8%
  • August 2026: IIP growth – 8%
  • April–August 2026-27: cumulative growth – 6.8%

In August, electricity production grew by 12.3%, according to the new IIP series.

Why does this matter?

Higher industrial production can support:

Production → investment → employment → income → consumption → economic growth

The festive season is particularly important because increased consumer demand can stimulate sectors such as:

  • automobiles,
  • electronics,
  • consumer durables,
  • textiles,
  • retail and
  • logistics.

IIP and Index of Core Industries (ICI)

The editorial also highlights that the trends in IIP and the Index of Core Industries (ICI) are now broadly moving in the same direction.

Index of Core Industries

The 8 core industries are:

  1. Coal
  2. Crude Oil
  3. Natural Gas
  4. Refinery Products
  5. Fertilizers
  6. Steel
  7. Cement
  8. Electricity

These sectors are important because they constitute a significant part of industrial activity and have strong linkages with other sectors of the economy.

Why is this important for UPSC?

  1. Economic growth vs industrial growth

A rise in IIP indicates an increase in industrial production, but it should not automatically be treated as equivalent to overall economic growth.

Economic growth is broader and is generally assessed through indicators such as GDP/GVA, while IIP is specifically an indicator of industrial production.

  1. Quality of growth

For sustainable growth, India needs industrial expansion that generates:

  • productive employment,
  • higher productivity,
  • investment,
  • exports,
  • technological upgrading and
  • stronger manufacturing capabilities.
  1. Manufacturing dominance

Manufacturing has the largest weight in IIP, making developments in this sector particularly important for interpreting India’s industrial performance.

Household Debt: Financing Today Against Tomorrow

Why in News?

The editorial “Household debt, financing today against tomorrow” examines the changing pattern of borrowing by Indian households. RBI data show that household debt increased from 39.2% of GDP in March 2021 to 45.5% of GDP in September 2025.

The important issue is not merely the amount of household debt, but what households are borrowing for and how quickly this borrowing is increasing.

What is Household Debt?

Household debt refers to the money borrowed by households from financial institutions and other formal sources.

It includes:

  • Housing loans
  • Vehicle loans
  • Credit-card loans
  • Personal loans
  • Consumer-durable loans
  • Digital loans
  • Buy Now, Pay Later (BNPL) facilities

In simple terms:

Household debt = spending or investing today using income that will be earned in the future.

Rising Household Debt in India

According to RBI data cited in the editorial:

Period

Household debt as % of GDP

March 2021

39.2%

June 2023

~42%

September 2025

45.5%

Thus, household indebtedness has been increasing over the period.

However, the article points out that India’s household debt-to-GDP ratio remains relatively modest compared with several emerging-market economies. Therefore, the composition and pace of borrowing are important indicators of risk.

Major Change: From Asset Creation to Consumption

This is the most important UPSC point.

Earlier, household borrowing was dominated by housing loans.

A housing loan generally creates an asset — a house.

But borrowing is increasingly shifting towards:

  • Credit cards
  • Personal loans
  • Consumer durable loans
  • Digital lending
  • BNPL
  • Other non-housing retail loans

According to the RBI’s Financial Stability Report cited in the analysis, non-housing retail loans constituted 58.4% of household borrowing in March 2026. Consumption-related borrowing is now close to half of household debt.

Why is this important?

Consider:

Housing loan:
Borrow → buy house → create an asset → repay from future income.

Consumption loan:
Borrow → buy goods/services → no corresponding financial asset → repay from future income.

Therefore, a household dependent heavily on consumption credit can become more vulnerable if its income falls.

Household Savings: A Changing Picture

India has traditionally had a relatively savings-oriented household sector.

The recent trend, however, shows changes in household financial behaviour.

Household net financial savings:

  • 2023–24: 5.2% of GDP
  • 2024–25: around 6% of GDP

Thus, savings have shown some recovery after the pandemic-era decline.

What is Net Financial Savings?

Net Financial Savings = Gross Financial Savings − Financial Liabilities

For example:

If a household saves ₹1 lakh through deposits, insurance, mutual funds etc., but has ₹40,000 in new financial liabilities:

Net financial savings = ₹1,00,000 − ₹40,000 = ₹60,000

Why Rising Household Debt Can Be a Concern

  1. Reduced disposable income

More debt means a larger portion of future income goes towards:

  • EMIs
  • Interest payments
  • Credit-card repayment

This can reduce money available for consumption and savings.

  1. Vulnerability to income shocks

If there is:

  • Job loss
  • Medical emergency
  • Economic slowdown
  • Fall in household income

highly indebted households may struggle to repay loans.

  1. Financial stability

If household defaults increase significantly, it can affect:

Households → Banks/NBFCs → Financial system → Economy

However, RBI research has previously found Indian household borrowing to have remained within sustainable levels over several stress periods.

  1. Digital lending risks

Easy availability of digital credit and BNPL can make borrowing extremely convenient.

This can create risks such as:

  • Over-borrowing
  • Multiple loans
  • High effective interest costs
  • Debt traps
  • Inadequate understanding of loan terms

Role of RBI

The RBI plays an important role in managing risks associated with household credit.

Its tools include:

  • Regulation of banks and NBFCs
  • Risk-weight requirements
  • Monitoring personal and unsecured loans
  • Consumer-protection regulations
  • Regulation of digital lending
  • Financial stability monitoring

The objective is not to prevent households from accessing credit, because credit can support housing, education, entrepreneurship and consumption smoothing.

The objective is to ensure that borrowing remains responsible and sustainable.

Household Debt: Positive vs Negative Effects

Borrowing can help

Excessive borrowing can create

Housing purchase

High EMI burden

Education

Over-indebtedness

Entrepreneurship

Defaults

Consumption smoothing

Reduced savings

Asset creation

Financial vulnerability

Economic demand

Financial instability

Therefore, household borrowing itself is not necessarily harmful. Its impact depends on the purpose, cost, repayment capacity and composition of debt.



Index of Services Production (ISP): A New Monthly Gauge of India’s Services Economy

Why in News?

The Ministry of Statistics and Programme Implementation (MoSPI) has released the trial Index of Services Production (ISP) for July 2026. The new index is designed to provide a monthly measure of changes in services-sector output, similar to how the Index of Industrial Production (IIP) tracks industrial activity.

For July 2026:

  • 17 of 19 services sub-sectors recorded positive year-on-year growth.
  • 10 of 19 recorded double-digit growth.
  • Administrative and support services grew the fastest at 20.9%.
  • Retail trade grew 18.5%.
  • Real estate grew 14.4%.
  • Accommodation and food services grew 12.6%.
  • Banking grew 12.3%.
  • Air transport and repair services contracted by 8.4% and 5%, respectively.

What is the Index of Services Production?

The ISP is a short-term, monthly indicator intended to measure changes in the real volume of output produced by the services sector.

In simple terms:

IIP → Measures industrial production
ISP → Measures services production

This is particularly important because services contribute more than 50% of India’s GVA, yet India previously did not have a comparable monthly index for tracking the sector’s overall production.

Why was ISP needed?

India has traditionally had a monthly indicator for industry — IIP — but not for services.

Policymakers had to depend on several separate indicators, such as:

  • GST collections
  • Bank credit
  • Railway traffic
  • Air passenger traffic
  • Digital transactions
  • Business surveys

These indicators provide information about individual activities but do not give a single comprehensive monthly picture of services output.

The ISP is intended to fill this statistical gap and improve economic monitoring, forecasting and policymaking.

Current ISP Series

Feature

Details

Nodal ministry

MoSPI

Base year

2024–25

Frequency

Monthly

Current status

Trial/experimental series

Coverage

19 services sub-sectors

Coverage of services economy

About 60%

Main purpose

Measure short-term changes in real services output

The first sub-sectoral trial ISP was released for April 2026. MoSPI is currently publishing the index on an experimental basis so that it can test data quality, stability and methodology before regularisation.

Which sectors are covered?

The current trial series covers 19 sub-sectors, including:

Trade

  • Wholesale trade
  • Retail trade
  • Repair services

Transport

  • Railways
  • Road transport
  • Water transport
  • Air transport
  • Warehousing and transport support
  • Postal and courier services

Communication

  • Telecommunications
  • Information and broadcasting

Financial and property-related services

  • Banking
  • Insurance
  • Real estate

Business and professional services

  • IT and computer-related services
  • Professional, scientific and technical services
  • Administrative and support services

Other services

  • Accommodation and food
  • Arts, entertainment and recreation

How is ISP calculated?

This is an important Prelims + Economy concept.

MoSPI uses three broad sources of data:

  1. GST data

For many services, GST outward-supply data are used as an indicator of service production.

For example:

GST outward supplies → estimate of service activity → adjustment for price changes → real output

  1. Administrative data

Used for sectors such as:

  • Railways
  • Air transport
  • Banking
  • Insurance
  1. ASISSE

The Annual Survey of Incorporated Services Sector Enterprises (ASISSE) provides information for areas such as health and education where GST data alone are not sufficient.

Important: Nominal value vs Real output

A major conceptual point is that ISP aims to measure volume/real output, not merely the rupee value of services sold.

Suppose a company’s revenue increases by 10%.

That could happen because:

  • it produced 10% more services, or
  • prices increased by 10%, or
  • a combination of both.

Therefore, price changes have to be removed using appropriate deflators.

Simple formula:

Nominal value → remove price effect → Real output

This allows ISP to capture changes in the actual volume of services produced.

Why is the base year 2024–25?

The trial ISP uses 2024–25 as the base year.

The base year is chosen because it should represent a reasonably normal and recent period and also aligns with the newer statistical series being developed by MoSPI.

Weights are based on the contribution of different service industries to GVA.

Limitations of ISP

The index is currently a trial/experimental series, so some limitations remain.

  1. Formal-sector bias

ISP primarily captures the formal services sector, because much of its data comes from GST-registered entities.

Therefore, a significant part of India’s informal services economy is not directly captured.

  1. Services are difficult to measure

Unlike manufacturing, services are often intangible.

For example:

How do we measure the “quantity” of legal advice, software development or consultancy produced?

This makes service-output measurement more complicated than counting manufactured goods.

  1. Some sectors are excluded

The present framework does not comprehensively cover areas such as:

  • Public administration and defence
  • Several non-market activities
  • Some informal services
  • Government-provided health and education
  • Certain financial activities outside banking and insurance

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