Why in news?

The Strait of Hormuz has emerged as the central flashpoint in the ongoing West Asia conflict, with Iran restricting passage after US-Israeli strikes and the Donald Trump administration responding with a naval blockade.

However, the strait’s importance is not new. Owing to its strategic location controlling global energy flows, it has historically been a site of intense imperial competition, especially during the 18th and 19th centuries when colonial powers like United Kingdom used naval strength and diplomacy to dominate trade routes through the region.

What’s in Today’s Article?

• 16^th Century: Portuguese Conquest and Control
• 7th–18th Century Rivalry in the Strait of Hormuz
• British Hegemony in the Strait of Hormuz
• Models of Control in the Strait of Hormuz
• 20th Century Shift: Oil and Strategic Control in the Strait of Hormuz

16^th Century: Portuguese Conquest and Control

• The Strait of Hormuz was originally controlled by the wealthy Kingdom of Hormuz, a major trade hub linking India, Persia, Arabia, and East Africa.
• In 1515, the Portuguese Empire seized Hormuz Island and transformed it into a fortified toll point, dominating and taxing lucrative spice and silk trade routes throughout the 16th century.
• By the early 17th century, rising competition led the English East India Company to challenge Portuguese control.
• In 1622, a strategic alliance between the British, the Dutch East India Company, and the Safavid ruler Shah Abbas I successfully defeated the Portuguese, ending nearly a century of Iberian dominance over the strait.

7th–18th Century Rivalry in the Strait of Hormuz

• After the fall of Portuguese control, the Strait of Hormuz entered a phase of intense rivalry between the English East India Company and the Dutch East India Company.
• The Dutch, operating as a quasi-sovereign power with military authority, dominated the region during much of the 17th century from their base in Bandar Abbas, leveraging a strong navy and aggressive trade practices to control the spice trade.
• By the 18th century, the Dutch East India Company weakened due to overextension, internal corruption, and high administrative costs in its Asian territories.
• The situation worsened after the Fourth Anglo-Dutch War, which pushed the company into financial collapse.
• Its eventual withdrawal from the Persian Gulf created a power vacuum, enabling the British to expand their influence and establish dominance in the region.

British Hegemony in the Strait of Hormuz

• After the exit of European rivals, the United Kingdom focused on controlling the Strait of Hormuz to safeguard maritime routes to British India.
• To ensure safe passage to Bombay, Britain launched naval campaigns in 1809 and 1819 against the Al Qawasim confederation, accusing them of piracy and destroying their fleets.
  • The Al Qawasim (also known as Al Qasimi) was a powerful 18th-century maritime confederation of Sunni tribes based in the southern Gulf.
• Treaty System and Indirect Control
  • Rather than direct rule, Britain established control through treaties with local Arab rulers, restricting their foreign relations and trade while allowing internal autonomy.
  • These arrangements effectively turned the region into British protectorates.
  • The treaty-bound Sheikhdoms came to be known as the Trucial States, which later evolved into the United Arab Emirates.
  • This system ensured long-term British dominance over the strait without heavy administrative costs.

Models of Control in the Strait of Hormuz

• The Portuguese Empire relied on direct military dominance over the Strait of Hormuz, constructing large fortifications like the Castelo de Nossa Senhora da Conceição and imposing taxes on passing trade.
• However, this heavily militarised system proved costly and unsustainable over time.
• In contrast, the United Kingdom adopted a more cost-effective and strategic approach, combining naval power with diplomacy.
• By integrating local rulers into the Trucial system, Britain allowed internal autonomy while controlling foreign policy, defence, and trade.
• This indirect model enabled Britain to secure the strait efficiently, ensuring control over a key global chokepoint.
• It facilitated the flow of resources from India while promoting the export of British goods, consolidating long-term economic and geopolitical dominance.

20th Century Shift: Oil and Strategic Control in the Strait of Hormuz

• At the turn of the 20th century, British priorities in the Strait of Hormuz shifted from trade protection to energy security.
• In 1901, financier William Knox D’Arcy secured oil exploration rights in Persia, leading to a major breakthrough in 1908 when George Bernard Reynolds discovered oil at Masjed Soleyman—the first large commercial strike in the region.
• Formation of Anglo-Persian Oil Company and State Control
  • Following this discovery, the Anglo-Persian Oil Company was established in 1909.
  • Recognising oil’s strategic importance, especially after Winston Churchill shifted the navy from coal to oil, the British government acquired a 51% stake in the company by 1914, ensuring direct control over energy resources.
• Transformation of the Strait’s Role
  • The strait evolved from a trade chokepoint into a critical energy corridor, facilitating the transport of West Asian oil to Britain.
  • This marked a major shift in global geopolitics, aligning with the growing importance of petroleum during and after the First World War.
  • Through treaty-based control over Gulf states, Britain maintained its dominance in the region until 1971, when it formally withdrew its military presence, marking the end of the Trucial States era.

Why in news?

The Ministry of Statistics and Programme Implementation (MoSPI) has released an 'Approach Paper' outlining its plan to measure the output of India's formal services sector every month through a new Index of Service Production (ISP).

The index will use 2024-25 as the base year and will rely heavily on GST Network data as a key input. Public comments on this proposal have been invited.

A Technical Advisory Committee on ISP (TAC-ISP) was formed in May 2025. It consisted of 24 experts. It has prepared the current approach paper after extensive discussions.

What’s in Today’s Article?

• What is the ISP and Why is it Needed?
• Index of Service Production (ISP)
• Conclusion

What is the ISP and Why is it Needed

• Currently, India publishes two key high-frequency (monthly) economic indicators:
  • Index of Industrial Production (IIP) — measures monthly output of the industrial sector (manufacturing, mining, electricity).
  • Consumer Price Index (CPI) — measures retail inflation and forms the basis of India's headline inflation number.
• Both are closely watched by policymakers, the RBI, and economists to understand the economy's trajectory.
• However, there is no equivalent monthly index for the services sector — a glaring gap given that services contribute more than half of India's GDP and generate millions of jobs.
• What Do Policymakers Use Currently?
  • To understand services sector performance, policymakers and economists currently rely on the S&P Global's HSBC Purchasing Managers' Index (PMI).
  • However, the PMI is a survey-based sentiment index — it captures how businesses feel about activity, not what is actually being produced.
  • It does not measure actual output. The ISP is designed to fill this gap with hard, output-based data.

Index of Service Production (ISP)

• ISP aims to track short-term movements in the services sector. It will be similar in concept to IIP but for services.
• It will be developed by the National Statistical Office (NSO).
• What Will the ISP Cover?
  • The approach paper studies 40+ service sub-sectors, including:
    • Trade (wholesale & retail)
    • Transport
    • Banking and insurance
    • Communication
    • Hotels and restaurants
    • Real estate
    • Professional and technical services
    • Entertainment and recreation
  • Focus is on availability of output data and price deflators.
• Methodology and Global Alignment
  • Based on international best practices.
  • Includes methods for:
    • Data standardisation
    • Use of price deflators (to adjust for inflation)
• What Data Sources Will the ISP Use?
• MoSPI plans to draw from three key data sources:
  • GST Network (GSTN) Data — Provides information on production and outward supplies across different sectors and will serve as the primary data source for monitoring services sector output. However, sectors exempt from GST — such as health and education — cannot be captured through this route.
  • Administrative Data from Ministries and Organisations — Sector-specific data from relevant government bodies will supplement GSTN data for sectors not covered by GST.
  • Annual Survey of Incorporated Services Sector Enterprises (ASISSE) — MoSPI's own enterprise survey, currently being conducted, will provide additional granularity.
• It should be note that all three data sources exclude the informal services sector.
• The excluded segments — due to data unavailability — account for nearly 33% of total GVA of the services sector.
• Specifically, health and education (which will be excluded until ASISSE results are available) alone account for nearly 10% of services sector GVA.
• How Will Output be Adjusted for Prices?
  • To convert nominal output into real output (adjusted for price changes), a Producer Price Index (PPI) would ideally be used — as it measures the prices received by producers.
  • However, since India does not yet have a comprehensive PPI, MoSPI plans to use non-food CPI and sub-sector specific CPI as proxies in the interim.
    • DPIIT is currently working on revising the Wholesale Price Index (WPI) and developing a full Producer Price Index (PPI).
    • A Working Group has recommended methodologies for compiling PPIs for services sub-sectors like Banking, Insurance, Securities, Pensions, Air Transport, Railways, and Telecom.

Conclusion

• The ISP, once operationalised, will be a transformative addition to India's statistical architecture.
• It will give policymakers — including the RBI's Monetary Policy Committee — a far more accurate and timely picture of the services sector, which is the backbone of India's economy.
• It will also reduce India's dependence on private sector survey-based indices like the PMI for understanding services output.
• The initiative reflects MoSPI's broader push toward evidence-based policymaking through better data.

Why in the News?

• India and New Zealand have signed a comprehensive Free Trade Agreement (FTA) with investment commitments & expanded market access.

What’s in Today’s Article?

• India-New Zealand FTA (Concept, Key Aspects of the FTA, Challenges, etc.)

Free Trade Agreement: Concept

• FTA is a pact between countries to reduce or eliminate tariffs, quotas, and trade barriers.
• It aims to enhance trade flows, investment, and economic integration while improving market access for goods and services.

Key Aspects of India-New Zealand FTA

• This is India’s seventh FTA in the past five years, after agreements with Mauritius, the UAE, Australia, European Free Trade Association countries, the UK and Oman.
• Tariff Liberalisation and Market Access
  • The agreement provides duty-free or preferential access for a large number of Indian exports to New Zealand.
  • Sectors such as textiles, pharmaceuticals, engineering goods, and agricultural products are expected to benefit significantly.
  • This improves India’s export competitiveness in a developed market.
• Investment Commitments
  • New Zealand has committed to investing approximately $20 billion in India over a defined period.
  • The investment is expected to flow into infrastructure, renewable energy, food processing, and technology sectors.
  • This enhances capital availability and supports India’s growth objectives.
• Services Sector Opportunities
  • The FTA includes provisions to facilitate the movement of professionals and service providers.
  • Indian IT professionals, healthcare workers, and education service providers are likely to gain improved access.
  • This aligns with India’s comparative advantage in services exports.
• Agricultural Trade Balance
  • New Zealand is a major exporter of dairy and agricultural products, which has been a sensitive area for India.
  • The agreement is expected to include safeguards or calibrated access to protect Indian farmers while enabling selective imports.
  • Balancing domestic interests with trade liberalisation remains a key feature.
• Regulatory Cooperation and Standards
  • The agreement promotes mutual recognition of standards and regulatory cooperation.
  • This reduces non-tariff barriers and simplifies compliance for exporters.
  • It also improves the ease of doing business between the two countries.
• Strategic and Geopolitical Significance
  • The FTA strengthens India’s engagement in the Indo-Pacific region.
  • It complements India’s broader strategy of diversifying trade partnerships beyond traditional markets.
  • The agreement also signals India’s renewed push towards bilateral trade agreements after exiting RCEP.
• Expected Economic Impact
  • The FTA is likely to boost bilateral trade volumes, which have remained modest compared to potential.
  • It will support India’s goal of becoming a global manufacturing and export hub.
  • The investment inflows and technology partnerships can contribute to job creation and industrial growth.

Challenges and Concerns

• There are concerns regarding competition from New Zealand’s agricultural exports, particularly dairy.
• Domestic industries may require adjustment support and policy safeguards.
• Ensuring effective utilisation of market access remains critical, as seen in previous FTAs.

Context:

• India imports nearly 90% of its crude oil, making it acutely vulnerable to global price shocks, currency fluctuations, and geopolitical disruptions.
• Despite decades of reforms, the country's fuel pricing mechanism remains caught between market logic and political compulsion.
• This is a grey zone that breeds opacity, distorts incentives, and periodically destabilises public finances and oil marketing companies (OMCs) alike.

From APM to 'Managed Deregulation':

• Pre-2010 - The Administered Pricing Mechanism (APM):
  • Before 2010, India operated under the APM, where the government directly fixed petrol and diesel prices — largely insulated from global crude markets.
  • State-owned OMCs like Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) sold fuel below cost, with losses compensated through:
    • Direct subsidies
    • Upstream support (from ONGC and Oil India)
    • Oil bonds — deferred liabilities passed on to future governments
  • While consumers benefited from stable prices, the system severely distorted price signals and strained government finances.
• The reform trajectory:
  • 2010: Petrol deregulated, based on the Kirit Parikh Committee recommendations.
  • 2014: Diesel deregulated.
  • 2017: Daily price revision mechanism introduced.
  • On paper, India embraced market-based pricing. In practice, it never truly let go.

 The Grey Zone - What 'Managed Deregulation' Really Means:

• Structural asymmetry: Prices are nominally linked to global crude rates and the rupee-dollar exchange rate, but government tax policy decisively shapes the consumer outcome.
• Who benefits when crude prices fall?
  • Central and state governments raise taxes silently.
  • OMCs accumulate windfall profits.
  • Consumers pay broadly unchanged pump prices.
• The numbers:
  • Between 2022 and 2025, crude oil prices dropped from $99 to $68 per barrel, but combined tax collections of central and state governments from petrol and diesel increased from Rs 5.24 lakh crore to Rs 6.31 lakh crore.
  • At the same time, oil marketing company profits surged — Rs 83,000 crore in 2024 and Rs 50,000 crore in 2025. However, consumers saw no benefit.
• Who bears the loss when crude prices rise?
  • The current Strait of Hormuz crisis and broader geopolitical tensions are pushing crude prices higher.
  • OMCs are now reporting losses of ~₹20/litre on petrol, and losses of up to ₹100/litre on diesel.
  • Yet retail petrol in Delhi remains around ₹95/litre — held artificially low under political pressure.
  • The system that quietly captured gains during the downcycle is now ill-equipped to absorb losses in the upcycle. An inevitable price hike looms.

Key Challenge - Structural Opacity and Asymmetric Risk:

• The core problem is the absence of a rule-based, transparent pricing architecture.
• This creates -
  • Consumer mistrust: No visible logic behind pump prices.
  • Fiscal distortion: Taxes used as a silent revenue lever rather than a policy instrument.
  • OMC vulnerability: Companies forced to absorb losses that should be passed through.
  • Investment uncertainty: No predictable margin framework discourages private sector participation.
  • Macroeconomic risk: Sudden large price corrections are more destabilising than gradual adjustments.

Way Forward - The Fuel Price Transparency Framework (FPTF):

• The core architecture:
  • The proposed FPTF would make every component of the pump price visible and rule-bound.
  • For example, pump prices should be linked directly to oil prices, exchange rates, ethanol blending, refining and marketing costs, company margin and government taxes.
• Step-by-step calculation:
  • If crude is at $100 per barrel and the exchange rate is Rs 93 per dollar, one barrel/ 159 litres costs Rs 9,300/ Rs 58.5 per litre.
  • Petrol in India is blended with about 20% ethanol. With petrol at Rs 58.5 per litre and ethanol at Rs 60 per litre, the blended cost comes to around Rs 58.8 per litre.
  • Add 15% to cover refining, transport, marketing, dealer commissions, and company margins, bringing the cost to roughly Rs 67.6 per litre.
  • With combined central and state taxes currently around Rs 28.9 per litre, the final pump price comes to about Rs 96.5 per litre — very close to prevailing prices.
• Managing a price hike under FPTF: (Different scenarios)
  • 
  • Key insight: The FPTF does not eliminate price increases — it makes them understandable, calibrated, and accountable. Tax cuts become a policy lever, not a political surprise.

India's 3-Pillar Energy Security Strategy:

• Adopt FPTF: A rule-based, formula-driven pricing system.
• Secure long-term crude contracts: Deepen supply partnerships with Russia and other reliable suppliers, independent of external geopolitical pressure. Supply diversification reduces vulnerability to single-source disruptions.
• Accelerate domestic exploration: Invest aggressively in India's sedimentary basins to reduce the 90% import dependence over the long term. This is as much a strategic imperative as an economic one.

Conclusion:

• India's fuel pricing story is one of reforms half-taken and accountability deferred.
• A FPTF is not merely a technical fix — it is a governance reform. It restores consumer trust, shields OMCs from politically-induced losses, gives governments a calibrated fiscal tool, and sends credible signals to investors in India's energy sector.
• For an economy that runs on imported oil, transparent pricing, diversified supply, and domestic exploration are not policy options — they are macroeconomic necessities.

Context

• The experience of posting a sharp or satirical comment online, only to see it disappear without explanation, reflects a growing concern about the regulation of digital speech.
• This scenario is increasingly plausible in light of the draft amendments to India’s Information Technology Rules released by the Ministry of Electronics and Information Technology (MeitY) on March 30, 2026.
• Though presented as technical clarifications, these amendments signal a deeper transformation in how online expression is governed.
• At stake is not merely content moderation, but the balance between state authority, platform responsibility, and citizens’ fundamental right to free speech.

Expansion of Executive Authority

• Rule 3(4) and Safe Harbour Provisions
  • A central concern within the draft amendments is the expansion of executive power.
  • Rule 3(4) requires digital platforms to comply with a wide range of government-issued instruments, such as advisories, directions, and standard operating procedures, to retain safe harbour protection under Section 79 of the IT Act.
  • This effectively encourages platforms to follow government instructions even when such instructions do not stem from formally enacted law.
• Conflict with Judicial Precedent
  • This provision appears to conflict with the Supreme Court’s ruling in Shreya Singhal vs Union of India, which clearly established that platforms must act against unlawful content only upon receiving a court order or a legally valid government notification.
  • By allowing informal directives to influence content moderation, the amendments risk weakening this constitutional safeguard.
• Implications: Over-Censorship
  • In practice, this creates an environment where platforms may over-censor content.
  • Faced with legal uncertainty and potential liability, companies are likely to adopt a risk-averse approach, removing content pre-emptively rather than defending user expression.
  • This undermines the principle of free speech by making lawful expression vulnerable to administrative pressure. 

Expansion of State Oversight

• Inclusion of Ordinary Users
  • Another significant shift is the expansion of regulatory oversight to include ordinary users.
  • Amendments to Rule 8 bring individuals who post or share news and current affairs content under the purview of government oversight mechanisms, such as the Inter-Departmental Committee.
• Judicial Concerns and Ongoing Challenges
  • The Bombay High Court stayed key provisions of IT Rules in 2021, citing concerns related to freedom of speech under Article 19(1)(a).
  • Similarly, the Madras High Court warned that such oversight could undermine media independence.
  • Despite these unresolved challenges, the draft amendments effectively revive a similar regulatory framework.

Expanded Data Retention Obligations

• Scope of Data Collection
  • The draft amendments also introduce broader data retention requirements.
  • Platforms are required to retain user data in addition to obligations under other laws, potentially resulting in prolonged storage of personal information, browsing history, and communication records.
• Risks and Consequences
  • Extended data retention increases the risk of misuse, data breaches, and unauthorized access.
  • It also contributes to a climate of surveillance, where individuals may self-censor due to the awareness that their online activities are being recorded and stored for extended periods.

Cumulative Impact on Digital Speech

• Interconnected Regulatory Changes
  • While each amendment raises individual concerns, their combined effect is more significant.
  • Informal government directives gain enforceability through safe harbour provisions, oversight expands to include ordinary users, and data retention enhances state access to information.
• Shift Toward Executive Control
  • Together, these changes signal a shift toward a governance model where executive discretion plays a dominant role in regulating online speech.
  • This risks undermining the legal and constitutional frameworks that traditionally protect freedom of expression.

Constitutional and Legal Considerations

• Limits of Delegated Legislation
  • Supporters of the amendments may argue that governments need flexible tools to manage harmful content.
  • However, constitutional principles require that such powers remain within the limits of the parent statute.
  • This principle was affirmed in Indian Express Newspapers vs Union of India.
• Need for Democratic Scrutiny
  • When regulatory rules begin to impose obligations not clearly grounded in law, the balance between regulation and overreach becomes unstable.
  • The short public consultation period further limits meaningful democratic engagement with these changes.

Conclusion

• The draft amendments to the Information Technology Rules raise critical questions about the future of online speech in India.
• By expanding executive authority, increasing oversight, and enhancing data retention, they risk narrowing the space for free expression.
• Ultimately, the challenge lies in ensuring that regulatory frameworks protect both public order and the fundamental right to speak freely.

Context

• The credibility of a democratic system depends heavily on the accuracy and inclusiveness of its electoral rolls.
• In India, the right to vote is guaranteed under Article 326 of the Constitution, making universal adult suffrage a foundational principle.
• However, recent actions by the Election Commission of India (ECI), particularly through its Special Intensive Revision (SIR) exercise, have raised serious concerns.
• The introduction of the term logical discrepancy and the large-scale deletion of voters from electoral rolls have triggered debates about legality, constitutional limits, and democratic fairness.

Citizenship as the Basis of Voting Rights

• Constitutional Provision
  • Article 326 clearly states that every citizen of India above the age of 18, unless disqualified by law, is entitled to be registered as a voter.
  • Citizenship is therefore the fundamental requirement for inclusion in electoral rolls.
• Administrative Responsibility
  • The authority to determine and regulate citizenship lies with the Union Home Ministry, not the ECI.
  • It is the Ministry’s responsibility to specify the documents required to establish citizenship.
  • However, in the absence of an official list from the Ministry, the ECI prescribed its own set of documents during the SIR exercise.
  • Notably, widely used documents such as Aadhaar cards, ration cards, and even voter identity cards were excluded.
  • This created confusion and hardship, especially for rural populations who may lack access to alternative documentation.

Jurisdictional Overreach by the ECI

• A significant constitutional issue arises from the ECI’s actions.
• Under Article 324, the ECI is empowered to conduct and supervise elections, but it does not have the authority to determine what constitutes valid proof of citizenship.
• By prescribing its own documentation requirements, the ECI appears to have exceeded its jurisdiction and encroached upon the powers of the Union Home Ministry.
• This raises concerns about the separation of powers and institutional accountability.

Legal Framework Governing Electoral Roll Revision

• Statutory Provisions
  • Section 21 of the Representation of the People Act, 1950, and Rule 25 of the Registration of Electors Rules, 1960, govern the revision of electoral rolls.
  • These provisions distinguish between:
    • Summary Revision: Conducted before elections
    • Intensive Revision: Conducted in non-election periods due to its comprehensive nature
• Deviation from the Law
  • The SIR exercise conducted by the ECI shortly before elections deviates from this legal framework.
  • Intensive revision is a time-consuming process that involves preparing electoral rolls afresh and cannot be carried out hastily in the run-up to elections.
  • This deviation from established procedures has contributed to administrative chaos and large-scale voter exclusions.

Procedural Violations and Administrative Lapses

• Non-Adherence to Established Rules
  • The Registration of Electors Rules require booth-level officers (BLOs) to conduct house-to-house visits and collect information from residents.
  • Citizens are expected to provide information to the best of their ability, implying flexibility and inclusiveness.
  • However, the ECI’s insistence on strict documentation, often difficult to obtain, contradicts this principle.
  • The removal of millions of voters in Bihar and West Bengal highlights a failure to adhere to these procedural safeguards.
• Denial of Natural Justice
  • Reports suggest that many voters were removed from electoral rolls without being given a hearing. This violates the principles of natural justice, which require that individuals be given an opportunity to present their case before adverse action is taken.
  • Such actions not only breach statutory provisions but also undermine the legitimacy of the electoral process.

Role of the Judiciary and Implications for Democracy

• Role of the Judiciary
  • The response of the judiciary, particularly the Supreme Court, has been perceived as limited.
  • While the Court acknowledged concerns regarding documentation, it stopped short of addressing the broader constitutional issue of jurisdiction.
  • Instead of directing the Union government to clarify acceptable proof of citizenship, the Court merely suggested that the ECI consider including Aadhaar as a valid document.
  • This restrained approach has been criticised for failing to address the root of the problem.
• Implications for Democracy
  • The large-scale deletion of voters, combined with procedural irregularities and legal ambiguities, poses a serious threat to democratic integrity.
  • The exclusion of genuine citizens from electoral rolls effectively disenfranchises them and weakens the principle of universal suffrage.
  • Moreover, the use of undefined categories such as logical discrepancy erodes transparency and public trust in electoral institutions.

Conclusion

• The Special Intensive Revision exercise conducted by the ECI raises critical concerns about constitutional propriety, legal compliance, and democratic fairness.
• The apparent overreach of authority, deviation from statutory provisions, and violation of natural justice principles collectively point to a troubling situation.
• To safeguard the integrity of elections, it is essential that all institutions adhere strictly to their constitutional roles.