On July 05th, 2025, India & the world witnessed important developments across various sectors. Recent economic and industrial developments highlight India's dynamic growth trajectory. The Reserve Bank of India proactively managed market liquidity, while the MSME sector showcased its significant contribution to job creation and GDP. Concurrently, a major public sector undertaking (PSU) made a strategic move to expand its global footprint, underscoring India's growing presence on the international economic stage.

Awareness regarding daily UPSC current affairs is crucial for cracking the UPSC Prelims, excelling in UPSC Mains. It helps perform well in the UPSC personality test, thus becoming an informed and effective UPSC civil servant.

Below are the current affairs and headlines of the day taken from The Hindu, Indian Express, Press Information Bureau & All India Radio as required for UPSC preparation:

📈💰 RBI's Liquidity Management: VRRR Auction

Source: The Economic Times

Syllabus: GS Paper III (Economy)

In News

The Reserve Bank of India (RBI) on Friday withdrew ₹1,00,010 crore from the banking system through a seven-day Variable Rate Reverse Repo (VRRR) auction. This operation is part of the RBI's ongoing efforts to manage the significant liquidity surplus currently present in the banking system, which had reached around ₹4.04 lakh crore as of July 3.

🔄 Role of Variable Rate Reverse Repo (VRRR)

The VRRR auction is a key instrument in the RBI's liquidity management toolkit, falling under its Liquidity Adjustment Facility (LAF).

• Reverse Repo Operation: In a reverse repo operation, commercial banks lend money to the RBI, depositing their surplus funds with the central bank. In return, the RBI provides government securities to the banks as collateral. This effectively drains liquidity from the banking system.
• Variable Rate: Unlike the fixed-rate reverse repo, VRRR auctions allow the RBI to absorb liquidity at market-determined rates, reflecting prevailing demand and supply conditions for short-term funds. This makes it a more flexible tool for fine-tuning liquidity.
• Mechanism of the Recent Auction: In this specific seven-day VRRR auction, the RBI invited bids from banks to park their surplus funds with it for a week. By accepting ₹1,00,010 crore worth of bids, the RBI effectively removed this amount from circulation, thereby tightening liquidity.

💰 Reasons for Current Liquidity Surplus

The significant liquidity surplus witnessed in the banking system can be attributed to several factors:

• Government Inflows: Month-end government spending, including salary and pension disbursements, injects substantial funds into the banking system as these funds move from government accounts (held with the RBI) to commercial bank accounts.
• Bond Redemptions/Coupon Payments: Maturities of government securities and interest (coupon) payments on existing bonds also release funds into the system.
• Foreign Inflows (Implicit): While not explicitly mentioned in this snippet, strong foreign portfolio investment or foreign direct investment inflows can also contribute to domestic liquidity surplus.

💡 Implications

The RBI's proactive use of VRRR indicates its commitment to maintaining tight control over liquidity conditions. This measure aims to:

• Anchor Short-Term Rates: Keep short-term interest rates (like the overnight money market rate) aligned with the repo rate, which is the RBI's key policy rate.
• Manage Inflationary Expectations: By absorbing excess money, the RBI aims to prevent inflationary pressures that could arise from too much money chasing too few goods and services.
• Ensure Financial Stability: Uncontrolled liquidity can sometimes lead to excessive risk-taking by banks; managing it helps maintain stability.

⚖️ Monetary Policy Stance: This action aligns with a stance of calibrated withdrawal of accommodation or maintaining a tight monetary policy, depending on the broader inflation and growth outlook.

🏭🤝 MSME Sector: Jobs and GDP Contribution

Source: AIR

Syllabus: GS Paper III (Economy)

In News

Union Minister for Micro, Small & Medium Enterprises (MSME), Jitan Ram Manjhi, recently highlighted the significant contributions of the MSME sector to India's economy. He stated that the sector has created over 28 crore employment opportunities in the past 10 years and contributes approximately 30% to India's Gross Domestic Product (GDP). He further noted that the number of registered MSME units has increased fifteen times in the last five years.

📊 Multi-dimensional Contributions

• Jobs & Livelihood: The figure of over 28 crore employment opportunities created in the last decade underscores its massive absorptive capacity for the workforce, including skilled, semi-skilled, and unskilled labor. Specific mention of over 80 lakh jobs through the Prime Minister's Employment Generation Programme (PMEGP) demonstrates direct government support initiatives contributing to this. The growing number of registered units on the Udyam Registration Portal (crossing 20 crore in total employment reported since July 2020) further validates this trend.
• GDP Share: Accounting for 30.1% of the Gross Value Added (GVA) to the GDP, MSMEs are crucial drivers of economic output. This signifies their role across various sectors, not just manufacturing.
• Manufacturing Output: With a 35.4% share in the manufacturing sector output, MSMEs are integral to India's industrial base, contributing to local production and reducing import dependence for many goods.
• Exports: Their substantial contribution of 45.73% to the country's total exports is critical for India's balance of payments and earning foreign exchange. It also indicates the increasing competitiveness and quality standards of Indian MSME products in global markets.

📜 Government Initiatives and Policy Support

The remarkable increase (fifteen times) in registered MSME units in the last five years is a testament to government support and policy reforms. Key initiatives include:

• Udyam Registration Portal: A simplified, online, and paperless registration process for MSMEs, which has significantly boosted formalization and access to government schemes.
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): Provides collateral-free credit to MSMEs, addressing a major challenge of access to finance.
• Public Procurement Policy: Mandates central ministries, departments, and Public Sector Undertakings (PSUs) to procure a certain percentage of their annual requirements from MSMEs.
• Interest Subvention Schemes: To reduce the cost of borrowing for MSMEs.
• Delayed Payment Mechanism (MSME Samadhaan): To address the crucial issue of delayed payments from buyers to MSMEs.

🚧 Challenges: Despite their contributions, MSMEs face challenges such as access to formal credit, technology adoption, market access, quality certification, and competition from larger players. Government policies continuously aim to address these issues.

🌍🔩 SAIL's Global Expansion: Dubai Office

Source: PIB

Syllabus: GS Paper II (Governance)

In News

Steel Authority of India Limited (SAIL), one of India's largest public sector steel producers, has inaugurated its first overseas Representative Office in Dubai, United Arab Emirates (UAE). This strategic move marks a significant step in SAIL's global expansion strategy and aligns with India's broader vision of enhancing the global presence of its steel industry and contributing to the target of 300 million tonnes crude steel production by 2030.

🇦🇪 Strategic Choice of Dubai

Dubai's selection as the location for SAIL's inaugural international office in West Asia is highly strategic due to several factors:

• Gateway to MENA Region: Dubai serves as a crucial commercial and logistical hub for the entire Middle East and North Africa (MENA) region, offering SAIL direct access to these rapidly developing markets with high demand for steel in infrastructure and construction.
• Investor-Friendly Environment: The UAE, particularly Dubai, is known for its conducive business environment, stable regulatory framework, and liberal foreign investment policies, which ease the process of establishing and operating international offices.
• Logistics Hub: Dubai's world-class port facilities (like Jebel Ali), airports, and connectivity make it an excellent logistics hub, facilitating efficient import and export of steel products. This reduces lead times and costs for international trade.
• Proximity to Emerging Markets: Its geographical proximity to other emerging steel markets in Africa and Central Asia further enhances its appeal, allowing for efficient market penetration.
• Strong India-UAE Ties: The robust and growing bilateral trade and economic relations between India and UAE, solidified by agreements like the Comprehensive Economic Partnership Agreement (CEPA), provide a favorable backdrop for such ventures, benefiting from reduced tariffs and streamlined trade.

🎯 Multifaceted Objectives of the Dubai Office

• Boost Exports: The primary objective is to significantly increase SAIL's steel exports, reducing reliance on the domestic market and capitalizing on international demand for Indian steel products.
• Deepen Industry Linkages: Establishing a physical presence allows for closer engagement with international clients, distributors, and other industry stakeholders, fostering stronger business relationships, addressing customer specific needs, and understanding market trends directly.
• Market Intelligence: The office will serve as an intelligence gathering unit, providing real-time insights into global steel prices, market trends, competitive landscape, and regulatory changes. This proactive intelligence gathering is crucial for dynamic market strategies.
• Brand Promotion: It will enhance SAIL's brand visibility and reputation as a reliable global supplier of quality steel products, building trust and recognition in international markets.
• Facilitate Raw Material Sourcing (Indirectly): While primarily export-focused, a global presence can also indirectly aid in better understanding international raw material markets (like coking coal, iron ore) for future sourcing strategies, optimizing the supply chain.

🇮🇳 Alignment with National Goals

This move by SAIL is a direct step towards achieving India's ambitious National Steel Policy target of increasing crude steel production capacity to 300 million tonnes by 2030-31. Expanding global markets is crucial for absorbing such large production volumes and making India a net exporter of steel. It also aligns with the "Make in India, Make for the World" vision, promoting Indian manufacturing capabilities globally. The simultaneous opening of offices by other PSUs like NMDC (iron ore) and MECON (engineering consultancy for metals) in Dubai further underscores a coordinated national push for global engagement in the metals and mining sector, creating a synergistic Indian presence.

🎯 Question No. 1

With reference to the Reserve Bank of India's (RBI) recent liquidity management operations, consider the following statements:

1. The RBI withdrew ₹1 lakh crore from the banking system through a seven-day Variable Rate Reverse Repo (VRRR) auction.
2. The primary aim of this VRRR auction was to infuse liquidity into the banking system.
3. The banking system currently has a significant liquidity surplus, partly due to month-end government inflows.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

✅ Correct Answer: (c)

ℹ️ Explanation:

• Statement 1 is correct: The news states, "The Reserve Bank of India-RBI has removed 1,00,010 crore rupees from the banking system through the seven-day variable rate reverse repo (VRRR) auction."
• Statement 2 is incorrect: The move is "aimed at reducing the excess liquidity currently present in the banking system," not infusing it. VRRR is used to absorb liquidity.
• Statement 3 is correct: The news states, "As per the RBI's latest data, the banking system had a liquidity surplus of around Rs 4.04 lakh crore as of July 3... largely due to month-end government inflows such as salary and pension disbursements."

🎯 Question No. 2

What is the purpose of the Reserve Bank of India (RBI) regularly conducting Variable Rate Reverse Repo (VRRR) auctions?

(a) To increase the lending capacity of commercial banks.

(b) To provide long-term funds to the government.

(c) To manage liquidity in the system and keep short-term interest rates aligned with its monetary policy stance.

(d) To directly finance infrastructure projects in the country.

✅ Correct Answer: (c)

ℹ️ Explanation: The news explicitly states, "The RBI regularly conducts VRRR auctions to manage liquidity in the system and keep short-term interest rates aligned with its monetary policy stance."

🎯 Question No. 3

With reference to the Micro, Small and Medium Enterprises (MSME) sector in India, consider the following statements as per the Union Minister's recent remarks:

1. The MSME sector has created over 28 crore employment opportunities in the past decade.
2. It contributes approximately 30% to India's Gross Domestic Product (GDP).
3. The number of registered MSME units has increased fifteen times in the last five years.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

✅ Correct Answer: (d)

ℹ️ Explanation: All three statements are directly mentioned in the news:

• "MSME Ministry has created over 28 crore employment opportunities in the past 10 years."
• "The Ministry contributes approximately 30% to the GDP." (Also mentioned as 30.1% in another snippet).
• "The number of registered MSME units has increased 15 times in the last five years."

🎯 Question No. 4

Apart from its contribution to GDP and job creation, which of the following areas also receive significant contributions from the MSME sector in India, as highlighted by the Union Minister?

1. Manufacturing sector output
2. Country's total exports
3. Prime Minister's Employment Generation Programme (PMEGP)

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

✅ Correct Answer: (d)

ℹ️ Explanation: The news states:

• MSME contributes "35.4% to the manufacturing sector."
• MSME contributes "45.73% to the country's total exports."
• "Over 80 lakh employment opportunities have been created through the Prime Minister's Employment Generation Programme."

🎯 Question No. 5

Steel Authority of India Limited (SAIL) recently opened its first overseas office in Dubai. What is the primary purpose of this strategic move?

(a) To relocate its manufacturing operations to a cheaper base.

(b) To solely focus on importing raw materials from the Middle East.

(c) To boost steel exports, deepen industry linkages, and reinforce India-UAE trade ties.

(d) To establish a direct retail presence for steel products in the UAE.

✅ Correct Answer: (c)

ℹ️ Explanation: The news states, "Positioned as a strategic hub, the Dubai office will help SAIL boost steel exports, deepen industry linkages, and reinforce India-UAE trade ties."

🎯 Question No. 6

Which of the following aspects of Dubai's profile makes it an ideal base for Steel Authority of India Limited's (SAIL) global expansion?

1. Its role as a gateway to the Middle East and North Africa (MENA) region.
2. Its investor-friendly environment.
3. Its proximity to emerging steel markets.
4. Its position as a logistics hub.

Select the correct answer using the code given below:

(a) 1, 2 and 3 only

(b) 2, 3 and 4 only

(c) 1, 3 and 4 only

(d) 1, 2, 3 and 4

✅ Correct Answer: (d)

ℹ️ Explanation: The news snippets collectively highlight all these points:

• "Dubai's role as a gateway to the Middle East and North Africa (MENA) region."
• "its investor-friendly environment make it an ideal base for expanding into emerging markets."
• "Proximity to emerging steel markets and major global trade routes." (Implicitly covered by "gateway" and "logistics hub").
• "its position as a logistics hub."