CURRENT AFFAIRS | 24 APRIL 2026
CLAT GK + CONSTITUTIONAL LAW & RELEVANT AREA
The Reserve Bank of India, in its April 2026 ‘State of the Economy’ article released with the monthly bulletin on 23 April 2026, has warned that a prolonged West Asia conflict could transmit shocks to India through higher energy costs, disrupted trade flows and volatile financial markets — even as the bulletin reports headline positives including net FDI of $4.62 billion in February 2026, the highest level in 45 months. With Sensex closing at 77,664 (-1.09%), Nifty at 24,173 (-0.84%) and Brent crude above $107/bbl the same day, the bulletin is the Union’s most comprehensive economic readout of the war’s spillovers.
Key Facts at a Glance
| Publication | RBI Monthly Bulletin, April 2026 — Article: ‘State of the Economy’ |
| Net FDI (Feb 2026) | $4.62 billion — 45-month high (highest since May 2022 — $5.31 bn) |
| Gross FDI (Apr-Feb FY26) | $88.30 billion — up 18% YoY |
| Forex reserves | ≈ $700 billion — ~8 months import cover |
| Rupee | 94.1/USD — down 4.2% calendar-year-to-date |
| FPI outflows post-conflict | ₹13,600 crore |
| GDP growth projection | FY26: 7.6% · FY27: 6.9% (projected downshift) |
| CAD (CareEdge — Rajani Sinha) | Projected 2.1% of GDP in 2026-27 vs 1% pre-conflict |
| Market snapshot (23 Apr 2026) | Sensex 77,664 (-1.09%) · Nifty 24,173 (-0.84%) · Brent $107.66/bbl |
Constitutional & Statutory Framework
- Article 112 — Annual Financial Statement (Budget) laid before Parliament.
- Article 150 — form of accounts of Union and States as prescribed by CAG with President’s approval.
- Article 266 — Consolidated Fund of India; no withdrawal without parliamentary authorisation.
- Article 280 — Finance Commission constituted by President every 5 years.
- Reserve Bank of India Act, 1934 — constitutes RBI; regulates monetary policy via MPC (added 2016).
- FEMA, 1999 — governs foreign-exchange transactions; replaced FERA 1973.
- Article 246 + Entry 36, List I — ‘Currency, coinage and legal tender; foreign exchange’ is exclusively Union subject.
- FRBM Act, 2003 — fiscal-responsibility framework; empowers Centre to table Medium-Term Fiscal Policy Statement.
Landmark Cases & Key Organisations
- RBI — India’s central bank; currency authority + banking regulator + monetary policy-maker (Monetary Policy Committee under §45ZB RBI Act).
- FDI vs FPI — FDI implies ≥10% equity and lasting interest (managerial control); FPI is passive portfolio investment. Legal source: RBI Master Direction on Foreign Investment.
- Current Account Deficit (CAD) — net of trade + services + transfers in Balance of Payments. Wider CAD → rupee pressure → inflation pass-through.
- Foreign Portfolio Investors (FPIs) — regulated by SEBI (FPI Regulations, 2019); can exit quickly, making markets volatile.
- Import cover — months of imports that reserves can finance; >6 months is considered adequate per IMF benchmarks.
- CareEdge Ratings — independent domestic rating agency whose chief economist Rajani Sinha has flagged CAD widening to 2.1% of GDP.
CLAT 2027 Angle — Why This Matters
- Economics-in-legal-reasoning passages love the RBI Act, FEMA and BoP — expect questions on who regulates what (RBI vs SEBI vs FinMin).
- Link Article 280 (Finance Commission) with the Centre-State fiscal angle: oil-import-driven deficits hit Centre directly because petroleum taxes are largely Union (Entry 84, List I).
- Remember the ‘trilemma’ (open capital account, independent monetary policy, fixed exchange rate — pick two) if a logical-reasoning or GK passage asks about managed float.
- West Asia shocks = 3 transmission channels: Energy (Brent → CPI), Trade (Suez/Hormuz freight), Finance (FPI exit → rupee).
Mnemonic
SEP-FDI — Supply chains, Energy, Prices, Forex, Deficit, Inflation — six channels a West Asia war hits India through.
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Practice Quiz — 10 CLAT-Style Questions
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Quick answers
Under which Act is the Reserve Bank of India (RBI) constituted?
Reserve Bank of India Act, 1934. RBI was established under the Reserve Bank of India Act, 1934 and began operations on 1 April 1935.
Which Article of the Constitution provides for the Finance Commission?
Article 280. Article 280 mandates the President to constitute a Finance Commission every 5 years to recommend devolution of taxes between the Centre and States.
What is the central feature distinguishing FDI from FPI?
FDI involves management control/lasting interest (≥10%); FPI is passive portfolio investment. FDI (Foreign Direct Investment) entails lasting interest and managerial control (typically ≥10% equity); FPI (Foreign Portfolio Investment) is passive investment in shares/bonds without control.
The Current Account Deficit (CAD) is a component of which macroeconomic statement?
Balance of Payments. CAD reflects the net of goods, services and transfer flows in the current account of the Balance of Payments.
Which Article vests the power to make a law on foreign exchange in Parliament?
Article 246 read with Entry 36 List I (Currency, Coinage & Legal Tender, Foreign Exchange). Foreign exchange falls under Entry 36 of List I (Union List) read with Article 246, giving Parliament exclusive legislative power.
Which statute replaced FERA and governs India's forex management today?
FEMA, 1999. The Foreign Exchange Management Act, 1999 (FEMA) replaced the more restrictive FERA, 1973 to align with a liberalised economy.
