4 Economy

MAINS:
4.1 Roadmap for Green Hydrogen Ecosystem in India
Context: The Report, Green Hydrogen: Enabling Measures Roadmap for Adoption in India has been released by the World
Economic Forum.
More on News:
z The report recommends public-private interventions in expediting the adoption of green hydrogen in India.
z It provides pathways for establishing green hydrogen as a viable energy source in India.
What is Green Hydrogen?
z The Ministry of New and Renewable Energy (MNRE)
has defined green hydrogen as hydrogen produced to
emit no more than 2 kg of carbon dioxide per kg of
such hydrogen.
| Currently, producing 1 kg of ‘grey hydrogen,’ as it is
known, emits 9 kg of carbon dioxide.
| While Green hydrogen is produced by electrolysis
splitting water molecules into hydrogen and
oxygen through an electrolyzer using renewable
energy, grey hydrogen requires carbon combustion.
z Applications of Green Hydrogen: It is a key input
in fertilizers and refineries, feedstock in the chemical industry to carry out various processes like ammonia production,
transport, energy storage, power generation, etc.
Status of Hydrogen Production in India:
z Currently, India produces 6.5 million metric tonnes per annum (MMTPA) of hydrogen, predominantly for use in crude oil
refineries and fertilizer production.
z Most of the country’s current hydrogen supply is grey hydrogen, produced using fossil fuels in a process that creates CO2
gas emissions.
Need for Green Hydrogen:
z Increasing Energy Demand: India is currently the third-
largest economy in the world in terms of energy needs, and Advantages of using hydrogen as a fuel:
the country’s demand for energy is set to surge further. z Hydrogen combined with air, produces energy and water vapor.
z Generates more energy per kg than other fuels.
| As per the report, the demand is estimated to grow
35% by 2030. z Acts as feedstock in the refining, fertilizer, and chemical
industries.
z Reducing Energy Import Cost: India’s energy import bill in
2022 was around $185 billion, which is likely to increase if the country continues to supply its growing energy demand
through traditional methods.
| According to the MNRE, National Green Hydrogen Mission, India can reduce fossil fuel imports worth Rs 1 lakh crore
by 2030.
z Climate Goals and Emission Reduction: India commits to achieve net zero by 2070 at the United Nations Climate Change
Conference in Glasgow (COP26), held in 2021.
| Green hydrogen can abate at least 50 MMTPA of greenhouse gases by 2030.

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z Enhancing Energy Security: Green hydrogen is critical to help meet India’s energy security needs while reducing emissions
in hard-to-abate sectors on the path to net zero.
| India has the potential to produce 210 Mtpa (598 Mtoe) of hydrogen from solar and wind and meet 32% of Asia-
Pacific’s (APAC’s) hydrogen demand.
z Forex Earnings: According to the International Energy Agency, there could be a global demand for about 180 million tons
of hydrogen by 2030.
| India may utilize this opportunity to transform itself from an energy importer to an energy provider and exporter.
Challenges with Green Hydrogen Production:
z Utilisation of Grey Hydrogen: Most of the hydrogen
capacity in India is mainly produced using natural gas
within refineries and fertiliser industries.
z Huge production Cost: The production costs of green
hydrogen amount to roughly $4-5 per kilogram, equivalent
to approximately double the price of grey hydrogen.
| The green hydrogen production costs is dependent
upon the:
‹ Round-the-clock renewable energy electricity
costs, which account for approximately 50–70%
of green hydrogen costs.
‹ Electrolyser costs constitute 30–50% of total
green hydrogen production costs.
z Water Intensive Nature of Electrolysers: Water
consumption by electrolyzers is another issue that needs
to be discussed. Electrolyzers consume about 9 liters of
water to produce 1 kg of hydrogen.
| Thus, seawater electrolysis may be helpful, it requires
further development and research work.
z Lack of Harmonised Standards and Codes: Since the
industry is in a nascent stage in India, standards and codes
for manufacture and safety for the entire chain of green
hydrogen is required to be put in place.
| India’s standards allow the use of biomass which also results in carbon emissions for the production of green hydrogen.
| Moreover, diverting scarce renewable energy capacity towards the production of green hydrogen means inadequate
clean electricity being made available for consumers.
z Inadequate Hydrogen Infrastructure: The existing hydrogen infrastructure is insufficient to promote the larger acceptance
of fuel cell vehicles.
Roadmap for Building a Green Hydrogen Ecosystem in India:
z Renewable Energy Capacity Addition: India’s renewable energy potential can support its goals for green hydrogen growth
but needs rapid capacity addition.
| The country’s solar energy potential is estimated at 748 gigawatts (GW) at full capacity.
| However, currently, the total installed solar capacity in India stands at 72.31 GW as of November 2023, or 9% of its
total potential.
z Reducing the Cost of Producing Green Hydrogen: This includes
| Renewable energy incentives and tariffs: For example, the Solar Energy Corporation of India (SECI) recently achieved
a cost of INR 2.6 /kWh through standalone solar and wind tender tariffs while tenders for RTC renewable energy stand
at INR 4–4.5 /kWh.
| Scale and Innovation in Electrolysers: This can be done by increasing direct subsidies for early adopters.
‹ For example, the USA has announced, under the Inflation Reduction Act (IRA), a tax credit of up to $3/kg of
hydrogen.

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 ‹ Supporting long capital investment cycles for technologies with long-term clarity on policies and incentives
‹ Encouraging the development and testing of indigenous electrolyser technology.
z Disincentivize Carbon-Intensive Alternatives: Local, regional and national governments in India might consider diverting
their current spending on fossil-fuel subsidies to projects supporting green hydrogen production and infrastructure-
building.
| For example, Europe has included green hydrogen under the Emissions Trading System.
z Reduce or eliminate costs related to green hydrogen conversion, storage, and transport:
| Energy Conversion: In the short to medium term, allow/encourage companies to form clusters and bid for PLIs/other
incentive schemes.
| Transports: Investing in long-term infrastructure construction, including pipelines for transporting green hydrogen
throughout the country.
‹ For example, the European Union’s European Hydrogen Backbone program aims to develop a pipeline network in
the EU.
| Storage: Storage accounts for roughly 30–40% of total RTC renewable energy costs. This can be reduced by interventions
for energy storage systems throughout the country. .
z Developing Harmonised Standards: Work with other countries/global organizations to develop harmonized global standards
(and/or the ability to certify green hydrogen made in India according to importers’ norms).

4.2 Harnessing the Potential of Fisheries in the Marine States

Context: NITI Aayog has recently hosted a National Workshop on “Harnessing Potential of Fisheries in the Marine States”.
More on News:
z Deliberation on Critical Aspects of Marine Fisheries: The key stakeholders
from Central and State Governments, Researchers, Industry Representatives
and practitioners deliberated upon critical aspects of realizing India’s vast
marine fisheries.
| Such as sustainability practices, export competitiveness, infrastructure
gaps and livelihood challenges facing India’s marine fishing industry
across states.
z NITI Aayog applauded the achievement of Andhra Pradesh in the fisheries
sector and emphasized the need to address the regional disparities in terms
of production and productivity in marine fisheries.
z Marine Fisheries Management: Fisheries are state subjects under the
Seventh Schedule of the Constitution of India. Fishing and fisheries beyond
territorial waters are on the Union list.
Potential of Marine States in India’s Fisheries Sector in the Marine States:
z Improving Fishermen’s Income: The total fisheries potential of India has
been estimated at 22.31 million metric tons, of this, the marine fisheries
potential stands at an estimated 5.31 million metric tons, tapping this
potential may help in doubling fishermen’s income by 2025.
z Boosting Seafood Exports: In 2021-22, the country exported 1.36 million MT
of seafood worth US $ 7.76 billion which is an all-time high export by value.
| The PMMSY lays out ambitious goals for FY 2025, doubling exports to
US$ 12.28 billion.
z Providing Employment Opportunities: Fisheries is a fast-growing sector in
India, which provides employment to more than 28 million people.
z Ensuring Nutritional Security: Fish is ‘nature’s superfood’ and an important
source of proteins and healthy fats, source of essential nutrients including omega-3 fatty acids, iodine, vitamin D, and
calcium.

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Challenges Associated with India’s Fisheries Sector in the Marine States:
z Infrastructure Gaps: Inadequate cold chain facilities can lead to
post-harvest losses. The post-harvest management in the marine
fisheries sector suffers from inadequate infrastructure in landing
centers and fishing harbors such as a lack of cold storage facilities,
logistic facilities, etc.
z Climate Change and Extreme Weather Events: Marine fisheries
sectors across the globe are going through challenging times due to
climate change issues, change in ocean temperature and the
current rate of marine biodiversity loss due to exploitative fishing
practices.
| For instance, in Kerala, marine fish production declined in
2019-20 and 2020-21, mostly due to the rough weather at sea.
z Conflicts between India and Neighbouring Countries: This conflict
primarily arises from fishermen’s violations of national jurisdiction
while pursuing fish as they lack navigational devices to forewarn
them of trespassing their jurisdiction.
| Problem between India and Pakistan: Fishermen in Okha in
Gujarat accidentally trespassing on Indian jurisdiction being
caught by Pakistan’s navy patrols.
z Deep Sea Trawling: This bottom trawling is done with some gears
that can harm the marine life as it is a method that is
infamous for catching huge number of fishes as well as Inland Fisheries:
disrupting sea life. Sharks, Sea turtles and coral reef are z Inland Resources: They are in the form of rivers and canals,
the most vulnerable victims which also damages tourism. floodplain lakes, ponds and tanks, reservoirs, brackish water,
saline/alkaline affected areas, etc.
| Deep sea trawling is famous in the Palk strait located z Atmanirbhar Bharat package for the fisheries sector: PMMSY
between the India and Sri Lanka, where, for every 3 km has successfully pulled inland fisheries from traditional
there are approximately 2000 trawlers operating. waters, and infused technology, inspiring many talented and
enterprising youth to venture into fisheries.
z Illegal, Unreported, and Unregulated (IUU) Fishing:
Within India, IUU fishing typically has been viewed as a
non-traditional security concern that includes food and economic
security, as well as broader societal and political issues.
| IUU fishing activities push illegal activities like human trafficking
and smuggling of drugs and arms in fishing vessels.
z Other Challenges: Waste management, exploitation of middlemen,
the drudgery of fisherwomen engaged in the processing sector,
certification and traceability, etc. are other factors limiting the
growth of the marine fisheries sector in the country.
Way Forward:
z Sustainable Fisheries Practices: Encourage and promote sustainable
fishing practices to ensure the long-term health of marine ecosystems.
This can involve implementing regulations, adopting eco-friendly
fishing methods, and promoting responsible harvesting.
| For instance, regulations like the Kerala Marine Fishing
Regulation Act (KMFRA) were amended to strictly regulate the
fisheries sector, such as preventing juvenile fishing. This led to
an increase of 26% in marine capture in 2018-19.
z Infrastructure Development: Address infrastructure gaps in the
marine fisheries sector by investing in developing cold chain
facilities, upgrading landing centers, and improving fishing harbors.

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 | For instance, schemes like PMMSY aim to address significant productivity and production gaps in the fisheries sector
by enhancing post-harvest infrastructure and management.
z Climate Resilience: This may include developing strategies and measures to address the impact of climate change and
extreme weather events, including early warning systems and climate-resilient infrastructure.
z Diversification and Value Addition: Encourage diversification in the fisheries sector by promoting activities such as
ornamental fisheries.
| Additionally, supports value addition through improved processing techniques, certification, and traceability, which
can enhance the export competitiveness of Indian seafood.
z Technology Adoption: Promote technology adoption in marine fisheries, including using advanced aquaculture techniques.
| For instance, Geographical Information Systems (GIS) combined with other technology like NavIC or GPS can be utilized
with fishing vessels to reduce the instance of international trespassing and for improved spatial areas management
where fishermen are assigned the rights to harvest.
z Providing Subsidies to Fishermen: The subsidies can be direct and indirect. Direct subsidies include those for the purchase
of vessels, gear, engines, etc. Indirect subsidies include financial assistance through welfare schemes, construction of ports,
fishing harbours etc.
4.3 Agricultural Export Policy of India
Context: The Indian government targets to double agricultural exports to
around $100 billion by 2030.
More on News:
z Current Agricultural Export Value: The value of India’s agricultural exports
was $52.50 billion in 2022-23, while in 2021-22 it was $50.21 billion.
z Need for Accelerated Growth: Thus, the growth will need to be
accelerated significantly in order to attain the target of $100 billion,
which will help push agricultural growth in the country and raise
farmers’ incomes.
Agriculture Export Policy in India:
z It is framed with a focus on agriculture export oriented production,
export promotion, better farmer realization and synchronization within
policies and programmes of Government of India.
Agriculture Export Policy, 2018:
z It is the most recent agricultural policy of India aimed at doubling
agricultural exports and integrating Indian farmers and agricultural
products with the global value chains.
Challenges Faced by Indian Exports:
z Expiry of Nairobi Package: The 10th Ministerial Conference (MC)
at the World Trade Organisation (WTO) in 2015 in Nairobi provided
India a sunset clause for developing countries and LDCs to phase
out export subsidies provided by them for their agriculture exports.
| Thus, India is bound to put an end to its export subsidies by
the end of 2023.
| India’s large public stockholding for food security is a
contentious issue and the US dragged India to the WTO,
challenging Indian export subsidy programs as trade distorting
and WTO non-compliant.
z Limited Agri-Export Basket: According to the Global Trade Research
Initiative (GTRI), India’s agri-export basket is dependent on just
five commodities making the sector vulnerable to fluctuations in
global prices and demand.

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 | These five products - Basmati Rice, Non-basmati Rice, Sugar, Spices, and Oil Meals- account for 51.5 percent of India’s
total agriculture exports.
z Public stockholding (PSH) is a policy tool used by governments
z India’s Uncertain Trade Policies: India has banned exports
to procure, stockpile and distribute food when needed. Ex:
of those products in which it has held a leadership position
MSP scheme.
in the world market for several years. z Agricultural and Processed Food Products Export Development
| Imposing restrictions not only affects global food Authority (APEDA): It is a statutory body under the Ministry of
security, particularly for less affluent nations in the Commerce and Industry responsible for promoting export of
Global South but also undermines India’s reputation agricultural and processed food products from India.
as a dependable food supplier.
z Infrastructural Issues: The sector is hindered by inadequate cold
chain infrastructure (CCI) and inefficient logistics and there is little
awareness of the need for farmgate packhouses (pre-cooling units
with cold rooms) or other CCI components.
| This leads to spoilage and export competitiveness issues,
including problems related to the quality of products.
| According to the APEDA, approximately 40% of the country’s food
is spoiled due to this impacts the farmer’s income.
z Small and Fragmented Landholdings: Small and marginal landholdings,
coupled with a lack of access to credit present challenges in transitioning
to commercial production.
| Small and marginal farmers with less than two hectares of land
account for 86.2% of all farmers in India.
z Geopolitical Conflicts: India’s agricultural exports have faced the
logistical challenges arising from the Red Sea crisis which resulted in
high freight rates and container shortages.
| About 15 percent of global shipping traffic transits through the
Suez Canal, the shortest shipping route between Europe and Asia,
connecting the Red Sea and the Mediterranean.
| Iran-aligned Yemen Houthi militant group recently
launched a drone attack on a cargo vessel in response
to Israel’s assault on the Gaza Strip.
Reforms Needed to Push Indian Exports:
z Diversification of Food Export Basket: India needs to
increase diversification in its food export basket to contain
the risk to overall exports with decline in the production
of one item or the other.
| For this, India should give a boost to exports of value-
added millet products. Higher diversification will
help India insulate itself from fluctuations in global
prices and demand.
z Focusing on Increasing Productivity: Competitiveness
results primarily from increasing productivity requires
massive investments in agriculture R&D, seeds,
irrigation, fertilisers, better farming practices including
precision agriculture.
| India’s overall investment in agriculture R&D is
around 0.5% of the agri-GDP which is meagre and
needs to be immediately doubled.

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 | Despite having the highest area under rice cultivation, significantly more than China, India is the second-largest
producer due to its lower yield rates, standing at 2,809 kg/hectare in contrast to 6710 kg per hectare of China.
z Developing Robust Export Infrastructure: To increase agricultural exports, there is an urgent need for the development of
high-quality infrastructure at seaports and airports, which serve as the main exit points for imports and exports.
| Attracting private investment in processing and related activities will help boost exports.
z Focusing on ready-to-eat foods: India’s focus should be on the export of large-scale food processing rather than exporting
only raw materials.
| This includes segments like “ready-to-eat” foods.
z Brand India through Strong Marketing and Promotion: In this regard, the government should allocate separate funds
for campaigns, exhibitions, digital campaigning, and promotion strategies for Indian products both at the domestic and
international levels.
| Trade and industry associations and Indian missions abroad can also play a prominent role in this.
z Balancing Export Earnings with Environmental Costs: Rethinking on the agricultural export policy is needed as India’s export
basket is based on water intensive crops and export earnings do not justify environmental costs in most cases.
| Ex-China, which has higher rice productivity than India does not encourage export of rice as every kg of rice products
can consume up to 80 litres of water.
z Removing Trade Barriers: A task force needs to be established within the Commerce ministry to identify and eliminate trade
barriers.

4.4 Fintech sector in India

Context: The Reserve Bank of India (RBI) recently directed banks and non-banking financial companies (NBFCs) to reserve more
capital for risk weights.
More on News:
z Enhanced Risk Weight Requirement: The mandatory
risk weight requirement has been increased by 25
percentage points, which would apply to unsecured
personal loans, credit cards and lending to NBFCs.
| Risk weight is the amount that institutions need
to set aside in order to avoid insolvency and
protect its depositors and investors.
z Rise in cost of Loans: Banks and NBFCs will need
more capital, which will lead to an increase in the
interest rates for loans to consumers. This will have
a direct impact on fintech firms.
| Fintech companies facing a funding crunch may be forced to seek capital through the public markets with a greater
share of unsecured loans.
z Decline in Fintech Funding: The year 2023 witnessed
a steep decline in funding by Indian fintech startups,
mainly due to a decline in seed-stage funding.
| Seed funding is the funding for a startup when at its
beginning stage.
| FinTechs in India raised only USD 2.1 billion in 2023,
down by almost 300 per cent as compared to 2022.
What are Fintechs?
● Fintech, a combination of the terms “financial”
and “technology,” refers to businesses that use
technology to enhance or automate financial
services and processes.

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Significance in India:
z Fintech Sector: India is home to the third-highest number of fintechs
globally, with more than 9,000 fintechs, holding a 14 per cent share of
Indian start-up funding.
z Adoption Rate: As per the Economic Survey 2022-23, Indian fintech
companies witnessed an 87% adoption rate across varied user bases as
opposed to the global average rate of 64%.
z Digital Transactions: Fintech companies account for 70 per cent of digital
payment transactions, marking a twofold rise in their share during FY22
compared to FY19.
z Financial Inclusion: More than 10 million people and small businesses
gained access to savings accounts, insurance, investment options, and
credit facilities through mobile-based services and digital platforms.
| The adult population with bank accounts increased from 53% to
78%.
z Democratising Lending Process: Peer-to-peer lending platforms are
democratizing lending, providing individuals and small businesses with
access to funds without the need for traditional financial institutions.
| Mobile payment platforms and digital wallets offer users a
convenient and secure transaction method.
z Rise in Public Investment: Investment platforms and robo-advisors are making investing in stocks, mutual funds, and other
financial instruments more accessible..
| These platforms use advanced algorithms and artificial intelligence to provide personalized investment advice, enhancing
the efficiency and affordability of wealth management services.
Challenges Associated with Fintech Lending:
z Cyber Attacks: The increasing digitization of financial
services has increased the risks of cyber threats.
| Recent data from the Indian Computer Emergency
Response Team (CERT-In) highlights that almost
100% of fintech companies had issues related to
privacy, security, and compliance, owing to APIs,
subdomains, and abandoned web applications.
| In 2022, a total of 13.91 lakh cases were reported.
z Regulatory Issues: The absence of a single umbrella
legislation regulating the sector’s functioning, constantly
evolving regulations and numerous regulatory approvals
pose a major challenge to FinTechs in India.No specific
set of laws and regulations governing fintech services and
products in the country.
z Illegal Digital Lending: The ease of access to fintech
loan apps has led to a rise in numerous instances of
harassment, unethical recovery practices and suicide
linked to unregulated lending apps.
| Digital lending is a method that uses digital platforms
for “ customer acquisition, credit assessment, loan
approval, disbursement, recovery, and associated
customer services.”
| A recent incident reported involved the arrest of two
individuals from Assam linked to a case where an individual’s suicide was connected to an online loan probe.

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z Financial Illiteracy: There is a lack of necessary digital exposure and adequate digital knowledge to understand the risks
associated with online transactions.
| This lack of awareness leads to risky behaviours, such as sharing passwords and personal information.
z Infrastructural Issues: Due to network/ connectivity problems in rural areas, online transactions are more prone to
interruptions and slower response times, leading to security threats.
z Co-Lending Partnerships: There is an increasing number of fintech firms entering into co-lending partnerships with banks
and Non-Banking Financial Companies (NBFCs).
| This has created complicated lending layers, posing challenges for the regulator in monitoring connected-party lending.
| In response, the RBI has advocated for a comprehensive framework to oversee such lending, ensuring uniform application
across all entities regulated by the RBI.
z Data Privacy Issues: The RBI has mandated that all financial institutions conduct Know Your Customer (KYC) verification for
each customer.
| It necessitates huge amounts of company funds, given the substantial number of customers and the need for the data
to be collected, stored, and monitored.
| Private data and sensitive information are at risk with every digital and electronic transaction as the businesses exploit
this data for financial gain.
Way Forward:
z Strengthening the Cybersecurity Infrastructure: A robust cybersecurity regulation is the first defence against cyberattacks
and fraud.
| Fintech companies can collaborate with local law enforcement agencies to address cyber threats specific to the region.
| Reporting mechanisms for cybercrimes can also be established to encourage users to report any suspicious activities.
z Improving the Cybersecurity of payment infrastructure in rural India: Fintech applications should have robust security
features, including multi-factor authentication, encryption, and biometric recognition.
| These security layers can significantly reduce the risk of unauthorised access to financial data. Companies must prioritise
the security of users and personal and financial data.
z Addressing Infrastructural issues: Given the intermittent internet connectivity in rural areas, fintech companies should
enable offline access to financial services simultaneously.
| This will ensure that users can perform essential transactions with limited or no internet connectivity..
z Digital Literacy Programs: Fintech firms should invest in digital literacy programs to educate rural users about the risks and
best practices associated with online transactions.
| These campaigns can reach a broader audience by collaborating with local organizations and government bodies.
| Offering 24/7 customer support and educational resources in local languages can bridge the knowledge gap and help
rural users navigate any issues.
| Fintech companies can organise community outreach programs to connect with rural users directly.
z Creation of a unified regulatory framework on connected lending: As suggested by RBI, this must be created to regulate
connected lending – where a borrower might influence the lender’s decision – for all its regulated entities.
z Compliance Program for Fintechs: Fintechs should develop a compliance program to ensure they comply with all applicable
laws and regulations.
| It should include policies and procedures for managing risk, conducting due diligence on customers and counterparties,
and reporting suspicious activity to the authorities.
4.5 India’s Regional Income Disparities
Context: The income disparities among India’s states over the past three decades have increased significantly.
More on News:
z Geographical Divide of SDP: A clear geographical distinction z State Domestic Product: The State Domestic Product is defined
exists between states with per capita State Domestic as the aggregate of the economic value of all goods and services
Product (SDP) above the national average in 2019-20 and produced within the State’s geographical boundaries, counted
those below it. without duplication during a specified period, usually a year.

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 | The affluent states are situated in the south, west, and
northwest, while the less prosperous ones are in the north,
center, and east (refer to the map).
| During 1990-91, the per capita State Domestic Product (SDP)
of the higher-income states was 1.7 times that of the lower-
income states which increased to 2.5 times by 2019-20.
z Prominent Distinction of SDP in the Manufacturing and Services
Sector: In manufacturing, the higher- to lower-income states’ per
capita SDP ratio increased from 2.4 in 1990-91 to 3.6 in 2019-20.
| Similarly, the services sector rose from 2.0 to 2.9 over the same
period.
Reasons Behind Regional Disparities in India:
z Historical Factors: The British rulers and industrialists developed only
those regions in India that possessed rich potential for prosperous
manufacturing and trading activities.
| Ex-Maharashtra and three metropolitan cities like Kolkata,
Mumbai and Chennai.
z Failure of Planning Mechanism: The planning
mechanisms enlarged the disparity between India’s
developed and less developed states.
Regional Imbalance Committees:
| Punjab and Haryana received the highest per capita plan outlay from the z B.D. Pande Committee (1968): Strategy
First to the Seventh Plan. States like Gujarat, Maharashtra and Madhya to establish industries in backward areas.
Pradesh also received larger plan outlays in almost all the five-year plans. z Niranjan Nath Wanchoo Committee
z Lack of Growth of Ancillary Industries in Backward States: The Government (1968): Study on regional imbalance.
followed a decentralized approach for the development of backward z Sukhamoy Chakravorty Committee
regions, establishing public sector industrial enterprises in backward areas like (1972): Classification of backward areas.
Rourkela, Barauni, Bhilai, Bongaigaon etc.
| However, due to lack of growth of ancillary industries in these
areas, all these areas remained backward in spite of huge
investment made by the government.
z Failure of India’s Industrialization Strategy: Unlike China, India could
not break its stagnant history of industrialization. Instead, the services
sector emerged as the driver of economic growth.
z Declining Public Investments: The primary factor contributing to the
expanding disparity in per capita State Domestic Product (SDP) is the
increased shift in investment from the public to the private sector
during the post-1991 liberalization era.
| Between 1990-91 and 2019-20, the public sector’s share in gross
fixed capital formation has declined from 40 percent to 23
percent, while the private sector’s share has increased from 18
percent to 38 percent.
z Poor Linkage of Economic Hubs: India’s growth hubs are not connected
with each other, either geographically or via a particular engine of
growth.
| The few growth hubs in India did not lead to spillover effects
leading to skewed distribution of employment across the states
creating pockets of poverty in the poorer states.
z Limited Success of Green Revolution (GR): The benefits were concentrated in Punjab, Haryana and Western UP regions,
creating economic and social disparities among regions.
Way Forward:
z Connecting Value Chains in High-Income States with Low-Income States: Entrepreneurship and labor skills in lower-income
states need to be promoted along with connecting these regions with higher-income states.

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 | At present, the national value chains in industries like vehicle manufacturing are more or less confined to the higher-
income states.
z Skill Development: Immediate actions are required to enhance skill
development and engineering education.
| This will cultivate the potential necessary to attract enterprises from
higher-income states that have either already surpassed or are on
the verge of reaching a stage where their share in the working-age
population is no longer increasing.
z Region-specific interventions: A one-size-fits-all approach is unsuitable
for a diverse country like India.
| It needs a focus on dimensions such as setting up agro-processing
storage unit storage and transportation and generating accessible
employment opportunities supplemented by significant investments
in education and health.
z Relaxing Borrowing Limits for Poor States: The country’s Poorer states
require a long-term fiscal stimulus to catch up with the rest of the country.
| The central government may reduce its borrowing and debt limits to
facilitate more liberal borrowing limits for poor state governments.
| This will enable poorer states to raise their capex spending, raising
growth, and helping them catch up with other states.
z Increasing Female Labour Force Participation Rate: The female labor
force must be empowered to increase their participation rate.
| According to the Periodic Labour Force Survey Report 2022-23, India’s Female Labour Force Participation Rate stands
at 37.0% in 2023.
Conclusion:
The issue of regional development disparity must be given prime importance as 75 percent of the medium-term and 90 percent
of long-term growth in the working-age population will occur in these states. If we fail to boost these states’ income and growth
potential, India’s demographic dividend will become a demographic downfall, which could worsen political instability.
4.6 Indian Aviation Sector
Context: According to the Union Civil Aviation Minister, the government is
working to make India the third largest aviation sector in the world in the
next three years from the fifth position currently.
More on News:
z Increasing Domestic Passenger Market: The domestic passenger
market will grow to 300 million by 2030.
z Increasing Aviation Capacity: On the sidelines of Wings India 2024
in Hyderabad, the Minister said that India should increase its aviation
capacity to 2000 aircraft from the current 700 plus by 2030.
z Wings India 2024: It is the biennial aviation event which brings
together business leaders and policymakers.
Challenges Associated with India’s Aviation Sector:
z Infrastructure: India’s airports face modernization needs due to age
and challenging locations, causing congestion and safety concerns.
Insufficient runway capacity and an outdated air traffic management
system contribute to delays and congestion.
z Regulatory Complexes: The complex regulatory framework in India’s
aviation industry, involving agencies like the Ministry of Civil Aviation,
DGCA, AAI, etc. leads to challenges such as unclear policies and delays
in obtaining permits.

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z Skilled Workforce Shortage: The aviation sector faces challenges due to a shortage of skilled professionals, impacting safety
and causing delays. High training costs and outdated training facilities in India contribute to a skills mismatch.
z Dollar Dependency Impact: Fluctuations in the
dollar rate against the Indian Rupee can severely
impact profits since major expenditures like aircraft
acquisition, maintenance, and lease costs are dollar-
denominated.
z Comparatively Low Penetration: Despite the rapid
growth witnessed in the passenger traffic, its per
capita penetration is still significantly low versus
global average.
| As per data compiled by the World Bank and
Jeffries, India is at 0.13 seats deployed per capita
(domestic air travel penetration) against 0.49 for
China and 0.57 for Brazil.
z High Fuel Costs: In India, the cost of Aircraft Turbine
Fuel (ATF) can account for 50-70 percent of an airline’s
operational expenses.
z Safety Preparation:
| Mock Drill Frequency: According to a media
report citing Japan Airlines’ public relations office,
the carrier’s crew members are trained every year
to evacuate passengers within 90 seconds under
various scenarios, but the frequency of such mock
drills in India is every three years.
Government Policies to Support: Tokyo’s Haneda Airport Accident:
z Increasing Foreign Direct Investment (FDI): Up to 100% FDI z A Japan Airlines Airbus A350 collided with a Japan Coast Guard
under the automatic route is permitted in: Aircraft on the runway at Tokyo’s Haneda Airport. Both planes
caught fire, and five people died.
| Non-scheduled air transport services, Helicopter z Implication for India: India is the fastest-growing aviation
services and seaplanes. market and as more flights take off from India’s major airports,
| MRO for maintenance and repair organizations; flying there is a need to stay vigilant to ensure that a Haneda-like
incident does not happen.
training institutes; and technical training institutes.
| Ground Handling Services subject to sectoral regulations & security clearance.
| Brownfield Airport projects.
z National Civil Aviation Policy 2016 (NCAP): It promotes ease of doing business, deregulation, simplified procedures, and
e-governance. For instance, in April 2020, the GST for MRO services rendered locally was reduced from 18% to 5%.
z Regional Connectivity Scheme or UDAN (‘Ude Desh ka Aam Nagrik’): It is a vital component of NCAP 2016 and plans
to enhance connectivity to India’s unserved and under-served airports and envisages to make air travel affordable and
widespread.
z Digi Yatra Policy: It is an initiative launched by the Ministry of Civil Aviation for providing passengers seamless and hassle-
free experience at airports without the need for verification of ticket and ID at multiple touch points.
z Monetising Assets: The Airport Authority of India (AAI) has formed joint ventures in seven airports and awarded six
airports viz. Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram, Mangaluru for operations, management and
development under public–private partnership (PPP) for a period of 50 years.
| As per National Monetisation Pipeline (NMP), 25 AAI airports have been earmarked for asset monetisation between
2022 and 2025.
z National Air Sport Policy (NASP) 2022: It lays out the vision of making India as one of the top sports nations by 2030, by
providing a safe, affordable, accessible, enjoyable, and sustainable air sports ecosystem in India.

45
Way Forward:
z Technological Impetus & Opportunities: Emerging technologies like artificial intelligence (AI), AR/VR, blockchain, big data,
and machine learning (ML) will maximise operational effectiveness and cut costs.
| Advanced monitoring systems, quicker check-in procedures, effective luggage management, and enhanced flight
services and maintenance will all be made possible by these technologies.
z New Passenger-Handling Manual for Delayed Flights: There is a need to modify rules and conduct of operations to avoid
problems caused by long delays as a personal vendetta against them on the airlines’ part.
| For instance, fog in Delhi has delayed flights, leading to a passenger assaulting pilot announcing that the flight would
be delayed.
z Ensuring Crew and Passenger Safety:
| Crew training: Ensuring the crew is well trained and holding regular drills to ensure safety of passenger and crew
aboard the plane. As per the US Federal Aviation Administration (FAA) regulations, aircraft manufacturers are required
to demonstrate that all passengers and crew members can evacuate a plane within 90 seconds.
| Education: While Indian airlines do make the mandatory safety announcements, the whole process should be
simplified, and the message needs to be conveyed in a more visual manner.
z Efficient Regulatory System: There’s a need for a more clear, consistent, and efficient regulatory system. Achieving
enhanced transparency, accountability, faster reform, and increased engagement with industry stakeholders is crucial for
the industry’s growth and development.
z Upskilling Workforce: Coordination between the industry and educational institutions is crucial to align training programs
with industry requirements.
| For this, there is a need to improve training affordability, updating facilities, fostering collaboration between industry
stakeholders and educational institutions.
4.7 Horticulture Sector in India
Context: The Ministry of Agriculture and Farmers’ Welfare released the Third advance estimate of area and production of
various horticultural crops for the year 2022-23.
More on News:
Total Horticulture Production 2021-22 (Final) 2022-23 (Second advance Estimate) 2022-23 (Third advance Estimate)
Area (in million hectares). 28.04 28.12 28.34
Production (in million tonnes). 347.18 351.92 355.25
z Increase in Horticulture Production: The total horticulture production
estimated for the year 2022-23 is 355.25 million tonnes, which is an
increase of about 8.07 million tonnes from the year 2021-22 (347.18
million tonnes).
z Expansion in Plantation Crops: Production of plantation crops is estimated to
increase to 16.84 million tonnes in the year 2022-23 as compared to 15.76
million tonnes in the year 2021-22 i.e. an increase of about 6.80%.
About Horticulture Sector:
z Horticulture can be defined as the branch of agriculture concerned with
intensively cultured plants directly used by people for food, medicinal
purposes, or aesthetic gratification.
z M. H. Marigowda is considered the father of horticulture in India.
Advantages/Significance of Horticulture Sector in India:
z Horticulture Production: India is currently producing about 320.48
million tons of horticulture in 25.66 million Ha of the area as compared to food grain production, in 127.6 M. ha.
| Higher Productivity than Food Grains: Horticulture occupies only a fraction of the area under agriculture (about 20% of
the total area under foodgrain in 2018-19).

46
 | The productivity of horticulture crops is much higher compared to productivity of food grains (12.49 tones/ha against
2.23 tones/ha.).
z Short Duration Crops: Vegetables are short-duration crops
that are mostly grown on small patches of land by marginal
farmers, often in less than an acre of land.
| As land holdings become increasingly fragmented,
production of vegetables ensures quick returns to
farmers, compared to some pulse varieties that take up to
six months to harvest.
z Employment Generation: Horticulture creates additional job
opportunities in rural areas, expands the range of agricultural
activities, and generates higher incomes for farmers.
| One hectare of fruit production generates 860 man-days
per annum as against 143 man-days in cereal crops.
| The Cashew industry alone employs over 5.5 lakh workers
annually.
z Industrial development: Horticulture plants directly or
indirectly serve as raw material for many industries.
| The plantation crops like tea, coffee, rubber, oil palm, etc.
are the raw materials for industries.
| Growing ornamental plants is an industry in itself.
Aromatic plants like Rose, Jasmine, Tuberose, Sandal,
Khas, etc. are used in the perfumery industry.
Challenges Faced by the Horticulture Sector In India:
z Capital Intensive Nature of Horticultural Crops: The limited
outreach of farm insurance and farm mechanisation, combined with a lack of access to institutional credit for small and
marginal farmers, contribute to lower investment in the sector.
| According to NABARD, approximately 30 percent of agricultural households still avail credit from non-institutional
sources.
z Poor Linkages of Value Chain: The horticulture marketing chain faces challenges due to the perishable nature of fruits and
vegetables, which makes it difficult to store and transport them efficiently.
| Poor logistics and lack of equitable cold storage and warehousing facilities contribute to delays and wastages.
| There is inequitable distribution of the cold storage facilities among the states, with around 59% of the storage
capacity (i.e., 21 MMT) present in the four states of Uttar Pradesh, West Bengal, Gujarat, and Punjab.
z Poor Quality of Seeds: According to the National Horticultural Board, the inadequate availability of quality planting
material was one of the primary reasons for the low productivity of various horticulture crops in India.
z Pests and Diseases: Horticultural crops in India face the possibility of fungal infection and bacterial blights spreading fast
and wide.
| Farmers, facing bacterial blights affecting pomegranate orchards, have been forced to remove their orchards.
| Exporters of potatoes faced similar challenges on account of late blight fungus.
z Poor Coordination Between Horticulture Departments: There appears to be a lack of coordination among state horticulture
departments, with each promoting crops independently without considering the choices made by farmers in other states.
| The oversupply issue, such as the significant drop in tomato prices to one rupee per kg earlier highlights the need for
better market intelligence.
| Farmers require clearer information on future demand and supply to make informed decisions about their crop choices.
z Poor Research and Development (R&D): There is an R&D shortfall in horticulture varieties. Presently, the capacity utilisation
of processing facilities in the country is only around 25 to 30%.
z Insignificant Share in Global Trade: The country’s global horticulture trade remains insignificant, accounting for only 1% of
the global trade in vegetables and fruits.

47
Way Forward:
z Institutional Support: Institutes like the National
Horticultural Board, Agricultural and Processed Food
Products Development Authority, and NABARD need
to provide liberal financial assistance for undertaking
extension services in horticulture.
z Strengthening Post-Harvest Mechanism: Establishing post-
harvest and logistics infrastructure is crucial for efficiently
transporting marketable surplus, preventing farmers from
being compelled to engage in distress sales during harvest.
z Accessibility of Good Quality Seeds: It is imperative to
enhance the accessibility of superior-grade seedlings and
rootstock within the marketplace.
| The Union Finance Minister allocated Rs 2,200 crore to
boost the availability of disease-free, quality planting
material for horticulture crops in Budget 2023.
z Co-operatives in Horticulture: To harness market efficiency
and boost exports, co-operatives in horticulture should be
promoted.
| For instance, HOPCOMS supplies seeds, fertilizers
and insecticides to farmers at reasonable prices and
collects the horticultural produce directly from them
for sale through retail outlets spread across Karnataka.
z Promoting Export Growth through ODOP: Food processing of fruits and vegetables may be done by leveraging the One
District One Product model, to expand the export basket.
| Litchi (Bihar), strawberries (Bundelkhand) and kiwis (Uttarakhand) are being cultivated and processed by farmers for
making juice, jam, jelly, etc., with technical assistance from the Indian Council of Agricultural Research.
| These fruits can be exported by building social capital through farmer-producer organisations (FPOs), which can
leverage the entire horticultural value chain.
z Compliance with International Standards: Horticultural producers have to comply with world-class quality norms (Codex
standards). For-ex, Japan and the US banned the import of mangoes and other fruits from India due to the prevalence of
fruit-fly pest infestation.
z Digitalisation of Horticulture: Climate-smart technologies, biotechnology (for cultivation of Bt Brinjal), and nanotechnology(for
improving the shelf-life of fruits and vegetables) should be promoted to boost exports.

PRELIMS NEWS: Remission of Duties and Taxes on Exported Products

4.8 Govt to Extend Duty Remission Benefits to E-Com- (RoDTEP)
merce Exports z About: The Scheme provides for refund of taxes,
duties and levies that exporters incur in the process of
Context: The Union government will extend export benefits under manufacturing and distribution of goods.
its duty remission scheme (RoDTEP) to e-commerce exports.
z Under the scheme, a rebate is provided for all hidden
More on News: taxes at every level on the exported product that has not
z Present Export status: India’s exports of goods via been refunded under any other existing scheme.
e-commerce is about $1-1.5 billion (through postal and z The RoDTEP scheme is WTO compliant. This means that it
courier exports) in comparison to China’s e-commerce does not violate any international trade agreements.
exports $300 billion annually. z Tax range: The refund rate under the scheme ranges from
z Target: India aims for USD 200 billion in exports through 0.5 per cent to 4.3 per cent of the product’s value, and
e-commerce by 2030, when total merchandise exports it varies depending on the product and the country of
will touch USD 1 trillion. export.

48
4.9 SEBI Unveils Norms For Zero Coupon Instruments By About Annual Startup Awards 2022:
NPOs z Objective: To recognize and reward outstanding Startups
with high potential for employment generation or wealth
Context: The Securities and Exchange Board of India (SEBI) creation, demonstrating measurable social impact.
has issued guidelines for public issuance of ‘zero coupons
zero principle’ instruments by not-for-profit organisations z Release of Ranking: The ranking for the states and union
(NPOs) and listing of such instruments on the Social Stock territories has been released by the department for
Exchange (SSE). promotion of industry and internal trade (DPIIT) under
the commerce ministry.
About ‘Zero Coupon Zero Principle’ Instruments:
z Participating States: Total 33 states and UTs
z These are financial instruments that a non-profit organisation
may use to raise funds. When an entity issues these securities z Category: five categories — best performers, top performers,
and raises money, it is not a loan but a donation. leaders, aspiring leaders and emerging startup ecosystems.
| The borrowing entity does not have to pay interest— z Best Performing States: Gujarat, Kerala, Karnataka and
therefore zero coupon—and does not have to pay Tamil Nadu have ranked as best performing states in the
the principal (zero principal) either. startup ranking for 2022 based on their initiatives taken
to develop the startup ecosystem for promoting budding
| Like any other debt instrument, it will come with a
entrepreneurs.
time duration.
z Top Performers: Maharashtra, Odisha, Punjab, Rajasthan
z Any individual or corporate can buy the security through
and Telangana are categorized as top performers.
SSE once they are open for business.
z Leaders: Andhra Pradesh, Assam, Madhya Pradesh, Uttar
z The Finance Ministry had declared zero coupon zero
Pradesh, Uttarakhand, Goa, Manipur, and Tripura are
principal instruments (ZCZP) as securities for the
categorised as ‘leader’.
Securities Contracts (Regulation) Act, 1956.
z Aspiring leaders: Bihar, Haryana, Andaman and Nicobar
z These instruments will be governed by rules by the SEBI.
Islands, and Nagaland.
z Significance: It will help organizations and corporates to
z Emerging startup ecosystems: Chhattisgarh, Delhi,
utilize their social responsibility funds and support non-
Jammu and Kashmir and Chandigarh, among others.
profit organizations more transparently.
4.11 Extension of Bharatmala Phase 1
About SSEs:
z It is a separate segment within the existing stock exchange. Context: Phase 1 of the Bharatmala Project deadline has
| It helps social enterprises raise funds from the public been extended by six years, to FY 2027-28.
through its mechanism. More on News:
z Background: Finance Minister Nirmala Sitharaman had z The first phase of Bharatmala was announced in 2017 and
proposed to initiate steps for creating a stock exchange was to be completed by 2022.
under the market regulator’s ambit in the 2019 budget z Estimated Cost: The Cabinet Committee on Economic
speech. Affairs (CCEA) approved the first phase of Bharatmala
z Eligibility for Listing: Any for-profit social business (FPSE) Pariyojana with an estimated cost of Rs 5.35 trillion.
or non-profit organization (NPO) demonstrating the z New deadline: The completion of construction has a new
importance of social intent will be recognized as a Stock deadline of 2027-28.
Exchange and qualified to be listed or registered on the SSE. z Reasons for Delay:
| By SEBI’s Regulations, 2018, there are 17 reasonable | Increase in raw material cost, Increased land acquisition
criteria, some of which include promoting education, costs and unresolved land disputes and Impact of the
employability, equality, and environmental sustainability COVID-19 pandemic on construction activities.
and eradicating hunger, poverty, and malnutrition.
Bharatmala Pariyojna:
About NPOs
z About: It is a centrally funded road and highway development
z NPOs are legal entities that operate for the benefit of the project conceptualised in 2 phases across India.
public and society rather than for profit.
z Objective: To develop road connectivity linking Border
4.10 Annual Startup Awards 2022 areas, Coastal roads and port connectivity of major
and Non-Major ports, improvement in the efficiency of
Context: Gujarat, Kerala and Karnataka have emerged as the
National Corridors, development of Economic Corridors,
best-performing states in developing startup ecosystems, as
expressways, Inter Corridors and Feeder Routes along
per the States’ Startup Ranking 2022
with integration with Sagarmala.

49
 | Phase I: It is to develop economic corridors, feeder z Mechanism: It occurs when an investor borrows a security
roads, and expressways. It covers 34800 km out of and sells it on the open market, planning to buy it back
the total length of 74942. later for less money.
z Nodal Ministry: Ministry of Road Transport and Highway | Short sellers bet on, and profit from a steep drop in
z Implementing Agencies: National Highways Authority the share prices. However, long-term investors seek a
of India (NHAI), National Highways and Infrastructure rise in the share prices over time.
Development Corporation Limited (NHIDCL), and State z Types:
Public Works Department.
| Naked Short Selling: When traders sell shares before
4.12 UPI Tap & Pay actually obtaining them.
Context: NPCI has introduced a new feature in UPI Payments | Covered short selling: Where the seller has made
- UPI Tap and Pay. arrangements to borrow the securities before the
sale.
More on News:
z Rules in India:
z It will aid the objective to achieve offline payments using
UPI architecture. | Naked short selling is not allowed in India and USA
| Only securities that have been allowed by the
About Tap and Pay:
exchanges to offer futures and options (F&O)
z It uses Near Field Communication (NFC) to capture the
contracts are eligible for short selling.
payee’s UPI ID/VPA to make the payments through UPI.
‹ Only stocks in 183 out of more than 2000 listed
z Once the UPI ID is captured, payment can be made using
companies are allowed to be shorted.
UPI PIN or UPI Lite.
What is Near Field Communication (NFC): 4.14 Seven Products From Odisha Gets GI tags
z It is a short-range wireless connectivity technology that Context: Recently, seven products from Odisha, have been
allows devices in proximity to communicate with each added to the list of GI tags.
other.
About Geographical Indication:
z Uses: It allows a quick exchange of information with a
single touch, to pay, exchange information like contact z Geographical Indications of goods refer to the place
cards and share documents. of origin of a product and provide assurance about the
z Technology: It uses electromagnetic radio fields, to enable quality of the product.
communication. z International Treaty: These tags are a part of the
z Hardware Based: This technology requires a chip in both Intellectual Property Rights (IPRs) guided by the Paris
the devices to enable NFC communication. Convention for the Protection of Industrial Property,
1883.
What is Unified Payments Interface (UPI)?
z Implementation: In India, the Department for Promotion
z It is a payment system that was launched by the National
of Industry and Internal Trade, Ministry of Commerce
Payments Corporation of India(NPCI) in 2016.
and Industry, implements a Geographical Indication Tag
z It allows round-the-clock money transfer between two
z Importance: The GI tag conveys an assurance of quality
bank accounts without knowing the account details.
and distinctiveness, because of its origin in a specific
z It requires all the customers to register with NPCI through geographical locality, region or country.
a virtual payment address called UPI ID.
Newly Added GI Tag Products:
4.13 Adani-Hindenburg Row: SC Verdict
Kapdaganda It is an embroidered shawl on an off-
Context: Recently, the SC has pronounced its verdict on short shawl white coarse cloth with red, yellow
selling related to Adani-Hindenburg Case. and green colored threads by women
More on News: of the Dongria Kondh tribe
z SC has ordered Centre and SEBI to investigate whether Lanjia Saura It is a painting art that belongs to the
the Hindenburg report on Short Selling violates any laws, Painting Lanjia Saura community, paintings are
and if so, to take appropriate legal action. in the form of exterior murals
What is Short-Selling? Koraput Kala It is a black-colored rice variety,
z Short selling is an investment or trading strategy Jeera Rice famous for its aroma, taste, texture
speculating on a stock’s decline or other security’s price. and nutritional value.

50
 Similipal Kai It is a chutney made with red International Labour Organisation ILO
chutney weaver ants by the tribals in Odisha’s z About: Founded in 1919, It is the only tripartite U.N.
Mayurbhanj district. Chutney is a agency, that gives an equal voice to workers, employers
good source of protein, calcium, zinc and governments to ensure that the views of the social
etc. partners are closely reflected in labour standards and in
Nayagarh They are known for the prickly thorns shaping policies and programs.
Kanteimundi on the stems and whole plant. The z Member states: 187 Member States including India
Brinjal green and round fruits contain more z Headquarters: In Geneva.
seeds as compared to other genotypes.
z Aim: To promote rights at work, enhance social protection
Odisha Khajuri It is a natural sweetener extracted and strengthen dialogue on work-related issues, set labour
Guda from date palm trees and has its origin standards, develop policies and devise programmes
in the Gajapati district. promoting decent work for all women and men.
Dhenkanal Magji It is a sweet made from buffalo milk z Flagship Reports:
cheese, with a distinct appearance,
| Global Wage Report
taste, flavor, shape, and size.
| World of Work Report
4.15 World Employment and Social Outlook Report:
Trends 2024 4.16 Mapping and Exchange of the Good Practices
(MEGP) Initiative
Context: Recently, The International Labour Organisation
(ILO) released the World Employment and Social Outlook: Context: A compendium of field stories to help countries
Trends 2024 Report. learn and invest in traditional climate resilient crops such as
millet, etc was launched recently.
Key Findings of the Report:
z Deteriorating Macroeconomic Environment:
MEGP Initiative:
z About: It is implemented through the collaboration of
| Global central banks raising interest rates due to
NITI Aayog and the World Food Programme (WFP).
geopolitical tensions.
z Documenting Good practices: The initiative will support
| Capital outflows impacting developing economies
the documentation of good practices and present an
and global industrial activity.
opportunity of experience sharing amongst Asian and
‹ China, Türkiye and Brazil slowed down considerably. African developing countries.
z Global Unemployment Rate: z Entries for the MEGP Initiative: They are invited in two
| Joblessness and the jobs gap have both fallen below main categories as per the following millet mainstreaming
pre-pandemic levels (The global unemployment rate framework.
in 2023 was 5.1%). z Millet value chain (production, storage & transportation,
| Anticipated rise in global unemployment in 2024, processing, packaging & branding, distribution &
contributing to growing social inequalities. consumption)
z Wages Growth: Real wage declined in the majority of z Mainstreaming dimensions (institutional commitment &
G20 countries as wage increase was not proportionate to coordination, multi-stakeholder partnership, sustainable
inflation growth.Only China, the Russian Federation and and innovative financing, gender & inclusion, and enabling
Mexico enjoyed positive real wage growth in 2023. environment for safety nets inclusion).
z Extreme poverty: The numbers of workers earning less Benefits of Initiative:
than US$2.15 per day in purchasing power parity (PPP) z Access to bridge initiatives like back-supporting millet
terms grew by about one million globally. startups
z Silver Lining (2023): z Access to regional platforms for learning dissemination
| Modestly higher growth than anticipated. z Access to networking platforms, including donors,
| Global jobs gap improved but remained elevated at innovation labs, research institutes, government
435 million. departments etc.
| The labour market participation rates had largely also z Linkages with government departments for potential
recovered from their pandemic lows. scale-up

51
 About GPS-Based Toll Collection System:
z The new system charges based on distance traveled,
potentially lowering costs for shorter trips.
z Vehicles need GPS/RFID devices and linked bank accounts.
z Takes into account vehicle size/weight for fairer charges:
smaller/lighter vehicles pay less.
z It is expected to impact commercial vehicles first, as they
contribute to 80% of toll revenue.

4.17 India’s First National Highway Steel Slag Road How does the GPS-toll collection system work?
Section z GPS devices are installed in vehicles and constantly
relay location data to the system. This offers highly
Context: Recently, India’s first National Highway (NH) steel slag accurate tracking but requires installation and ongoing
road section on NH- 66 (Mumbai-Goa NH) was inaugurated. maintenance costs.
About Steel Slag Road Technology: z Automatic Number Plate Recognition (ANPR) cameras
capture license plate images and use optical character
z It is a method that uses steel slag to build roads.
recognition (OCR) to identify vehicles.
z Development: CSIR-Central Road Research Institute
| They offer a cheaper alternative to GPS devices but
(CSIR-CRRI) developed SSRT to transform the waste of might face challenges with unclear plates or bad
steel industries into wealth. weather conditions.
z Steel Slag: It is a by-product of steel making, produced
during the separation of the molten steel from impurities Benefits:
in steel-making furnaces. z More equitable: charges based on actual usage, not fixed
distance.
| The slag occurs as a molten liquid melt and is a
complex solution of silicates and oxides that solidifies z Faster and more efficient: no need to stop at toll plazas.
upon cooling. z Rewards efficient vehicles with lower tolls.
z Uses of Steel Slag: Used as an aggregate in various z Reduces wear and tear on roads by charging heavier
applications that include its use in granular base, vehicles more.
embankments, engineered fill, highway shoulders, and z GPS-based toll systems have the potential to be a more
hot mix asphalt pavement. efficient and equitable alternative to the current FASTag
system.
Significance of SSRT:
Additional Information:
z Stronger Roads: The roads made out of steel slag are 30%
less thick because of better material characteristics. One Vehicle, One FASTag:
z Cost-Efficient Process: In comparison to normal highways, z The National Highway Authority of India(NHAI) has
undertaken the ‘One Vehicle, One FASTag initiative to
the construction costs will also be around 30% cheaper.
discourage using single FASTag for multiple vehicles.
z Eco-Friendly Road Construction: SSRT paves the way for
z Aims:
sustainable use of waste and reduces the reliance on
perishable natural aggregates. | To enhance the efficiency of the Electronic Toll
Collection system and provide seamless movement
4.18 GPS-Based Toll Collection at the toll plazas.
Context: The National Highways Authority of India (NHAI) | To discourage user behavior of using single FASTag
for multiple vehicles or linking multiple FASTags to a
will be putting in place GPS-based toll collection on various
particular vehicle.
routes across India with an aim to cut toll booth congestion.

52
4.19 Guidelines for Implementation of SIGHT What is the Stock Market?
z Definition: It is a marketplace where publicly listed
Context: A budget of Rs 17,490 crore has been allocated
companies’ stocks (Equities or Shares) are bought and
for implementing the Strategic Interventions for Green
Hydrogen Transition (SIGHT) program as part of the National sold.
Green Hydrogen Mission (NGHM). z There are two primary stock exchanges:
About SIGHT Programme: z The Bombay Stock Exchange (BSE): It is the oldest stock
z Objective: To support domestic electrolyser exchange
manufacturing and green hydrogen production. | The National Stock Exchange (NSE).
| These incentives are designed to facilitate cost z These stock exchanges have their benchmark indices:
reduction and rapid expansion.
| The SENSEX for the BSE
SIGHT Programme Implementation Guidelines:
| The NIFTY 50 for the NSE
z Method: Executed within Mode-2B (the system adopted
by the MNRE for the SIGHT scheme), this strategy entails ‹ These benchmarks track the performance of the
aggregating demand and inviting competitive bids for top 30 and 50 companies respectively.
green hydrogen and its derivatives to secure the most z Market Structure:
cost-effective options.
| Primary Market: Companies release shares to the
z Implementation: It will be entrusted to agencies public through an initial public offering (IPO) to raise
nominated by the Union Ministry of Petroleum and
funds.
Natural Gas (MoPNG) and guided by the Centre for High
Technology (CHT). | Secondary Market: Investors buy shares from each
z Monitoring: A scheme monitoring committee, co-chaired other either at the current market price or at a price
by the secretary of MoPNG, secretary of the MNRE, they both decide on.
mission director of the NGHM, and other experts, z Regulation by: The primary and secondary markets are
will periodically review the implementation status and regulated by Security and Exchange Board of India (SEBI
performance of capacities awarded under the scheme.
in India.
About National Green Hydrogen Mission (NGHM):
4.21 Ropeway Projects: Parvat Mala Program
z Aim: To make India a global hub for producing, utilising,
and exporting green hydrogen and its derivatives. Context: The Union Minister of Road and Transport ‘Ropeway:
z Implementation: Ministry of New & Renewable Energy Symposium-Cum-Exhibition’ in New Delhi announced over
z Sub Schemes under the NGHM: SIGHT & Green Hydrogen 200 Ropeway Projects Worth 1.25 Lakh Crore under the
Hubs ‘Parvatmala Pariyojana’.

4.20 India Replaces Hong Kong as 4th-largest Stock Market More on News:
z Ropeway: ‘Symposium-cum-Exhibition’ provided key
Context: The Indian stock market has become the 4th largest
insights to identify areas for development to promote
globally, surpassing Hong Kong.
indigenous manufacturing by ‘Make in India’ and enhance
More on News: the capacity & capability of ropeway technology.
z India’s total market value: $4.33 trillion (₹366 lakh crore)
What are Ropeways?
z Hong Kong’s total market value: $4.29 trillion
z It is a transport system connecting two places on the hills,
z The Top 3 stock markets in the world are the US, China, or across a valley or river.
and Japan.
z In the Mountainous area trolleys powered by a motor
move on wheels connected to a rope and carry materials
or people.
z Regulation of Ropeways in India
| According to the Government of India (Allocation
of Business) Rules 1961, the Ministry of Road
Transport and Highways (MoRTH) looked after the
development of Ropeways and alternate Mobility
Solutions.

53
What is Parvatmala Pariyojana? z Decline in Recovered Amount of Non-Performing Assets:
z National Ropeway Development Programme- The amount recovered via DRTs fell to 9.2% in FY23
Parvatmala was announced in the union budget 2022-23 compared to 17.5% in FY22.
as an Efficient and Safe Alternate Transport Network. | Hence, recovery of non-performing assets fell to 15%
in FY23 from 17.6% in FY22.
z Mode: Public-private partnership.
| Number of Cases referred to the recovery channel of
z Objective: To improve connectivity and convenience for
SARFAESI Act decreases, while in case of others (Lok
commuters besides promoting tourism in the Himalayan
Adalats, DRTs and the Insolvency and Bankruptcy
region. Code (IBC)), number of referred cases increase in
Factors Driving Ropeway Infrastructure: FY23 in comparison to FY22.
z Ideal for Challenging Terrain: Overcomes tech challenges | The amount recovered as percentage of the amount
in hilly areas where roads and rail are limited. involved is decreased for Lok Adalats and DRTs,
while increased for SARFAESI Act and IBC in FY23 in
z Economical Transportation: Lower land acquisition costs
comparison to FY22.
make ropeways more cost-effective than roads despite
higher construction costs.
z Space Efficiency: Narrow supports leave ground free,
enabling construction in built-up areas.
z Cost Efficiency: Single power plant for multiple cars
reduces construction and maintenance costs.
z Speedy Travel: Built in a straight line over hills, ropeways
offer faster transportation.
z Environment-Friendly: Low dust emissions and containers
designed to prevent environmental soiling.
DATA POINT:
4.22 NPAs: Amount Recovery Via Debt Recovery Tribunal
Falls To 9.2% in FY23
Context: The year 2022-23 saw a sharp rise of cas­­es referred
to debt recovery tribunal (DRT) and the amount involved shot
up to Rs 4.02 trillion in FY23 compared to Rs 69,000 crore.

z Improvement in Recovery through IBC: Recoveries via IBC

were back to over 40% in FY23 after a gap of two years.
| Except for FY20, total recoveries via various channels as
percentage of amount were around mid-teens levels.
| For Resolution through IBC:
‹ In the last six Financial Years, the highest amount
was recovered in 2018-19 (₹166,600 crore).
‹ In the last six Financial Years, the highest amount
that was recovered as percentage of the amount
involved in 2017-18 (₹49.6 crore).
| For Total Recovery via Various Channels:
‹ In the last six Financial Years, the highest amount
was recovered in 2019-20 (₹152,597 crore).
‹ In the last six Financial Years, the highest amount
that was recovered as percentage of the amount
involved in 2019-20 (₹22.6 crore).

54
NEWS IN SHORT
Recently, the Mumbai Trans Harbour Link (MTHL), also known as Atal Setu, the
longest sea bridge in India, has been inaugurated by the Prime Minister.

About Atal Setu Bridge:

z The Atal Setu bridge spans 22 km and includes a six-lane sea bridge of 16.5
Atal Setu
km and a 5.5 km-long elevated road on land.
z Origin: The bridge originates from Sewri in Mumbai and ends at Nhava Sheva in
Uran taluka in Raigad district.
z It is the 12th longest sea bridge in the world.
India’s First Inland Waterways Development Council (IWDC) has commited Rs.
45,000 crore for the development of River Cruise Tourism.

More on News:
z The IWDC was organized by the Inland Waterways Authority of India (IWAI).
z Monetary Commitments: Rs. 35,000 crore for cruise vessels and Rs. 10,000
Inland Waterways Development
crore for cruise terminal infrastructure by 2047.
Council
About IWDC:
z Establishment: The IWDC was established in October 2023 by the government
of India.
z Objective: To develop the Inland Water Transport (IWT) ecosystem for
improved cargo efficiency, passenger movement, and river cruise tourism.
From January 01, 2024, all wages under the Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA) scheme will be paid through an Aadhaar-
based payment system (ABPS).

About Aadhaar-Based Payment System (ABPS):

z It was Introduced in 2017.
z Key Features:
| Uses the worker’s 12-digit Aadhaar number as their financial address.
Aadhar Linked MGNREGS Workers | Payment eligibility requires Aadhaar details linked to the worker’s job
card.
| Aadhaar details must be linked with the worker’s bank account.
z Significance:
| Addresses leaks and ensures transparency in wage payments.
| Facilitates speedy payments, reducing rejections.
| Prevents disruptions in workers’ wage payments due to bank account
issues.

55
 9 PM Compilation for the Month of January 2024

1. Economic Weight: Taiwan is a major trading power and the world’s 16th largest economy.
2. Major Source of Semiconductors: It is the source of 92% of the world’s most advanced logic chips and
it fabricates 55% of the semiconductors embedded in vehicles, laptops, tablets and smartphones all over the
world.
3. Major Maritime Trading Route: Any conflict in the Taiwan Strait would affect critical digital supply chains
and the nearly 60% of global maritime trade that moves through the South China Sea and the Taiwan Strait.

What is India’s changing stance with respect to Taiwan?

India has a stake in the maintenance of peace and security in the Indo-Pacific, with Taiwan at its centre. It
maintains non-official relations with Taiwan. Lately, the following changes have occurred with respect to
its stance on the Taiwan issue:
1) Expansion of Economic Relations: Trade and investment relations between the two countries have
recently expanded significantly.
2) Direct Criticism of China: India for the first time in 2022, criticised China for its “militarisation of the
Taiwan Strait”.
3) Not Affirming the One-China Principle: India has lately stopped reaffirming the one-China principle. Its
stance is now more aligned with its partners in the QUAD.

What is the impact of Taiwan's stability on India?

1. Technology: Taiwanese companies are integral to India's ambition in technology. Taiwan

Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC)
are central to India's efforts to develop modern semiconductor capacity.
2. Manufacturing: Major Apple suppliers such as Foxconn and Pegatron, both Taiwanese firms, are vital to
India's manufacturing sector. Their involvement is crucial for India's goal to attract global supply chains.
3. Geopolitical Stance: A stable Taiwan Strait is beneficial for India. An autonomous Taiwan aligns with New
Delhi's interests. Stability in Taiwan helps ensure the smooth operation of technology and manufacturing
collaborations between the two nations.

GS Paper 3

Subject: Indian Economy

Topic: Indian Economy and issues relating to planning, mobilization, of resources,

growth, development and employment

On the Atal Setu and Indian Economy – Bridge to prosperity

News: The article discusses the significance of the recently inaugurated Atal Setu and the positive signs for the
future growth of the Indian economy.

Recently, the country’s longest sea bridge, the 22-km long six-lane Atal Setu (or the Mumbai Trans
Harbour Link) was inaugurated.
It is a significant step in India’s bid to project itself as a key investment destination.

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What are the positive signs for the Indian economy?

1. Structural Reforms: Over the past decade, the government has carried out various structural reforms
which are helping India deal with its twin-balance sheet problem (both banks and corporates facing
financial distress simultaneously).
2. Healthy Banking Sector: Indian banks have recovered, and they are capable of financing India’s growth.
3. Infrastructure Creation: The government has taken the lead in boosting infrastructure. It has done this by
higher capital expenditure and improving the implementation of projects. The pace of creation and quality of
roads, railways, ports, airports or bridges has risen sharply from the long-term average.
4. Other Advantages: India has a young and ambitious labour force, a free-market economic system and a
vibrant democracy.

Why is infrastructure creation important?

Good infrastructure — be it physical or digital — is important for India to take advantage of companies moving
out of China. Developed country markets and investors are looking for countries that can replace China in the
global supply chain.

What should be the way forward?

Most of the capital expenditure in the economy is due to direct government spending. Since there are limits
to how much the government can spend, the private sector needs to contribute as well.
India can leverage this opportunity to become a developed country in the next 25 years.

Issues associated with inverted import duties in India - Our import duty regime needs
urgent correction

News: The article discusses India's plan to fix inverted import duties.

Inverted duty structure is a situation when inputs are taxed at higher rates than finished products, which can
make domestic industry import dependent.

What are the problems with India's import duties?

1. Increased Production Costs: Inverted duties elevate production costs. This impacts sectors like textiles
and engineering, diminishing their global competitiveness.
2. Complex Tax System: India's import tax system is marked by complexity, with multiple layers of tariffs
and a perplexing inverted duty structure. This sector-specific, item-by-item tariff approach not only deters
foreign investment but also undermines domestic manufacturing competitiveness.
3. Negative Global Perception: The rise in average import tariffs from 13.5% in 2014 to 18.3% in 2021
contradicts global trade trends, drawing international criticism.
4. Hindered Global Integration: High tariffs and a complex system make it challenging for Indian
manufacturers to integrate into global value chains, crucial for economic growth in a globalized economy.

What government initiatives are in place to overcome these issues?

1. Inter-Ministerial Coordination: The commerce ministry has reportedly reached out to the finance
ministry to rectify these distortions for over a dozen items in the Union budget, indicating a collaborative
approach to tackle the issue.

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2. Focus on Rationalization: Previous efforts focused on increasing tariffs on imported final products. The
current initiative takes a broader approach, aiming to simplify the tariff system by reevaluating basic
customs duties and other charges.

What should be done?

1) Revise Inverted Duty Structure: Reform the import duty system to lower taxes on inputs, particularly in
critical sectors like textiles and engineering, to reduce production costs and enhance global competitiveness.
2) Simplify and Rationalize Tariffs: Make the tariff system more transparent and investor-friendly, to attract
foreign investment and integrate Indian manufacturing into global value chains.

On India’s K-Shaped Recovery - SBI report: K-shaped questions

News: The article discusses the recent report by SBI on India’s K-shaped recovery. It highlights the flaws in the
arguments presented in the report.

A new research report by the State Bank of India (SBI) seeks to debunk claims of India’s “K-shaped” economic
recovery.
Note: K-shaped recovery occurs when, following a recession, different parts of the economy recover at
different rates, times, or magnitudes. This contrasts an even, uniform recovery across sectors, industries, or
groups of people.

In the case of India,

according to the
author, there has been
a stark difference in the
way different sectors of
the economy
recovered after the
pandemic. While the
overall economic
growth figures look
robust, there is a
growing underlying
inequality.

What are the SBI

report’s arguments
against India’s
Figure 2.Source: Investopedia.
recovery being K-
shaped?

1. Positive Emerging Patterns: It highlights patterns of income, savings, consumption, expenditure and
policy measures aimed at public welfare.
2. Questions Parameters: It questions the use of old parameters like low two-wheeler sales or fragmented
land holdings.
For instance, low sales of two-wheelers could reflect savings being utilised to buy physical assets (real estate)
and buyers shifting to purchasing used/entry-level cars.
3. Rising Disposable Incomes in Non-Metro Areas: It cites data from Zomato as an example of rising
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disposable income in non-metro areas.

4. Decrease in Inequality: It refers to the income tax data for FY22 to note that the Gini coefficient had
declined significantly from 0.472 to 0.402 between FY14 and FY22.
It highlights that 36.3% of individual tax return filers belonging to the lowest income in FY14 have left the
lowest income group and shifted upwards.

Why are the SBI report’s arguments against it flawed?

1. High Welfare Spending indicated Economic distress: The government has been forced to extend the
scheme of subsidized food grain to 800 million Indians.
2. Tax Data does not reflect Broader Economy: Only a very small minority of people pay direct income tax.
Hence, it is not reasonable to draw conclusions from tax data about broader inequality.
Income tax data is nominal and is affected by overall inflation, thus making it unviable for drawing
conclusions.
3. Use of Tractor Sales Data: Tractor sales (in place of two-wheeler sales) may be a better representative of
the farm economy but not the overall rural economy.

On the Trends in Male and Female LFPR – Does India need to worry about a decline in its
male workforce?

News: The article discusses gender-based employment trends presented in the 2022-23 Periodic Labour Force
Survey (PLFS).

The 2022-23 Periodic Labour Force Survey (PLFS) has highlighted a decent growth in India’s total employment,
a rising female labour force participation ratio (LFPR) and a higher share of self-employment.

What are some findings that have not received enough attention according to the author?

First, while the LFPR and worker population ratio (WPR) of males
aged above 15 years have increased in 2022-23, they have fallen
for all ages, and decreased sharply for the prime working age
group of 30-59 years.
Second, the female LFPR for the 30-59 years group has increased
to 50.2% in 2022-23, the highest since 2004-05. Similar trends are
visible in the WPR as well—up for females aged 30-59 years and
down for males during the corresponding periods.
Third, while the LFPR and WPR for females have improved across
urban and rural areas, these ratios for males have declined in both
urban and rural India, with a substantial fall in urban areas.

What are the reasons behind these patterns noticed in the male rates?

A simultaneous rise in both male rates for the 15-29- years age bracket and fall in the 30-50-years group is
surprising. There could be at least two plausible causes for this:

1. Reversal of pandemic-related migration 2. Rise in the number of discouraged workers

trends: Leading to a fall in male workers in rural (one who is unemployed and not actively looking for
areas, thus resulting in a WPR contraction. work).

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What are the problems with this reasoning? What could be the reasons behind
discouragement?

One, there should have been a sudden rise in WPR

during the pandemic (2019-20 or 2020-21), as One, lack of job opportunities in rural areas
population estimates would not have fully captured (especially non-farm) led to a lower workforce.
reverse migration (from urban to rural). However, as
It fits well with sustained strong demand for
the graph depicts, it was not so.
MGNREGA work.
Two, no simultaneous rise in urban male LFPR and
Two, fiscal support to males (in the form of rural job,
WPR or a rise in the urban male unemployment rate.
free/subsidized gas cylinders, free food, subsidized
housing, etc.) was sufficient to make them stay out of
the workforce.
Three, higher-than-pandemic demand for work
under the (MGNREGA raises doubts over a
substantial reversal of reverse migration.
This scenario, according to the author, would be one
of the worst situations because such lazy behaviour
is unwarranted and indicates acceptance of
subsistence living, which is unproductive for any
economy.

What are the reasons for the rise in female LFPR?

It could be attributed to a lot of factors such as:

1. Fiscal support: It may have freed up time for women, which allowed more to join the workforce.
However, the majority (up to 85%) of the increase in female employment is in the agriculture sector and self-
employment category.
2. Reversal in Male Migration: It could also be due to a reversal in the trend of male migration, resulting in
more time available to women, who have chosen to enter the agricultural sector.

Issue of tax distribution among state - Tax contribution by States needs to be revisited

News: The article discusses how the Finance Commission in India decides the share of tax revenue for each
state.

How were taxes historically distributed?

Until the 10th Finance Commission (up to 2000), state shares in Union tax revenue were limited to personal
income tax and Union excise duties.
Population was a major factor, with 80% to 90% weight in the distribution formula for income tax in the first
seven Finance Commissions.
For Union excise duties, due to a lack of consumption data, states' tax contribution was not a determinant.
Post-2000, all central tax revenues were combined for distribution, with a unified formula for both income
tax and Union excise duties, focusing more on equity.
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In the 15th Finance Commission, the distribution formula included tax effort (2.5% weight) and demographic
performance (12.5% weight), along with equity indicators like per capita income and population as per the
2011 Census.

Read more about Finance commission

What are the issues regarding Tax Contribution?

1. Primary Issue: The main issue is whether states with higher tax contributions should receive a larger
share of Union tax revenue. States' Viewpoint: States with substantial tax contributions argue for greater
recognition in the distribution formula.
2. Historical Weightage: Historically, state tax contributions were given limited weight (10% to 20%) in the
revenue distribution formula.
3. Complexity in Attribution: Accurately attributing income tax revenue to specific states is challenging,
complicating the assessment of contributions. States' Demand: States with significant income tax
collections demand higher weighting for their tax contributions.
4. Balance Challenge: The debate involves finding a balance between rewarding states for economic
efficiency and maintaining equitable distribution among all states.

What should be done?

1. Include State GST contributions in the distribution formula as a measure of efficiency. This is because
GST, being a consumption-based tax, accurately reflects a state's tax base and is equally divided between the
State and Central governments.
2. Consider the relative share of petroleum consumption by States as another efficiency indicator.
Since petroleum taxes are outside GST, this reflects the State's contribution to Union excise duties and
customs duties on petroleum products.
3. Assign significant weightage (suggested at least 33%) to these efficiency indicators (GST revenue and
petroleum consumption) in the distribution formula. This is supported by the fact that GST revenue and
petroleum consumption are stable and fair measures of a state's contribution to the national exchequer.
4. Maintain a balance between efficiency and equity indicators in the distribution formula. Equity factors
like population, area, and income levels must be considered alongside efficiency to ensure a fair and equitable
allocation of Union tax revenues among States.

Increased capital expenditure by Indian states- States are spending

News: The article discusses how state governments in India veered towards the path of fiscal consolidation
after the COVID-19 pandemic. They are now spending more on capital expenditure rather than just on regular
expenses like salaries and pensions.

How have state governments managed their finances Post-COVID-19?

1. Post COVID-19, state governments in India kept their fiscal deficits below 3% of GDP in 2021-22 and 2022-
23, lower than the allowed limits of 4.5% and 4%.
2. States spend more than the central government, accounting for over 60% of total government expenditure.
3. In 2023-24, states (excluding Arunachal Pradesh, Goa, Manipur and Meghalaya) shifted focus to capital
expenditure with a 45.7% increase, while regular expenses grew only by 9.3%.
4. The ratio of capital outlay to total expenditure hit an eight-year high of 14.1%, indicating more spending on
productive assets.
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What drives the increased capital expenditure?

Increased capital expenditure by Indian states is driven primarily by two factors:

1. First, proactive policies by the Union government, including the early release of tax devolution funds.
In 2023-24, Rs 973.74 billion was approved, with Rs 590.3 billion disbursed for capital projects by
November.
2. Second, states' own revenues have shown robust growth. Tax and non-tax revenues grew by 11.5%
and 19.5%, respectively. This indicates improved tax administration efficiency and economic
formalization.
3. Thirdly, the state tax revenues outpacing nominal GDP growth, estimated at 8.9% according to the
National Statistical Office's First Advance Estimates, suggests two key aspects. Firstly, it reflects enhanced
efficiency in tax administration by the states, indicating better collection and management of taxes.
Secondly, it points to an increase in the formalization of the economy.
4. Additionally, significant revenue from the mining sector, boosted by reforms like e-auction of mining
leases, contributed to this growth, particularly in mineral-rich states.

What are the challenges?

1. Overall revenue receipts grew by only 5.5% due to a 29.2% reduction in grants from the Union government.
2. States increased market borrowings to a record Rs 5.8 trillion in nine months, mainly for capital expenditure.
3. States might slightly exceed their fiscal deficit target of 3.1% of GDP, potentially reaching up to 3.3 - 3.4%.

Effectiveness of IBC, 2016 - A performance appraisal of IBC

News: The article discusses the effectiveness of India's Insolvency and Bankruptcy Code (IBC), 2016. It
evaluates how well the IBC resolves financial distress in companies, improves bank balance sheets, and benefits
the economy, despite some challenges in efficiency and asset value realization.

What is the Insolvency and Bankruptcy Code (IBC)?

The Insolvency and Bankruptcy Code was enacted in 2016, and it replaced all the existing laws with a uniform
procedure to resolve insolvency and bankruptcy disputes. The code aimed to address the issue of Non-
performing Assets (NPAs) and debt defaults.
For more information on IBC read here.

What is the impact of the IBC on banks and the economy?

1. Reduction in Non-Performing Assets (NPAs): The IBC helped decrease the NPA rate of banks
significantly, from a peak of 14.8% in September 2018 to a low of 3.2% by September 2023.
2. Increase in Bank Profits: Banks experienced a remarkable turnaround, recording a historic profit of
€2.63 trillion in 2022-23, compared to a loss in 2017-18.
3. Improvement in Corporate Balance Sheets: Post-IBC, firms showed enhanced performance with more
robust balance sheets, better leverage management, and an improved interest coverage ratio exceeding
3.5.
4. Enhancement in Corporate Governance: There was a notable improvement in corporate governance,
indicated by a reduction in related party transactions, as identified in a study post-IBC.
5. Global Ranking Improvement: India's ranking in global insolvency resolution improved drastically,
moving from 136th to 52nd within the first three years of the IBC's implementation.

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What are the concerns related to the IBC?

1. Inefficient Time Management: The resolution processes under IBC are prolonged, averaging 867 days,
far exceeding the intended 180 days.
2. Gap in Asset Value Maximization: Resolutions are realizing only 86% of the fair value of the companies,
indicating a shortfall in achieving the desired value maximization.
3. High Incidence of Liquidation: The IBC results in more liquidations than rescues, particularly impacting
companies that were already sick or defunct at the time of entering the process. Most companies going into
liquidation were already sick or defunct, having assets valued at about 5% of their claims.
4. Methodological Issues in Appraisal: Some appraisals of the IBC's performance use flawed
methodologies, like focusing solely on recovery rates, which overlook other important factors like
realizations from equity holdings or the resolution of guarantors.

What is the way forward?

To improve the Insolvency and Bankruptcy Code (IBC), stakeholders like the government, adjudicating
authority, debtors, creditors, and professionals should play their roles more effectively. This does not require
legislative changes but rather better implementation and adherence to the IBC's processes, particularly in
ensuring time-bound resolutions and maximizing the value of stressed assets.

On Income Poverty in India – In Viksit Bharat, rural real wages are in decline

News: The article discusses the current status of poverty in India, especially focusing on agricultural wages and
unemployment rates.

What is the current status of poverty in India?

According to NITI Aayog’s National Multidimensional Poverty Index (NMPI), 248.2 million Indians have
been lifted out of poverty in the last 9 years.
NITI Aayog argues that NMPI is a better measure to estimate poverty than the traditional estimates based on
income/consumption.
However, there is a doubt over sustainability of a development model that improves access to public utilities
but does not enhance the quality of these services or income levels.
Therefore, household income is still an important indicator of poverty levels. Hence, importance should be
given to income poverty, real wages, and unemployment in the country.
For instance, India still has the largest number (160 million) of people under extreme poverty in the world
as per the World Bank’s estimate based on $2.15/capita/day income.

Since most of these poor people are in rural areas, it is important to look at employment in agriculture and the
real wage rates in rural areas.

What is the status of these indicators?

1. Low Growth in Real Agricultural Wages:

a. During 2009-10 to 2013-14, real agriculture and non-agriculture rural wages grew at 8.6 per cent and
6.9 per cent per annum respectively.
b. However, during 2014-15 to 2018-19, this decelerated to 3.3 per cent and 3 per cent per annum
respectively.
c. In the last five years 2019-20 to 2023-24, it has become negative for both agriculture (-0.6 per cent)
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and non-agriculture (-1.4 per cent). Reasons behind this include COVID-19 and more people moving into
the agricultural workforce.
2. High Unemployment Rates Persist: As per ILO, it averaged around 8.4% during 2004-05 to 2013-14 and
roughly 7.9% during the last 10 years. So, the growth model has not seen a significant reduction in
unemployment.

The government data shows that in rural areas, real wages have had negative growth in the last 5 years. In this
regard, there is a need to create more employment-intensive growth processes.

Understanding GST revenue performance

News: The article discusses the GST revenue performance, while suggesting reforms in the current GST regime
to boost collections.
The Goods and Services Tax (GST) has been a major policy success of recent years. According to the author, it
has stimulated the growth of a truly national market, replacing multiple distorting taxes with a single system.
A detailed article on GST can be read here.
What are the recent GST collection figures?
The GST collection figure reported for 2022-23 is Rs. 18.1 trillion, equivalent to 6.6% of GDP.
With refunds of Rs.1.8 trillion, the net GST revenues (both Centre and state, including the cess) amounted to
Rs.16.1 trillion, or 5.9% of GDP.
This gap (between collections and revenue) has hovered around 0.6-0.7% of GDP.

What are the refunds granted on GST?

Since in the case of GST, taxes are paid on actual
revenues, in most cases there is no need for refunds.
However, there is one major exception.
In GST, exports are zero-rated, which means that
exporters don't pay taxes on their output but are
entitled to refunds on the taxes they paid on their
inputs. This constitutes the major chunk of refunds
under the GST.
Note: Zero-rated items are different from exempt
items. Exempt items are not taxed but are also not
entitled to input tax credits.
According to the author, data suggests that the gap
between collections and revenues reflects refunds paid to exporters to reimburse them for the Integrated
GST (IGST) they paid. The author makes further inference that since exports often rely heavily on imported
parts, a large share of refunds is to compensate exporters for the IGST paid on their imported inputs.
What does this imply?
The large amount of refunds has important implications for ascertaining the performance of GST.
As seen in the infographic, the GST collection data implies that the GST regime immediately overtook the pre-
GST average , then dipped during the pandemic period, and once again surpassed the pre-GST regime in 2021-
22.
However, as per GST revenue figures (GST collection minus the refunds), GST revenue overtook the pre-GST
regime only in the current fiscal year.
Why did GST revenues decline?
This is due to two reasons:
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1. Faster Export Refunds: Export refunds have become much smoother, quicker, and fuller with the GST than
they were under the previous regime.
2. Rate Cuts: There were rate-cuts in the years leading up to the pandemic. This led to reduction of the weighted
average collection rate from 14.4% in 2017 to 11.6% in 2019.
What needs to be done to further boost GST collections?
The real need is to address the remaining major design flaws. This includes:
1. Reversing Rate-Cuts: The rate cuts of 2018-2019 need to be reversed, even if not fully, as part of a
rationalisation of the overall rate structure.
2. Simplification of the Rate Structure: The current complexity, especially for the cesses, is bringing down
revenue collections and is complicating enforcement.
For instance, moving to a three-rate structure (as per the Revenue Neutral Rate (RNR) Committee in
2015) with a standard rate of 18%, a lower rate of say 10%, and a demerit rate of 40%.
3. Incorporating GST Compensation Cess into the rate structure: This would simplify the system and
eliminate the exclusion of revenues from the divisible pool of taxes.

On the Necessity of Economic Growth in Poor States

News: The article discusses the status of economic growth in the poorest states of India. It also highlights
the areas these states can economically benefit in, and suggests steps for the same.
According to the author, India becoming a developed country by 2047 depends not only on its most advanced
cities, but also on the contribution of its poorest states like Uttar Pradesh, Bihar and West Bengal.
These together constitute a third of India's population (460 million).
What is the economic status of these states?
1. Low Average Income: Bihar's average income is less than a third (32%) of the country's average income.
UP's average income is under half (49%).
2. Historically Low Growth: In the preceding decade from 2012 to 2022 and before, the growth rates of UP
and Bihar were below the national average. West Bengal grew only at 3.9% over the decade from FY12-22.
In contrast, other poorer states like Madhya Pradesh, Odisha, and Assam have grown faster than the national
average from 2012-2022.
3. Recent Rise in Economic Growth: These states have however experienced GDP growth much higher than
the national average in FY23 (10.7% for Bihar, 8.4% for UP and 8.6% for West Bengal).
What are some of the areas these states can benefit economically from?
1. Agricultural Sector: As Punjab and Haryana eventually shift away from cereals to higher-value crops, UP
and Bihar could benefit from a second Green Revolution.
2. Tourism: Increased investment in tourism - highlighting the rich historical heritage of the Gangetic Plain -
can be a huge employment generator.
3. River Transportation: Developing better river transport through the Ganges (like the Rhine or Danube) can
connect these places to the world.
4. Demographic Dividend: These states will experience a continuous increase in their share of the working-
age population for another decade (especially UP, Bihar), while richer states-especially in the South-will see
that share declining.
What needs to be done?
1. Focus on education and skilling.
2. Infrastructure Development: Within infrastructure, a focus on expressways is important but rural roads
and rural electrification must also be prioritised.
3. Developing IT-based services sector: These offer a pathway to higher incomes for these landlocked
states.
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4. Control over crime.

5. Bifurcation of States: Bifurcating UP and Bihar into several smaller states can ensure better governance.
6. Changing the perception of these states as business-friendly states.
What happens in UP, Bihar and West Bengal will determine whether India will become an advanced economy
or be stuck in a middle-income trap.

Their development is necessary to prevent large regional disparities and the resulting social and political
tensions.

On Upskilling Rural Youth

News: The article discusses the issue of the education and skilling of rural youth. It highlights steps to control
the migration of rural youth, as well as improving the education available to them.
With almost 50% of India’s population set to be living in urban areas by 2047, the focus shifts on developing
rural areas. In this context, making the youth in rural India employment-ready is of utmost importance.
How can migration of rural youth be controlled?
The following steps can be used to control migration of rural youth to urban areas in search of meaningful
employment:
1. Making Agriculture an Aspirational Vocation among rural youth: The rural economy is experiencing a
major occupational shift with more farmers quitting agriculture to join non-farming jobs.
2. Creating alternative employment opportunities is also important.
3. Improving vocational training: This can imbibe relevant rural skills in youth so that they can secure a
living where they currently live.
According to a survey, 2/3rds of youth had never taken any vocational training.
Also, the current vocational education landscape in rural India (comprising Industrial Training Institutes
(ITIs)) lack placement opportunities.
4. Skill Development: Presently, rural education scarcely focuses on skill development. Skills in fields like
agricultural mechanisation, nursing and digital technologies can be imparted.
The Delhi government’s ‘Skills On Wheel’ initiative can be emulated in this regard.
How can rural education be improved?
1. Imparting Technical as well as Life skills: These are needed to empower youth and hence should be made
accessible through formal education.
2. Incorporating International Best Practices: Initiatives such as Mexico’s tele-schools and Bhutan’s well-
being-infused curriculum can be replicated. The tele-schools can provide a higher level of access to education
for remote areas.
3. Role of Civil Society and NGOs: For instance, organisations such as NIIT Foundation and Pratham Institute
are working with children in rural areas to provide upskilling opportunities.
Through these initiatives, employability of rural youth in both traditional and non-traditional trades can be
raised, leading to a vibrant economy.

Indian Development Model - India’s way forward: Services or manufacturing?

News: The article questions India's economic direction, particularly the wisdom of prioritizing services over
manufacturing given its unique developmental path. It highlights the challenges in job creation this approach
brings, especially for the educated youth.

What is the Indian development model?

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India’s service sector is, notably high-tech, is growing very fast compared to manufacturing. This shift differs
from traditional models where countries transition from agriculture to manufacturing before services.
This model leverages global service demand, benefiting from outsourcing trends and advances in information
technology, making it a part of the global supply chain for services.

What are the issues with the Indian development model?

1. Unbalanced Growth: India's manufacturing growth has plateaued at or below 20% of the economy. India’s
growth relies heavily on the service sector. Without a strong industrial base, growth might not be
sustainable in the long term.
2. High Unemployment: Despite economic growth, India faces a high overall unemployment rate over 8%.
Specifically, youth unemployment for ages 15-24 soars above 40%, indicating job creation is not
keeping pace with labor force growth.
3. Quality of Employment: The service sector is creating jobs primarily in low value-added, low-skill areas,
not in high-tech services, failing to meet the higher aspirations of a more educated workforce.
4. Educational Focus with Skill Mismatch: While producing 2.2 million STEM graduates yearly, the
development model faces challenges with the employability and industry relevance of these graduates.
5. Emphasis on Aggregate GDP: The development model often focuses on increasing total GDP rather than
GDP per capita, overlooking the individual prosperity aspect.

What should be done?

1. Combine Growth Models: India should integrate growth in both the service and manufacturing sectors.
It needs to extend beyond the PLI schemes, which focus more on production than employment, by
incentivizing private industry expansion.
2. Reform Policies: Implement land and labor regulatory reforms to attract more investment and incentivize
private industry to scale up, creating more jobs.
3. Address Skill Deficit: Focus on closing the skill gap by aligning education with industry needs and by
raising its investment in higher education. This will ensure the large young population is ready for the jobs
being created.

Topic: Inclusive growth and issues arising from it

Inequality in India - Growth mania can be injurious to society

News: The article discusses India's economic growth and increasing inequality. Despite ambitions for a $5
trillion economy, growth has benefited the rich more, leaving many poor behind. This rising inequality impacts
social issues and democracy, and the focus on just economic size may worsen these problems.

What is the current status of economic growth and inequality in India?

India's growth has led to more inequality. Since the 1980s, the gap between rich and poor has widened,
making India one of the most unequal societies.
World Inequality Report’, 2022 describe India as “a poor country with an affluent elite”.
Data from the Labour Bureau shows that from 2014 to 2022-23, real wages for agricultural labor slightly
increased by 4.6%, but for non-agricultural workers, wages actually decreased.
Over the period 2014-23, real per capita income in India has increased by 37% while the real wage of
agricultural labour has increased by less than 5%.
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What are the challenges in estimating inequality in India?

1. Limited Data Availability: Government agencies are reluctant to supply complete data on inequality,
making precise estimates challenging.
2. Gender Data Gap: There is a lack of wage data for women workers, who constitute a significant portion of
the labor force in certain sectors.
3. Focus on Male Workers: Rural wage rate data from the Labour Bureau, while reliable, only covers male
workers, leaving a gap in understanding the full wage trends.

Why is data on rural wage rates reliable in estimating inequality in India?

1. Market-Based Quotes: The rural wage rate data is based on actual market quotations, providing a realistic
view of wages.
2. Non-Survey Based: Unlike survey responses, this data reflects real-world transactions, reducing biases or
inaccuracies common in surveys.
3. Comprehensive Coverage: It covers a wide range of rural jobs, offering a broader perspective on wage
trends in rural areas.
4. Indicative of Living Standards: Since a large portion of India's workforce is in rural areas (51.7%
according to sixth economic census of India reports), these wage rates are indicative of the living standards
of a significant population segment.

What are the consequences of inequality in India?

1. Social Pathologies: Growing inequality in India is linked to increased violence, disease, and mental health
disorders.
2. Impact on the Rich: Inequality affects all, with the affluent building gated communities for security,
highlighting a divided society.
3. Eroded Trust: The trust between different societal groups diminishes, impeding collective efforts on
public issues.
4. Hindrance to Public Goods: Efforts to improve public goods like sanitation and waste management face
challenges due to inequality. Issues like open defecation continue, as commitment to public hygiene varies
across different income groups.
5. Challenge to Democracy: Inequality poses a threat to democratic values, as it contradicts the principle of
equitable opportunity for all.

Way forward

To address these challenges, India needs policies that balance economic growth with reducing inequality. This
includes focusing on increasing wages, especially in rural areas, and ensuring equitable access to public goods.
Strengthening data collection on inequality can also help in creating more effective policies.

Economic divide among India's States - The geography of unequal growth

News: The article discusses the growing economic gap between India's states over the last 30 years.

What is the current economic divide in India's States?

Wealthier states are mainly south, west, and northwest, while poorer states are in the north, center, and east.
The economic divide is marked by a 2.5 times higher per capita SDP in wealthier states compared to poorer
ones in 2019-20, growing from a 1.7 times difference in 1990-91.
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What are the reasons for economic divide in India's

States?

1. Sectoral Growth Gap in Manufacturing: The gap

in manufacturing between higher- and lower-income
states grew significantly, with the former's per capita SDP
being 3.6 times higher in 2019-20, up from 2.4 times in
1990-91.
2. Service Sector and IT Boom: In services, the gap
also widened, with a rise in the SDP ratio from 2.0 to 2.9
during the same period. Post-liberalization, the growth in
services, particularly IT companies, has been significant,
contributing to the economic disparity.
3. Infrastructure vs. Power Availability: Despite
having comparable road and rail infrastructure, lower-
income states, particularly in the Gangetic and eastern
regions, lag in per capita power availability.
4. Shift in Investment: There's been a shift from
public to private sector investment. The public sector's share in gross fixed capital formation dropped from
40% to 23% between 1990-91 and 2019-20, while the private sector's share rose from 18% to 38%,
leading to a concentration of investment in wealthier states.
5. Labor Availability Variations: Lower-income states (especially in the north and central regions), have
lower urban labor force participation rates and fewer workers with regular wage/salary income, affecting
their industrial growth.
6. Entrepreneurship Concentration: The higher-income states accounted for around 75% of organized-
sector factories in 2019-20. Additionally, out of 91 richest Indians residing in India, 87 live in these high-
growth states.
7. Education and Skill Disparity: About 70% of engineering seats in India are in higher-income states,
indicating a major imbalance in access to higher education and consequently, a disparity in attracting high-
tech industries.

Way forward:
To bridge India's economic divide, it's essential to boost entrepreneurship and skill development in the poorer
states, upgrade power infrastructure in regions like the Gangetic and eastern areas and expand access to
technical education. Additionally, forming interconnected national value chains that link the resources of
wealthier states with the potential of poorer ones can foster balanced economic growth.

Topic: Effects of liberalization on the economy

Shift in India's Trade Policy - Reverse India's trend of trace barriers going up

News: The article discusses the global decline of free trade, and the challenges India has faced with its Free
Trade Agreements (FTAs). India's trade deficits have grown due to these agreements, prompting a reevaluation
of its trade strategy and tariff policies.

What Is the Global Trade Scenario?

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1. Protectionism on the Rise: Western nations are increasing trade barriers, indicating a shift away from
free trade.
2. Ineffective International Bodies: The World Trade Organization is struggling to enforce global trade
rules, diminishing its effectiveness.
3. Geopolitical Divisions: The geopolitical split is challenging the past three decades of globalization efforts.
The global market is now a mix of bilateral deals instead of a unified system.

Why Is India's Trade Policy Shifting?

1. Increased Tariffs: After decreasing import tariffs in the 1990s, India raised them again, signaling a shift
in policy towards protectionism.
2. Trade Deficits Concerns: The growing merchandise trade deficits with FTA partners like ASEAN (over
300%), South Korea (160%), and Japan (138%) highlight the challenges India faces in boosting exports
relative to imports. India left the RCEP in 2019, aiming to reduce trade imbalances and overdependence on
Eastern economies, particularly China.
3. Pursuit of Western and West Asian FTAs: Post 2019, India shifted focus to forge free trade agreements
with Western and West Asian economies, moving away from the RCEP to avoid further trade imbalances
and attract global value chains.

For information on RCEP read here.

Way forward:

To improve trade, India should consider reducing tariffs to foster competitiveness and attract global value
chains. Reversing the growing trade deficits, as seen with ASEAN (300% increase), South Korea, and Japan,
could be achieved by integrating more effectively into global markets and making domestic industries more
competitive, thereby enhancing exports and economic health.

For more information On Shift in Global Trade Policy, read here.

Topic: Changes in industrial policy and their effects on industrial growth

On the Semiconductor Design-Linked Incentive (DLI) scheme

News: The article discusses India’s semiconductor strategy and the issues with the Semiconductor Design-
Linked Incentive (DLI) scheme.

A detailed article on Semiconductor Manufacturing in India can be read here.

Background:

The Semiconductor Design-Linked Incentive (DLI) scheme has approved only 7 start-ups till now, falling
short of its target of supporting 100 over 5 years.

What are the goals of India’s semiconductor strategy?

1. Reduce dependence on semiconductor imports, particularly from China, and especially in strategic and
emerging sectors.
2. Build supply chain resilience by integrating into the semiconductor global value chain (GVC).

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3. Taking advantage of India’s comparative advantage such as the presence of the design houses of every major
global semiconductor industry player and Indian chip design engineers.

What are the issues with the DLI scheme?

1. Barriers on FDI: It mandates that beneficiary start-ups maintain their domestic status for at least 3 years
after receiving incentives, and for this they cannot raise more than 50% of their funds via FDI.
2. Lack of Domestic Funding: Costs for semiconductor design startups are significant. The funding landscape
for chip start-ups in India continues to be challenging due to an absence of a mature start-up funding ecosystem.
3. Incentives Not Enough: Incentives under the DLI scheme are not very high, making it unattractive for start-
ups (For e.g. it is capped at ₹15 Crore for Product DLI).
4. Issues with the Nodal Agency: As the nodal agency Centre for Development of Advanced Computing (C-
DAC) is also a market player in the Indian chip design sector, there are concerns of conflict of interest.

What should be the way forward?

1) Focusing on the Broader Objective: The scheme should focus on facilitating design capabilities within the
country, as long as the entity engaging in the design development process is registered in India.
2) Focusing on the Design Stage: Stimulating the design ecosystem is less capital-intensive than the foundry
and assembly stages of the semiconductor GVC. The financial outlay of the scheme must be enhanced.
3) Regarding Nodal Agency Reform: The Karnataka government’s Semiconductor Fabless Accelerator Lab
(SFAL), with its specific partnerships with the Indian Electronics and Semiconductor Association, vendors, IP,
and testing companies, could be an appropriate example for an implementing agency for DLI.

A recalibrated policy focused on chip design implemented by a capable institution can help establish India’s
foothold in this high-tech sector.

Reduction of import duties on EVs - Import concessions:

News: The article discusses India's proposal to lower import taxes on electric vehicles (EVs) to help secure a
free-trade deal with the UK.

About India's electric vehicles (EV) Market:

India is the fourth-largest automobile market globally after China, the US, and Japan, valued at about $250
billion.
It's anticipated to grow annually by more than 9% from 2022 to 2027.
In 2023, EV sales in India surged by 45%, indicating growing market potential.
However, fully assembled EVs priced above $40,000 face a 100% import duty, while those under $40,000 face
a 70% duty. This is much higher than in countries like the US, France, Saudi Arabia, and China.

What are the implications of the reduction of import duties on EVs?

Positive Implications:
1. Attract Foreign Investment: Lower duties may entice companies like Tesla to set up manufacturing units
in India.
2. Competitive Pricing: Increased competition could lead to better and cheaper EVs, benefiting consumers.
3. Global Integration: Lowering tariffs is vital for India's participation in free trade agreements and
attracting global players.
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Negative Implications:
1. Local Industry Threat: Domestic manufacturers fear reduced duties will flood the market with imports,
harming local industry and investment.
2. Sunrise Industry Risk: Lowering duties might deter investments in the domestic EV sector, considered a
nascent yet promising industry.

What are the government initiatives to support the EV market?

1. Production-Linked Incentive Scheme: A scheme with an outlay of ₹25,938 crore aimed at boosting local
manufacturing in the automotive sector, including EVs.
2. National Programme on Advanced Chemistry Cell: With an investment of ₹18,100 crore, it focuses on
promoting advanced cell chemistry for batteries.
3. FAME Scheme: The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles scheme (FAME 1,2
and 3) encourages the use of hybrid and electric vehicles through incentives.

For more information on FAME read Article1, Article2.

Way forward:

Balancing reduced duties and nurturing the local industry is crucial. With the right policies, lowering import
duties could lead to a more competitive market, resulting in better and cheaper EVs, benefiting consumers and
the industry.

Topic: Infrastructure

Develop Lakshadweep but protect its ecology

News: The article discusses the development of Lakshadweep into a high-end, eco-friendly tourist destination.
This plan aims to limit visitor numbers to protect the environment, avoiding the environmental issues seen in
the Maldives due to tourism.

What is the need for developing Lakshadweep?

1. Alternative to the Maldives: Tensions with the Maldives highlight the need for India to have its own high-
end tourist destination.
2. Preventing Environmental Damage: The negative environmental impact in the Maldives underscores
the need for a sustainable tourism model in Lakshadweep.
3. Limited Space Management: Lakshadweep's small size necessitates a controlled development approach
to avoid overcrowding and ecological harm.
4. Economic Development: With only 10 of its 36 isles inhabited, developing Lakshadweep addresses the
need for economic growth in this region.

What are the challenges in developing Lakshadweep?

1. Limited Area: Lakshadweep's small size (32 sq km) and limited inhabited islands (10 out of 36) pose a
challenge for large-scale development.

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2. Exclusivity for High-End Tourism: Due to space limitations, even with land reclamation, Lakshadweep is
likely to cater only to the upper tier of travelers, making it an exclusive destination. This approach, though
seemingly unfair, is a strategic choice to manage the area's constraints.
3. Waste Management: As seen in the Maldives, efficiently handling waste to prevent environmental
degradation is a significant challenge.
4. Balancing Exclusivity and Accessibility: Developing high-end resorts while preserving the local
environment, as opposed to the overcrowding seen in places like Goa, requires careful planning.
5. Sustainability: It's essential to adopt sustainable practices early on to prevent future environmental
problems. Constructing new facilities, such as the planned airport, while preserving the environment,
presents a significant challenge.

What can be learn from Maldives?

1. Maldives' experience shows how excessive tourism can lead to environmental degradation.
2. In the Maldives, waste disposal became a significant issue, with an estimated 300 tonnes of hard and soft
waste dumped daily on a small island. This situation transformed a once-beautiful island into an overrun
garbage dump, as highlighted in a 2012 BBC report. This example underscores the importance of effective
waste management in Lakshadweep to avoid similar environmental degradation.
3. The swift rise in tourism in the Maldives emphasizes the fragility of small island ecosystems, underscoring
the need to maintain a balance between tourist numbers and ecological conservation.

What should be done?

1. Conduct Sustainability Surveys: Carry out detailed surveys to ensure development in Lakshadweep is
environmentally sustainable.
2. Target High-End Tourism: Cater to wealthier tourists, who can be taxed for the additional expenses, to
manage the demand and fund eco-friendly initiatives.

Subject: Agriculture

Topic: Major crops-cropping patterns in various parts of the country

On Production of Pulses in India – Attaining self-sufficiency

News: The article discusses the benefits of increasing production of pulses in India. It also highlights the
constraints in increasing production and the steps that can be taken to tackle the challenges.

India is the largest producer, consumer, and importer of pulses in the world.

What are the benefits of increasing production of pulses in India?

1. Address food-security concerns.

2. Address environmental challenges.
3. Reduce Import bill.
4. Addressing protein deficiency: Pulses are a source of dietary fibres and plant-based proteins.
5. Enhancing soil fertility: Pulses can fix nitrogen in the soil.
6. Low Water Requirement: Suitable for cultivation in rain-deficient or depleting groundwater regions.
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3. ECONOMY
3.1. NATIONAL MULTIDIMENSIONAL POVERTY INDEX
Why in the news?
NITI Aayog released a discussion paper titled ‘Multidimensional
Poverty in India since 2005-06’.
About Multidimensional poverty
• It refers to a measure that considers various factors or
dimensions beyond income to assess and understand poverty.
• Multidimensional poverty encompasses the various
deprivations experienced by poor people in their daily lives –
such as poor health, lack of education, inadequate living
standards, poor quality of work, the threat of violence, among
others.
o Ending poverty in all its forms everywhere, the aim of Sustainable Development Goal (SDG) 1, entails viewing
poverty not solely in relation to income and consumption, but as relating to other multiple capabilities.
Measurement of multidimensional poverty:
• The Multidimensional Poverty Index (MPI) assesses poverty at the individual level. Alkire-Foster Method is most
often used to compute MPIs.
• Global MPI (GMPI): It is a globally recognized comprehensive measure that captures poverty in multiple dimensions
beyond monetary aspects.
o GMPI Report was first released by the Oxford Poverty and Human Development Initiative (OPHI) and the United
Nations Development Programme (UNDP) since 2010.
o It covers 100 developing countries and captures the acute deprivations in health, education, and living standards
that a person faces simultaneously.
o If a person is deprived in a 1/3rd or more of ten (weighted) indicators, the GMPI identifies them as ‘MPI poor.
• National MPI (NMPI): It retains the 10 original indicators of the global MPI model and has added two indicators, viz.,
Maternal Health and Bank Account, in line with India’s national priorities.
o MPI value is arrived at by multiplying the headcount ratio (H) and the intensity of poverty (A), reflecting both the
share of people in poverty and the degree to which they are deprived.
✓ Headcount ratio (H): It indicates proportion of multidimensionally poor in the population.
✓ Intensity of poverty (A): It indicates average proportion of deprivations which is experienced by
multidimensionally poor individuals.
o Under the government’s Global Indices for Reforms and Growth (GIRG) initiative, NITI Aayog is the nodal agency
for MPI.
✓ GIRG monitors India’s performance on various important social and economic parameters.
o NITI Aayog uses National Family Health Survey (NFHS) to measure the NMPI.
✓ The latest NMPI, ‘National Multidimensional poverty: A Progress Review -2023’ is based on the data of NFHS 4
and 5.
Key finding of the recent discussion paper
• Decline in MPI: Headcount Ratio decreased from 29.17% in 2013-14 to 11.28% in 2022-23.
o 24.82 crore Indians escaped multidimensional poverty in last 9 years.
o Intensity of Poverty is also declining which shows that extent of deprivation among the deprived population is
falling.
o The pace of decline in poverty headcount ratio was much faster between 2015-16 to 2019-21 compared to
2005-06 to 2015-16.

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• Poverty declining across indicators: All 12 indicators of MPI have recorded significant improvement.
o Cooking Fuel and Housing have the highest deprivation level of deprivation.
o Child & Adolescent Mortality, Electricity, and Bank Account have the lowest deprivation levels.
• Regional decline in MPI: Poorer states record faster decline in poverty indicating reduction in disparities.
o Uttar Pradesh, Bihar, Madhya Pradesh, Odisha, and Rajasthan saw fastest reduction in the proportion of
multidimensional poor.
• Attainment of SDG: India on track to achieve SDG Target 1.2 (reducing multi-dimensional poverty by at least half)
much ahead of 2030.
• Factors responsible for decline in MPI: Various government programs including PM Ujjwala Yojana, Saubhagya, and
transformative campaigns
like Swachh Bharat Mission
and Jal Jeevan Mission have
collectively elevated living
conditions and overall well-
being of people.
Significance of NMPI
• Provides for more nuanced
perspective as it delves into
deprivations up to the
district level unlike
conventional monetary
poverty assessments that is
based on consumption
surveys.
• Facilitates targeted
interventions to address
acute poverty and uphold the
principle of inclusivity.
• Determination of overlapping
deprivations that directly
influence individuals’ quality
of life and overall well-being.
• Helps in more inclusive policy
formulation.
Issues associated with NMPI
• Less sensitive: To be
considered
multidimensionally
poor, households must be
deprived in at least 1/3rd of
indicators. This requirement
makes the MPI less sensitive
to minor inaccuracies.
• Impact of COVID-19: Some
economists have argued that
loss of livelihood due to
reverse migration and deaths
due to disrupted healthcare in
2020-21 are not covered in the Index.
28 www.visionias.in ©Vision IAS
• Stagnant wages: Real wages were stagnant for six years which had serious implications for consumption demands
and this cannot be consistent with a decline in poverty levels.
• Issues in reliability of Data:
Way forward
• Include new dimensions in calculating MPI: Like learning outcomes, social discrimination, unorganized workers,
environmental degradation etc.
• New measurement: National MPI should incorporate 75th round of National Sample Survey (NSS) data along with
NFHS.
• Effective monitoring: Comprehensive measures should be taken to monitor the progress across indicators on real
time basis.
o Also, social audit of the programmes, awareness generation about development programme, etc. is critical for
eliminating multidimensional poverty.

3.2. UNIFIED PAYMENTS INTERFACE (UPI)

Why in the news?
Recently, the Reserve Bank of India (RBI) has announced new rules and regulations to enhance the scope of Unified
Payments Interface (UPI) payments.
About National Payments Corporation of India (NPCI)
More on news • NPCI is an umbrella organization for operating retail
• About new rules payments and settlement systems in India.
o Enhancing UPI transaction limit: • It is an initiative of RBI and Indian Banks’ Association (IBA)
under provisions of Payment and Settlement Systems Act,
✓ The transaction limit for UPI payments made
2007.
to hospitals and educational institutions has
• It has been incorporated as a “Not for Profit” Company
been hiked to Rs 5 lakh from Rs 1 lakh earlier. under provisions Section 8 of Companies Act 2013.
✓ Transaction limit for UPI is capped at Rs. 1 • It has launched payment products such as RuPay card, IMPS,
lakh, except in a few categories like Capital UPI, BHIM, BHIM Aadhaar, Bharat BillPay etc.
Markets (Broking, Mutual Funds, etc.),
Collections (Credit card payments, Loan re-payments, EMI), Insurance etc. where transaction limit is Rs. 2
lakhs.
o Increased e-Mandates for Recurring Online Transactions: Limits for execution of e-mandates without Additional
Factor of Authentication (AFA) increased from Rs 15,000 to Rs 1 lakh for credit card bill payments, mutual fund
subscriptions and insurance premiums.
About Unified Payments Interface (UPI) and its Features
• UPI powers multiple bank accounts into a single mobile application (of any participating bank), merging several
banking features e.g., transfer of funds, etc.
o It was developed by NPCI in 2016 and built over Immediate Payment Service (IMPS) infrastructure.
o It is the most successful real-time payment system globally, providing
simplicity, safety, and security in person-to-person (P2P) and person-
to-merchant (P2M) transactions in India.
New Features of UPI
• Credit Line on UPI: It enables pre-sanctioned credit lines from banks via
UPI. Earlier, only the deposited amount could be transacted through the
UPI System.
• UPI Lite X: Users can both send and receive money offline through any
compatible device that supports Near Field Communication (NFC).
• UPI Tap & Pay: It allows NFC-enabled QR codes at merchants to complete payments, with a single tap without
entering the PIN.

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• Conversational Payments:
o Hello! UPI: Users can simply give voice commands to transfer funds and input a UPI PIN to complete the
transaction.
o BillPay Connect: Customers can fetch and pay their bills by sending a simple ‘Hi’ message or by giving a missed
call.
Initiatives to promote UPI
• Other Proposed Changes for UPI Payments
• UPI for secondary market: Introduced by NPCI to
o Deactivate UPI IDs: National Payments Corporation of enhance the ease of equity trading in country.
India (NPCI) has asked banks and mobile payment • UPI Chalega Campaign: Launched by NPCI to promote
applications. UPI as an easy, safe, and instant mode of payment. It
like Google Pay etc. to deactivate UPI IDs and numbers also educates users about various features such as
of accounts that have been inactive for one year. UPI LITE that enables swift low value transaction.
o The four-hour time limit for users initiating first • MoU between Google India Digital Services and NPCI
payments over Rs 2,000 to new recipients to make UPI International Payments: To broaden use of UPI
transactions safe. payments, enabling travellers to make transactions
✓ This has added a layer of control and security as it abroad and ease remittances process between
allows users to reverse or modify transactions countries.
• India’s UPI in overseas markets: Various countries like
within that window.
Oman, UAE, France, Nepal, Bhutan etc. are using UPI
o Introduction of UPI ATMs, allowing cash withdrawal by
system for payment.
scanning a QR code. • UPI 123PAY: It is an instant payment system for
Challenges associated with UPI feature phone users who can use UPI payment service
in a safe and secure manner.
• Regulation: Expanding UPI to accommodate a global user
base will require adhering to data protection, financial laws and regulations of different countries posing regulatory
and compliance challenges.
o Also, significant scalability in terms of software, network and partner banks is required.
• Dominance of Foreign-owned UPI Apps: Parliamentary panel’s report, ‘Digital Payment and Online Security Measures
for Data Protection’ recently highlights that foreign entities like PhonePe and Google Pay dominate Indian fintech
sector.
o Market share of PhonePe is 46.91% and Google Pay is 36.39% in terms of the transaction volume in October-
November 2023, whereas for BHIM UPI it is 0.22%.
• Security and Fraud: Cybercriminals may exploit vulnerabilities in the system or use social engineering techniques to
gain access to sensitive information leading to financial losses.
• Exchange Rates: Managing
currency conversion and
exchange rates while
facilitating payments and
loading money to the wallet
poses a significant challenge
for cross-border transactions.
• Lack of awareness: UPI
remains a barrier to its
widespread adoption
especially among individuals
with a lack of familiarity with
digital payments, leading to
financial fraud.
• Privacy and Surveillance: The
UPI system ensures end-to-
end cryptography, but the
regulator i.e. NPCI have
access to details of each

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 transaction Aadhaar number, device fingerprint, IP address, bank account numbers etc. This potentially compromises
privacy rights.
Way ahead
• Regulation: A collaborative approach among nations, partnership among financial institutions, service providers
etc. is required to develop a uniform compliance and regulatory framework among the partner nations.
• Infrastructure: Banks and Payment service providers need to expand their infrastructure in terms of software,
network etc. to process higher transactions per second and accommodate a global user base.
• Fraud Protection: A collaborative effort between UPI service providers, banks, and users is required to identify and
respond to UPI frauds.
• Transaction limits: Striking a balance between security and transaction flexibility is crucial to drive wider adoption of
UPI across various sectors.
• Education and awareness: Training programs and easy-to-understand guides should be designed to educate the
masses about the UPI ecosystem and mitigate associated concerns.

3.3. NON- PERFORMING ASSETS (NPA)

Why in the news? Steps taken to reduce NPA
RBI’s annual Trend and Progress of Banking in India • Securitisation and Reconstruction of Financial Assets and
report for the financial year 2022-23, showed that the Enforcement of Security Interest Act, 2002 (SARFAESI Act): It
gross non-performing assets (GNPA) ratio fell to 3.9 allows secured creditors to take possession of collateral, against
which a loan had been provided, upon a default in repayment.
per cent in 2022-23.
• Debt Recovery Tribunals: Established under the Recovery of
About Non- Performing Assets (NPA) Debts and Bankruptcy Act, 1993 provide for the establishment of
Tribunals for expeditious adjudication and recovery of debts.
• A NPA refers to a classification for loans or • Insolvency and Bankruptcy Code (IBC), 2016: For reorganisation
advances of a bank that are in default or arrears. and insolvency resolution of corporate persons, partnership firms
o A loan is in arrears when principal or interest and individuals in a time-bound manner i.e. within 180 days or
payments are late or missed and becomes an the extended period of 90 days.
NPA when the interest and/ or instalment of • National Asset Reconstruction Company (NARCL): It aims to
principal remain overdue for more than 90 reduce NPAs of banks, improving financial system stability and
days. efficiency.
o GNPAs are the sum of all loan assets that are o It is incorporated under the Companies Act 2013 with PSBs
classified as NPAs. holding a majority stake.
• Indradhanush plan for revamping PSBs, envisaging infusion of
Reasons for Non-Performing Assets capital in PSBs.
• Defective Lending Process: Improper selection and lack of
periodic review of the credit profile of borrowers ensuring their
repayment capabilities can create NPAs in PSBs.
o Due to a lack of cooperation with financial institutions,
borrowers default in more than one bank.
• Willful Defaults: Rising cases of borrower who have access to
funds to repay their loans but still choose not to, and default on
the repayment of the loan.
Industrial sickness: Ineffective management, lack of adequate
resources and technological changes, and changing government
policies produce industrial sickness. Therefore, banks financing
these industries ultimately end up with a low recovery rate of
loans reducing their profit and liquidity.
• Regulatory: Flouting of RBI guidelines and non-compliance with
regulatory directions regarding banking operations by Public
Sector Banks (PSBs), can lead to frauds and rise in NPAs.

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• Frauds by banker and borrower: The size of frauds in the public sector banking system has been increasing, though
still small relative to the overall volume of NPAs.
o In the first half of the 2023-24 financial year (April- September), there is an increase in reporting of fraud cases
in the banking sector to 14,483 from 5,396 cases in the same period a year ago (2022-23).
Impact associated with Non- Performing Assets
• Economic growth: Rising NPAs prevent banks from lending for other productive activities leading to a
slowdown in economic activity. It can further lead to a decrease in employment opportunities and inflation.
• Higher interest rates: Increasing NPAs can lead to an increase in interest rates, to cover the losses, which can lead to
an increase in borrowing costs for individuals and companies.
• Public trust: Rising NPAs led to reputational, operational and business risk for banks and undermined customers’
trust with financial stability implications.
• Pendency: The courts are facing the problem of increasing pendency of cases, as the current set up of courts made
to deal with the problem of debt recovery is not efficient and does not have enough manpower available to deal
with the high influx of debt recovery cases.
• Capital adequacy issues: NPAs erode the capital base of banks. When NPAs increase, banks may struggle to meet
capital adequacy norms.
Other Highlights of Report on Trend and Progress of Banking in India 2022-23
• The consolidated balance sheet of SCBs grew by 12.2% in 2022-23, the highest in nine years.
• In 2022-23, the combined balance sheets of Urban Co-operative Banks (UCBs) expanded by 2.3% while that of Non-Banking
Financial Companies (NBFCs) expanded by 14.8%.
• The rate of growth of the unsecured retail segment has outpaced total bank credit growth.
o NBFCs’ double-digit credit growth was driven by the growth of unsecured loans which grew more than twice as fast as
secured loans.
• During 2022-23, the total amount of fraud reported by banks declined to a six-year low, while the average amount involved
in fraud was the lowest in a decade.
• The capital-to-risk-weighted assets ratio (CRAR) of SCBs reached 16.8% at the end of September 2023.
Concerns raised by the eport
• Long tenure of directors, absence of comprehensive risk management policy and deficient compliance culture in UCBs.
• Concentration risks of corporate credit in NBFCs and significant exposure of banks to NBFCs.
• The top 50 exposures of Government-owned NBFCs constituted about 40 per cent of total corporate credit within the NBFC
sector.
• Also, all these 50 exposures were to the power sector, which faces multiple inherent issues.
Way forward
• Government support: Adopting a comprehensive 4R strategy consisting of the Recognition of NPAs
transparently, Resolution and recovery value from stressed accounts, Recapitalising Public Sector Banks (PSBs), and
Reforms in PSBs and the financial ecosystem can reduce NPAs and strengthen PSBs.
• Strengthen credit monitoring: Develop an early warning mechanism and comprehensive MIS (Management
Information System) to enable timely detection of problem accounts, flag early signs of delinquencies and facilitate
timely information to management on these aspects.
• Approval process: Banks should have an established credit approval process, for new credits as well as re-financing
of existing credits.
o A comprehensive assessment and periodic review of the borrower’s financial health and repayment capacity
should be carried out.
• Institutional mechanism: To cater to large industrial and infrastructure projects and the need for long-term funding,
new Development Financial Institutions (DFIs) can be developed.
• Risk Management: The banks can mitigate their potential concentration risk to a specific borrower group, sector,
geography, maturity duration etc. which was not initially envisaged at the time of loan origination.
o Encourage banks to diversify their loan portfolios to reduce concentration risk. Overreliance on a specific sector
or type of borrower can lead to higher NPAs during economic downturns in that sector.

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3.4. G-SECURITIES
Why in the news?
Recently, the Reserve Bank of India (RBI) has permitted the lending and
borrowing of G-Securities (G-Secs) by issuing directions called RBI
(Government Securities Lending) Directions, 2023.
More on news
• Government Securities Lending (GSL) refers to lending of eligible
G-Secs, for a fee, by the owner (lender) to a borrower, on collateral
of other G-Secs, for a specified period.
o Under GSL transaction, G-Secs issued by the Central
government excluding Treasury Bills (T-Bills) shall be eligible for
lending/borrowing.
o Also, G-sec issued by the Central Government including T-Bills
and State Governments bonds shall be eligible for placing as
collateral under GSL transaction.
• Other directions include
o Eligible Participants in GSL transactions as lenders of
securities: Entities eligible to undertake Repo transactions and
those approved by RBI.
o Tenure of GSL transaction: Minimum one day and maximum
period prescribed to cover short sales.
• Permitting lending and borrowing of G-Secs will-
o Add depth and liquidity to the G-sec market, aiding efficient
price discovery.
o Facilitate wider participation in the securities lending market
by providing investors an avenue to deploy idle securities and enhance portfolio returns.
o Enhance operational efficiency of government bonds by insurers.
About G-Securities (G-Secs)
• G-Sec is a tradeable instrument issued by Central or State Governments.
It acknowledges the government’s debt obligation.
o Such securities are short-term terms usually called Treasury bills (T-
Bills) with maturities of less than one year (91 days, 182 days, or 364
days) or long-term called Government bonds or dated securities
with maturity of one year or more (between 5 years and 40 years).
o In India, Central Government issues both T bills and bonds or dated
securities while State Governments issue only bonds or dated securities, which are called State Development
Loans (SDLs).
o G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
• Other G-Sec includes Cash Management Bills (CMBs), introduced in 2010, a new short-term instrument to meet
temporary cash flow mismatches of the Government.
o CMBs have the generic character of T-bills but are issued for maturities of less than 91 days.
• G-Secs are issued through auctions conducted by RBI. Auctions are conducted on the electronic platform called the
E-Kuber, the Core Banking Solution (CBS) platform of RBI.
Initiatives taken for Government -Securities (G-Secs)
• G-sec Acquisition Programme (G-SAP): Under it, RBI conducts open market operations to purchase G-Secs from the market.
o It helps the central bank in controlling excessive volatility faced by market participants in G-Secs market.
• RBI Retail Direct Scheme: Under this, retail investors will have the facility to open and maintain ‘Retail Direct Gilt Account’
(RDG Account) with RBI to access its G-Sec platform.
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 • Draft RBI (Bond Forwards) Directions, 2023: It aims to introduce bond forwards in G-Secs, a move that will enable market
participants, particularly long-term investors, to manage cash flows and interest rate risk.
o Bond forwards mean derivative contracts in which one counterparty (buyer) agrees to buy a specific debt instrument
from another counterparty (seller) on a specified future date and at a price determined at the time of the contract.
• Scheme for Non-competitive Bidding Facility in Auctions of G-Secs: Introduced by RBI to encourage retail participation in
primary market for G-Secs and SDLs.
What are the concerns associated with government securities?
• Captive investor base: A diversified investor base for fixed-income securities is important for ensuring high liquidity
and stable demand in the market. However, currently, a large portion of G-Secs are held by captive investors such
as banks, and insurance companies. What are the techniques for mitigating G-Secs risks?
• Operational challenges: RBI’s Negotiated Dealing • Holding securities till maturity could be a strategy
System Order Matching (NDS-OM) platform was not able through which one could avoid market risk.
to boost retail participation as it resulted in an artificial • Market risk and Reinvestment risk could also be
segmentation of investors in different securities. managed through Asset Liability Management (ALM) by
• Exchange rate management: Inflows of foreign funds via matching the cash flows with liabilities.
government bonds can lead to rupee appreciation. • Rebalancing the portfolio wherein the securities are sold
• Liquidity: The G-sec market lacks liquidity due to the once they become short term and new securities of
longer tenor are bought could be followed to manage
non-availability of buyers for the security in the
the portfolio risk.
secondary market. It can lead to distressed sales (selling • Advanced risk management techniques involve the use
at a lower price than its holding cost) causing loss to of derivatives like Interest Rate Swaps (IRS) through
sellers. which the nature of cash flows could be altered.
• Major risks associated with holding G-Secs:
o Market risk: Market risk arises out of adverse movement of prices of the securities due to changes in interest
rates. This could lead to loss if securities are sold at adverse prices.
o Reinvestment risk: Cash flows on a G-Sec include a coupon every half year and repayment of principal at maturity,
which needs to be reinvested. However, it poses a risk for investors as they may not be able to reinvest due to a
decrease in prevailing interest rates.
o Interest rate risk: Dated securities have a long-term maturity of 5-40 years, and thus are exposed to interest
rate risk, reducing their relevance over longer tenure.
Way forward
• Unified market: Unifying the G-Sec and corporate bond markets would enable the seamless transmission of pricing
information from G-Secs to corporate bonds. Having the same regulatory regime for trade, clearance, and settlement
of corporate bonds and G-Secs will result in economies of scale and scope, leading to greater competition, efficiency,
and liquidity in markets.
• Trading: To facilitate greater investor participation and achieve ease of doing business, G-Secs should be issued and
traded through the stock exchange mechanism.
• Investment: The government should issue G-Secs in demat so that demat holders (currently, more than 120 million
and expanding) can easily invest in G-Secs. G-Sec-based exchange-traded funds should also be developed to increase
retail participation.
• Transparent fiscal framework: Fiscal Responsibility and Budget Management (FRBM) legislation should highlight a
fiscal path to investors highlighting the steps to reducing government debt in a transparent and accountable manner
to boost investors’ confidence.
• Tax Incentives: Providing tax incentives in the form of no tax to be paid on interest income generated from the G-Sec
can boost the demand for the G-sec in the market.
Related News
State Government Guarantees (SGGs)
• Reserve Bank of India (RBI) released the Report of the Working Group on State Government Guarantees (SGGs).
• In 2022, 32nd Conference of State Finance Secretaries discussed problem of inadequate monitoring and reporting of
guarantees issued by State Governments.
o As a response, a Working Group was formed to address this issue.
34 www.visionias.in ©Vision IAS
 • About SGGs
o A guarantee is a form of contingent liability designed to shield investors or lenders from the potential default risk of a
borrower.
o State governments often authorize and issue guarantees on behalf of state enterprises, cooperative institutions, urban
local bodies, and other state-owned entities.
✓ These guarantees are typically extended to lenders, commonly commercial banks or other financial institutions.
• Concerns with SGGs
o Fiscal risks: Guarantees can pose fiscal risks, straining state finances with unanticipated cash outflows and increased
debt.
✓ Prudential level of debt-GSDP for a state is 20%, but non-disclosure of a high guarantee level understates a state’s
debt-GSDP.
o Moral hazards: Guarantees could create moral hazard, leading to the guaranteed entity to be sub-optimal in performing
its obligation.
✓ Similarly, investors and lenders may be less motivated to thoroughly assess project compared to traditional non-
recourse project financing.
Recommendations by RBI Report
• Clearly define purpose for which government guarantees are issued.
• Charge a minimum fee for guarantees extended.
• Fix a ceiling for incremental guarantees issued during a year at 5% of Revenue Receipts or 0.5% of GSDP (whichever is less).
• States should continue to build up the Guarantee Redemption Fund or GRF (established to cushion liabilities due to invocation
of guarantees).
o Participation from the states in GRF is voluntary, 19 states have already established GRF.

3.5. PETROLEUM EXPLORATION & PRODUCTION

Why in the News?
Oil and Natural Gas Corporation (ONGC) has started first crude oil
production from its Cluster-2 deep-sea project in the Krishna-Godavari
(KG) basin in the Bay of Bengal.
Petroleum basin in India
• A petroleum basin includes a diverse collection of rocks and
sediments, but most importantly it contains source rocks.
o Source rocks are specific shale formations in a basin where oil
and gas are born.
• There are 26 sedimentary basins in India, covering a total area of 3.4 million square kilometer.
• Of the total sedimentary area,
o 49% of total area is located on land,
o 12% in shallow water (up to 400 meter water depth) and
o 39% in the deepwater area (farther up to Exclusive Economic Zone or EEZ).
✓ The jurisdiction of the EEZ extends 200 nautical miles from the coastline, thereby conferring on the coastal
state the right to manage, explore, exploit, and conserve all resources within its purview, be they living or
non-living.
• These basins are also divided into three categories based on maturity of hydrocarbon resources as under:
o Category-I: Commercially established & producing basins. Total 7 basins (refer to the map)
o Category-II: Prospectivity identified. Total 5 basins (Kutch, Mahanadi- North East Coast (NEC) region & Andaman-
Nicobar, Vindhyan, Saurashtra)
o Category-III: Prospective. Total 14 basins (Himalayan Foreland, Ganga, Kerala-Konkan-Lakshadweep, Bengal,
Karewa, Spiti-Zanskar, Satpura-South RewaDamodar, Narmada, DecanSyneclise, Bhima-Kaladgi,Cuddapah,
Pranhita-Godavari, Bastar, Chhattisgarh)
• Methods of Extracting Crude Oil:
o Offshore drilling: In marine environments, offshore basins like Arabian Sea or Bay of Bengal.
o Onshore drilling: On land, covering various sedimentary basins across the country.
35 www.visionias.in ©Vision IAS
• ONGC is India’s largest oil
and gas producer
contributing 72% of the
country’s hydrocarbon
production.
Steps taken for enhancing
Petroleum E&P
• Directorate General of
Hydrocarbons (DGH) was
formed to promote sound
management of the oil and
natural gas resources.
• Approval processes have
been streamlined by
digitization and
standardization of
contractual submissions
on the e-platform.
• National Data Repository
(NDR), launched for public
in 2017, serves as a
government data bank
promoting E&P activities.
• Upgrade of the NDR to a
cloud-based, state-of-the-
art facility with virtual data
rooms is in progress for
investors for 24x7 access
to E&P data.
• As per India Hydrocarbon
Vision 2025, lays the broad
contours/targets for the
development of
Hydrocarbons.
• 100% FDI through
automatic route for
exploration activities of oil
and natural gas fields,
infrastructure related to marketing of petroleum products
and natural gas, etc.
• National Seismic Programme (NSP) aims to undertake a
fresh appraisal in all sedimentary basins across India.
Challenges in Petroleum E&P
• Capital: Oil production units are capital intensive in
nature. It requires expensive equipment and highly
skilled labours.
• Technological: Extracting petroleum from challenging
geological formations requires advanced drilling
technologies.
36 www.visionias.in ©Vision IAS
• Accidents: E&P activities involve the risk of spills, leaks, and other accidents. For e.g., recent event of Ennore oil spill
in Tamil Nadu.
• Environmental: Loss of habitats and wildlife due to drilling, pipelines, and other infrastructure.
• Community displacement: Displacement of local communities,
leading to social and cultural challenges.
Way forward
• Investment: Explore opportunities for joint E&P of oil and gas
assets with Global companies.
o Also, stable tax regime and tax break would help attracting
more private investment.
• Industry-academia collaboration: It provides access to the latest
research and technologies, bridges the divide between theory and
practice.
o For e.g., MoU signed between DGH and Wadia Institute of
Himalayan Geology for application of AI/ML in Amguri and
adjoining areas of Upper Assam.
• Sustainable E&P: For example, Oil India Limited has taken steps
for sustainable oil production by partnering with the Assam State
Biodiversity Board and the IUCN.
o They signed an agreement to study the impact of oil
production on Dibru Saikhowa National Park (of Assam) and
develop an oil production plan in response to the findings.
• Control Oil spills: by using latest technologies like oil-zappers.
Provide comprehensive training for industry personnel on spill
prevention and response protocols.
• Mitigating impact on community: Project planning should involves
carrying out an impact assessment to understand the potential
effects on local communities, including people’s health, livelihood
etc.
About HELP
• HELP introduced in 2016, replaced New Exploration Licensing Policy (NELP).
• Provides for a Single license for E&P for all types of hydrocarbons viz. conventional oil and gas, CBM, shale oil, gas hydrates,
etc.
• Shifted from the previous profit-sharing model to a Revenue Sharing Contract model (i.e., revenue is shared between the
government and the contractor).
o In profit-sharing model, the profit was shared after cost recovery.
• OALP was introduced enables investors to select blocks of their choice by evaluating data in the NDR and expressing interest.
• Reduced royalty rates, marketing and pricing freedom, round-the-year bidding, etc.

Unconventional Petroleum Resources

• Oil and natural gas trapped in less permeable rocks is referred to as an unconventional resource because it cannot be
explored, developed and produced by conventional processes.
o “Conventional resources” is a term referring to oil and natural gas trapped in rock that is porous and permeable.
✓ The natural pressure of the underground rock formation allows oil and natural gas to flow freely up a petroleum well.
• These include deposits like:
o Coalbed Methane (CBM) or Coal Seam Gas (CSG): Refers to methane rich gas naturally in coal seams typically comprising
80% to 90% methane with lower proportions of ethane, propane, nitrogen, and carbon dioxide.
o Shale gas/oil: It is a form of natural gas/oil that remain unexpelled, unmigrated, and entrapped within the pore space
and fractures of a source rock (commonly, shale).
✓ The shale gas/oil is produced commercially when sufficient fracture conductivity is induced by hydraulic fracturing.
o Gas hydrates: These are naturally occurring ice-like solids (clathrates) in which water molecules trap gas molecules in
deep-sea sediments and in and below the permafrost soils of the polar regions.
37 www.visionias.in ©Vision IAS
3.6. FOOD PROCESSING INDUSTRY
Why in the news?
India’s processed food exports have grown by 150% in the last
nine years making agricultural exports touch a value of about $53
billion.
What is Food processing?
• Food processing is the set of methods and techniques which
are used to transform raw ingredients into finished and semi-
finished products.
• According to Ministry of Food Processing Industries (MoFPI),
if any raw product of agriculture, animal husbandry or fisheries is transformed in such a way that
o its original physical properties undergo a change,
o the transformed product is edible and
o has commercial value, then it comes within the domain of Food processing Industry (FPI) .
Benefits of food processing exports
• Reduction in waste as processing helps in extension of shelf life.
• Nutritional benefits include addition of particular vitamins through fortification methods tailored to specific dietary
needs.
o It can address the malnutrition, under nutrition among children as well as overall population.
• Enhanced Employment: by generation of additional job in various segments of logistics, trading etc.
• Rural development: Increased export and demand of processed food worldwide can benefit farmers by improving
their incomes leading to rural development, poverty reduction etc.
• Adoption of new and emerging technologies for processing improves efficiency in this sunrise sector
• Exports can lead to Foreign exchange earnings improving India's trade balance and economic growth.
Challenges persisting in Food Processing Industry
• Lack of cutting-edge infrastructure. Many businesses operate in the small and medium enterprises sector, which
often lacks the resources to upgrade to the latest technology.
• Logistical challenges such as inadequate storage and transport facility, inefficient global supply chains also leads to
wastage and inadequate processing of food materials. Institutional Measures
• Lack of access to credit and financing creates entry • Agricultural and Processed Food Products Export
barriers make it difficult for small businesses to enter the Development Authority (APEDA) has been established as
market and compete with larger and better established per APEDA Act, 1985 for development of export by
companies. providing financial assistance, fixing of standards,
• Inadequate quality control & testing infrastructure improving packaging etc
leads to issues such as pest infestations, presence of • The Marine Products Export Development Authority
(MPEDA) is a statutory body entrusted with the primary
chemical residues.
task of promotion of export of marine products.
• Global Standards are often not met due to which our • Indian Institute of Packaging (IIP) develops standards for
products are banned by the importing country affecting export packaging fruits & vegetables.
India’s export leading to loss of income for exporters, • The Export Inspection Council (EIC) is the official export
farmers and processors. certification body having global acceptance which
ensures quality and safety of products exported.
Way forward
• Agriculture Export Policy (2018) has been introduced
• Changing the trend from sustenance to market- with the objectives of doubling India’s share in world agri
oriented by increasing focus on large-scale food exports by integrating with global value chains.
processing rather than exporting only raw materials.
• Promoting better Interaction between farmers and processors and the market demand like buying directly from
farmer producer organisations (FPOs).
38 www.visionias.in ©Vision IAS
• Strengthening institutional framework to develop manpower and bringing improvement in R&D capabilities.
• Enhance export competitiveness by developing Efficient Quality control, and Food safety Assurance of processed
food products
o facilities to move up the value chain and meet international standards like sanitary and phyto sanitary measures.
o Evolving the supply chain model by adoption of cooperative model, diversification of agricultural exports, timely
delivery of goods etc.
Initiatives taken by Government
• Pradhan Mantri Kisan Sampada Yojana (PMKSY): It is an Central sector scheme for development of Mega Food Parks,
Integrated Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure etc
• Pradhan Mantri Formalization of Micro Food Processing Enterprises Scheme (PMFME Scheme) aims at upgradation of micro
Food processing units, providing seed capital to SHGs, branding and marketing support
o One District One Product (ODOP) component of PMFME aims to create specific product clusters.
• Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) is a central sector scheme to support creation of
global food manufacturing champions and support Indian brands in the international markets.
• Liberalised FDI regime: 100% FDI through automatic route for FPIs and 100% FDI through government-approval route for retail
trading, including through e-commerce.
• Krishi Udan and Krishi Rail schemes have been launched to ease out freight rates enabling smooth movement of perishables.

3.7. PRADHAN MANTRI GRAM SADAK YOJANA

Why in the news?
A parliamentary panel has asked the Union Rural Development Ministry to tighten the supervision of road construction
in rural areas under the PMGSY, indicating the use of poor-quality materials.
About Pradhan Mantri Gram Sadak Yojana
• It started as a 100 % centrally sponsored scheme launched in the year 2000 to provide all-weather rural road
connectivity to eligible rural habitations.
• Ministry: Ministry of Rural Development
• Eligibility: Population size >500 in plain areas and >250 in hills and other difficult areas.
• Funding Pattern:
The funding pattern was revised to a 60:40 ratio between Centre and State in 2015-16, and a 90:10 ratio for
Northeastern States and Himalayan States.
• The scheme has four verticals, (i) PMGSY I, (ii) PMGSY II, (iii) Road Connectivity Project for Left Wing Extremism
Areas (RCPLWEA), and (iv) PMGSY III.
o PMGSY I (2000): It was launched to provide rural connectivity, by way of a single all-weather road, to the eligible
habitations as per Census 2001.
o PMGSY-II (2013): It was launched with a target to upgrade 50,000 Km in various States and Union Territories.
o Road Connectivity Project for Left Wing Extremism Affected Areas (RCPLWEA) (2016): It was launched for
construction and upgradation of strategically important roads; mainly to improve the road connectivity in left
wing extremism affected districts and adjoining areas.
o PMGSY-III (2019): It was launched for consolidation of 1,25,000 Km to connect major rural links connecting
habitations, inter-alia, to Gramin Agricultural Markets (GrAMs), Higher Secondary Schools and Hospitals.
Benefits of Pradhan Mantri Gram Sadak Yojana
• Boosts rural incomes with new and alternative non-farm livelihood opportunities with increased mobility.
• Easier and increased access to markets: Ease of access to newer markets has helped boost family incomes.
• Rural roads lead to path of prosperity: Villagers are travelling to other towns and big cities for newer livelihood
opportunities.
• Better access to health and education: rural roads have enabled school buses to reach far-flung villages, making it
easier for children to get to school.
• Village roads bring women freedom and choice: More women and girls in villages are going to schools, accessing
various facilities and becoming financially independent.
39 www.visionias.in ©Vision IAS
Challenges in achieving desired outcomes of PMGSY
Challenges in PMGSY Committee Recommendations
• Non-timely fund release by states: 41% of the total roads are • Consistent flow of funds should be ensured with proper
in a poor state due to non-provisioning of adequate funds by supervision of states and coordination with ministry of
the State. finance for the timely release of funds.
• Poor Quality of Roads: Due to non-existence or non- • Stricter compliance Quality Control Labs on the ground
functioning of the mandatory provision of quality control labs should be ensured for thorough evaluation of sites and
at the ground level. maintenance of road quality.
• Issues with Tendering and Contractors: Contractors use a • Measures for proper bidding process should be taken
practice called "low-tendering," submitting very low bids to win to prevent low-tendering along with implementing a
the projects which compromises the quality of materials. rigorous monitoring system.
• Post-Construction Maintenance: As per scheme, a road should • Post construction road maintenance for 10 years as per
have a design life of 10 years. However, contractors do not provisions of scheme should be ensured. The
adhere to this which results in degraded road quality. contractors not abiding by this should be blacklisted.
• Use of old census: Habitations under PMGSY are based on the • Inclusion of 2011 census figures: A new vertical should
2001 Census which has led to many eligible habitations being be introduced for the inclusion of habitations as per the
left out. 2011 census.

3.8. NEWS IN SHORTS

3.8.1. INDIA BECOMES FOURTH-LARGEST • Issues with Indian Stock markets: High volatility,
STOCK MARKET limited issuer and investor base adversely affects
liquidity, sub-optimal corporate debt market due
• India overtakes Hong Kong to become the world’s dominance of government bonds, etc.
fourth-largest stock market. Regulation of Stock markets in India
• According to data compiled by Bloomberg, the • Securities and Exchange of Board of India (SEBI):
combined value of shares listed on Indian exchanges Regulates different market intermediaries like stock
reached USD 4.33 trillion, versus USD 4.29 trillion for brokers, stock exchanges, etc.
Hong Kong, on Jan 22, 2024. o SEBI is a statutory body under SEBI Act, 1992.
o Top three stock markets are the US, China, and • Reserve Bank of India (RBI): Regulates Government
Japan. Securities market, etc.
• Stock market is where investors, both individual and 3.8.2. DIRECT LISTING OF PUBLIC INDIAN
institutional, trade a wide range of securities such as COMPANIES
stocks, bonds, Exchange Traded Funds (ETFs),
derivatives, etc. • Centre allowed direct listing of public Indian
o Two types of stock market: companies on international exchanges of GIFT
✓ Primary Market: New shares, bonds, etc., are International Financial Services Centre (GIFT-IFSC).
offered for the first time. This was enabled by:
✓ Secondary Market: Existing securities ○ Companies (Listing of Equity Shares in Permissible
(equities, bonds, etc.) are traded. e.g., Stock Jurisdictions) Rules, 2024 and
exchanges like Bombay Stock Exchange. ○ Amendment to Foreign Exchange Management
• Significance of stock market (Non-debt Instruments) Rules, 2019.
o For Businesses: Access to capital, risk ✓ Direct Listing Scheme of FEMA rules 2019
diversification, business expansion, etc. provides framework for issuing and listing of
o For Investors: Better returns compared to equity shares of public Indian companies on
traditional savings instruments, tax benefits, international exchanges.
capital growth, etc. ▪ Prior to this, Indian companies were not
o For Society: Social Impact bonds, Sustainable allowed to issue or list equity shares
investment though Green bonds, etc. abroad.
o For Economy: Mobilization of idle savings, boost to • Expected benefits: Give Indian companies access to
entrepreneurship through venture capital funds, cheaper foreign capital, boost foreign investment, etc.
etc.

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3.8.3. AADHAAR-BASED PAY More than 1100 government schemes and programs run by
Center and States have been notified to use Aadhaar. Some
MANDATORY FOR MGNREGA of them are
• Recently, Aadhaar-based payment system (ABPS) • Pradhan Mantri Ujjwala Yojana
• Pradhan Mantri Awas Yojna
became mandatory for MGNREGS workers.
• Pradhan Mantri Fasal Bima Yojana
• Mahatma Gandhi National Rural Employment
• Atal Pension Yojana
Guarantee Scheme (MGNREGS) gives a legal
guarantee of a hundred days of wage employment in 3.8.4. 16TH FINANCE COMMISSION
a year to adult members of a rural household willing for
unskilled manual work. • It was constituted with the approval of the President of
• MGNREGS has utilized APBS since 2017 and is made India in pursuance of Article 280(1) of the
mandatory now (from 1st January). Constitution.
o Government may consider exemption on a case- • The government appointed Arvind Panagariya (former
to-case basis if any Gram Panchayat has either a vice-chairman of NITI Aayog) as the chairman and
technical problem or an Aadhaar-related problem. members would be notified separately.
• ABPS working • The Commission’s work involves redressing the vertical
○ ABPS uses the worker’s unique 12-digit Aadhaar imbalances between the taxation powers and
number as their financial address. expenditure responsibilities of the center and the
○ To be paid under ABPS, States respectively and equalization of all public
✓ A worker’s Aadhaar details must be seeded to services across the States.
her job card; • The commission shall make recommendations on the
✓ Her Aadhaar details must be seeded to her following
bank account; ○ Distribution between the Union and States of the
✓ Her Aadhaar must be mapped with the net proceeds of taxes and allocation between the
National Payments Corporation of India States of such proceeds.
(NCPI) database. ○ Principles for governing the grants-in-aid and
• Significance of the move revenues of the state under Article 275 of the
○ Curbing corruption by weeding out fake Constitution.
beneficiaries. ○ Measures needed to augment the Consolidated
○ Will ensure speedy payments and reduce Fund of a State to supplement the resources of the
rejection (due to change of bank account of Panchayats and Municipalities based on state
beneficiaries). finance commission recommendation.
○ The commission may review present arrangements
for financing Disaster Management initiatives,
concerning the funds constituted under Disaster
Management Act, 2005.
• The 16th FC recommendations, upon acceptance by
the government, would cover the period of five years
commencing April 1, 2026.

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 ○ Phasing out of exemptions and incentives for the
corporate sector.
○ Vivad se Vishwas Scheme for reducing litigations
in the direct tax payments.
○ Finance Act of 2020 allows individual taxpayers to
pay income tax at lower slab rates by forgoing
specified exemptions.
○ Other reforms: Aadhaar – PAN linkage, digital
technology (Faceless Assessment, Faceless Appeal)
to improve tax administration, Taxpayers Charter,
etc.
About direct tax
• In India, the primary direct taxes at the central level are
personal and corporate income taxes, governed by the
Income Tax Act of 1961.
• However, India's tax-to-GDP ratio is comparatively low,
ranking much lower than other countries.
○ For instance, OECD countries typically have an
average tax-to-GDP ratio exceeding 30%.
• The dominance of the informal sector, tax evasion,
exemptions and incentives, etc. are key reasons for low
ration in India.

3.8.5. DIRECT TAX TO GDP RATIO ROSE 3.8.6. REVERSE FLIP

TO 15-YEAR HIGH
• Many Startups are reverse flipping i.e. moving their
• Direct Tax to GDP ratio rose to 15-year high in FY23 overseas holding entities to India.
Central Board of Direct Taxes data shows. • ‘Reverse flipping’: It is a term used to describe the
• Key highlight: trend of overseas start-ups shifting their domicile to
○ Direct Tax to GDP ratio reached a 15-year high at India and listing on Indian stock exchanges.
6.11% of GDP in FY23. • Reasons for Reverse Flipping:
✓ Direct Tax to GDP ratio gives an estimate of a ○ Capitalise on India’s large and growing economy
country’s ability to mobilise resources to fuel ○ Access to deeper pools of venture capital
its development. • The Economic Survey 2022-23 recognized the concept
○ Tax Buoyancy, however, declined from 2.52 to of reverse flipping and proposed ways to accelerate
1.18 compared to the previous year. the process, such as simplifying corporate laws and
✓ Tax buoyancy indicates the measure of capital movements, simplification of taxation, etc.
efficiency or responsiveness in tax collection
in response to the growth in GDP. 3.8.7. MOMENTUM INVESTING
▪ Tax revenues are considered as buoyant • Many academic studies have shown that momentum
when they increase more than investing can generate high returns.
proportionately in response to the • About Momentum Investing
increase in GDP even when the rates of o It refers to a style of investing wherein investors
taxes remain unchanged. purchase assets such as stocks or bonds that are
✓ The recent decline indicates that the current consistently rising in price, while selling assets
economic growth did not lead to as much of whose prices are falling.
an increase in direct tax collections for FY 23 o Momentum investor hope that the upward price
as seen in FY22. momentum of these assets would continue, thus
○ Gross direct tax collections increased by over allowing them to sell these assets at higher prices
173% to Rs 19.72 trillion in FY23 from Rs 7.22 in the future to make profits.
trillion in FY14. o The buy high, sell higher philosophy of momentum
• Initiatives prompting rise in Direct Tax to GDP investing is in stark contrast to the traditional
○ Corporate tax rate has gradually decreased since approach of buy low, sell high.
the Finance Act of 2016.

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3.8.8. MODEL BASED LENDING • Key Recommendation:
○ Discourage export: Iron ore is a non-renewable
• RBI governor has cautioned banks and NBFC against national resource and crucial to various industries.
model-based algorithmic lending. ✓ Prioritise the export of higher value-added
o It is a remote and automated lending process. products such as finished steel to promote
o It uses digital technologies for customer Atmanirbhar Bharat.
acquisition, credit assessment, loan approval, ○ Upgrade quality: Use cutting-edge technologies
disbursement, recovery, and associated customer to upgrade low-grade iron ore to higher grades.
service. ○ Sustainable mining: Promote clean technology
• Benefits: financial inclusion, quick processing, adoption and transformation of production
increased collaboration with fintechs, facilitation of processes into sustainable mineral production
innovative products. modes.
• Concerns: accuracy and information asymmetries,
algorithmic biases, exclusion of various sections
3.8.9. MODERN MONETARY THEORY
(MMT)
• MMT argues that countries that issue their own
currencies can never “run out of money” the way
people or businesses can.
○ As long as there is unemployment, it calls for
government spending without being concerned
about fiscal deficit.
○ At full employment, MMT prescribes taxes and
government borrowing to counter inflation.
• The monetization of fiscal deficit aligns with this
theory.
○ It involves central bank printing currency for
emergency spending by government.
○ India ceased this practice in 1996 via an MOU
between the RBI and the government.
3.8.10. INDIAN IRON ORE MARKET
• Competition Commission of India (CCI) published a
study examining competition in the iron ore market.
• Iron ore is predominantly composed of iron oxides
called magnetite and hematite and yields metallic iron
(Fe) when heated with a reductant.
• CCI study shows India's self-sufficiency in iron ore
production, contributing 7% globally and ranking as the
4th largest producer.
• Concerns raised by CCI
3.8.11. AUDIT QUALITY DEFICIENCIES
○ Recent years have seen increase in iron ore exports
(iron ore has low value as compared to finished • National Financial Reporting Authority (NFRA) found
products like Steel). deficiencies in audit quality of big four audit firms.
○ Allocation of captive mines (owned by companies • NFRA as a regulator oversees accounting standards and
for self -use) to some players creates entry auditing profession in India.
barriers. o NFRA is a statutory body constituted in 2018
✓ Mines and Minerals (Development and under Section 132 of the Companies Act, 2013.
Regulation) Amendment Act, 2021 allows the o Act mandates NFRA to monitor compliance with
captive mines to sell up to 50% of surplus iron Auditing Standards and to oversee the quality of
ore in the open market. service of the professions associated.
○ Differential pricing of iron ore for different end- o Under this mandate, NFRA initiated audit quality
users is likely to create competition concerns. inspections in big four audit firms.
43 www.visionias.in ©Vision IAS
 ✓ Namely Deloitte, Haskins & Sells LLP; BSR & Co o Lack of accident response infrastructure.
LLP; SRBC & Co LLP; and Price Waterhouse
Chartered Accountants LLP.
• Key Issues Highlighted
o Independence Issues: Firms are not in full
compliance with the independence related
requirements of the Code of Ethics.
o Quality of Audit Documentation: Deficiencies in
documentation can lead to challenges in justifying
audit conclusions and procedures.
o Inadequate Risk Assessment: Concerns raised
about effectiveness of internal risk management
processes within organization.
o Regulatory Compliance Issues: Violations of
Companies Act 2013 seen in policies of SRBC & Co.
✓ It did not fully recognize the relationships
between SRBC and its network members.

3.8.12. BHARATMALA PHASE 1

EXTENDED
• Bharatmala Phase 1 deadline extended by Six years to
2027-28.
• Bharatmala Pariyojana, launched under Ministry of
Road Transport & Highways, is an umbrella program
for highways sector.
o Phase I was approved in 2017 to focus on bridging
critical infrastructure gaps through development
of 34,800 km of National Highways by 2022.
o Till November-2023, 42% of project has been
completed.
• Objectives of Bharatmala Pariyojana
o Optimize efficiency of freight and passenger
movement across country by bridging critical
infrastructure gaps.
o Improving connectivity in North East. 3.8.13. 2023 LIST OF D-SIBS
o Improving efficiency of existing corridors through
development of Multimodal Logistics Park. • Reserve Bank of India (RBI) releases 2023 list of
• Features of Bharatmala Pariyojana Domestic Systemically Important Banks (D-SIBs).
o Satellite mapping of corridors to identify • D-SIBs are systemically important due to their size,
upgradation requirement. cross-jurisdictional activities, complexity and lack of
o Technology-based automated traffic surveys of substitute and interconnection.
over more than 1,500 points. o It also means that the bank is too big to fail.
o Origin-Destination study of freight movement ✓ If DSBs fail, there would be significant
across 600 districts. disruption to the essential services to the
• What are the gaps in highway infrastructure? banking system and the overall economy.
o Inadequacy in optimization of National Highway • Declaration/Regulation of D-SIBs:
network & Road network due to resource o It is based on the D-SIBs Framework of RBI which
constraints and absence of a national plan. was released in 2014.
o Lack of integrated planning in connectivity of ✓ This Framework is based on Basel Committee
major corridors and ports with hinterland. on Banking Supervision’s (BCBS’s) framework
o Presence of Congestion Points, with multiple for dealing with D-SIBs.
points of local congestion present even on already
developed corridors.
44 www.visionias.in ©Vision IAS
 o Banks are placed in 5 buckets.
✓ As per latest list, India’s D-SIB’s are State Bank
of India (bucket 4) and HDFC Bank (bucket 2),
ICICI Bank (bucket 1).
o D-SIBs have to maintain Additional Common
Equity Tier 1 (CET1) requirement as a percentage
of Risk Weighted Assets (RWAs).
o Bucket 1 banks have to maintain lowest CET1 i.e.
0.20% and Bucket 5 have to maintain highest CET
i.e. 1%.
• In case a foreign bank having branch presence in India
is a Global Systemically Important Bank (G-SIB), it has
to maintain additional CET1 capital surcharge.
o Financial Stability Board (FSB) releases the list of
G-SIBs.

3.8.14. PAYMENTS INFRASTRUCTURE

DEVELOPMENT FUND (PIDF) SCHEME
• RBI extends Payments Infrastructure Development
Fund (PIDF) Scheme till 2025.
• About PIDF Scheme
o It was first operationalized in 2021 for three years.
o Aims to encourage deployment of payment
acceptance infrastructure such as physical Point of
Sale (PoS) terminals, Quick Response (QR) codes, in
tier-3 to tier-6 centres, North eastern states and
UTs of J & K and Ladakh.
✓ It was extended to street vendors covered
under PM Street Vendor’s AtmaNirbhar Nidhi
(PM SVANidhi Scheme) in Tier-1 and Tier-2 3.8.15. NATIONAL TRANSIT PASS SYSTEM
centres.
(NTPS)
o PIDF is governed through an Advisory Council and
managed and administered by RBI. • Union Minister launches National Transit Pass System
o Types of Acceptance Devices Covered: Physical (NTPS)-‘One Nation-One Pass’.
PoS, mPoS (mobile PoS), GPRS (General Packet • It is under the Ministry of Environment, Forest and
Radio Service), PSTN (Public Switched Telephone Climate Change to facilitate the seamless transit of
Network) etc. timber, bamboo, and other Minor Forest Produce
• To widen the scope of beneficiaries and acceptance (MFP) across the country.
infrastructure, following enhancements are being ○ Currently, transit permits are issued for the
made under the scheme: transport of timber and forest produce based on
o Beneficiaries of PM Vishwakarma Scheme in all state-specific transit rules.
centres included as merchants under PIDF Scheme. • NTPS enables managing records for both inter-state
o Sound Box devices and Aadhaar-enabled and intra-state transportation of timber, bamboo, and
biometric devices are eligible for claim of subsidy MFP from private lands/government/private depots.
under Scheme. ○ States have exempted some species grown on
o Subsidy for special focus areas has been made private land from the purview of transit permits,
uniform at 90% of the cost of device, irrespective to transport these species No Objection Certificate
of the type of device. is provided.

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• Benefits of NTPS: 3.8.16. ATAL SETU NHAVA SHEVA SEA
○ Will contribute to ease of doing business by LINK
streamlining the issuance of transit permits by
providing a unified, online mode across the • Inaugurated by PM, it is the country’s longest Sea
country. bridge, also referred to as Mumbai Trans Harbour Link.
○ Provide a significant impetus to the agroforestry • It is a 21.8 Kms long bridge of which 16.5 km is built
sector. completely over the Sea.
○ Saving transportation costs and time, and • It connects Sewri in Mumbai with Nhava Sheva in
Seamless movement across state borders. Raigad district, thereby easing travel between
• Under the Forest Rights Act (FRA) of 2006, MFP Mumbai-Navi Mumbai.
includes all non-timber forest produce of plant origin
including bamboo, brushwood, stumps, etc. 3.8.17. STANDARDISATION IN INDIA
• The forest dwellers are legally empowered with the • India should be a Pioneer of Standards says Union
ownership and governance of the MFP through the Minister for Consumer Affairs, Food and Public
Panchayat Extension to Scheduled Areas Act, 1996, Distribution.
and FRA, 2006. • Speaking at 77th Foundation day of Bureau of Indian
Standards (BIS), Minister also highlighted recent
progress related to standards in India stating:
o Mandatory jewellery hallmarking covers 343
districts and 90% jewellery that people are buying
is hallmarked.
o About 156 Quality Control Orders (QCOs) of 672
products are being processed.
• Standards Development is the process of creating and
establishing agreed-upon guidelines or criteria to
ensure quality and operability of various products or
services.
• Significance of standardization:
o Supports economic growth and enhances
competitiveness.
o Fosters technological development and supports
innovation.
o Addresses health, safety and environmental
concerns.
• Standards Development process in India is largely
government led with BIS acting as National Standard
Body.
o Established under BIS Act 2016.
o Involved in harmonious development of activities
of standardization, marking and quality
certification.
o Administered by Ministry of Consumer Affairs,
Food and Public Distribution with its Minister
being President of BIS.

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 • Initiatives for EFFs in India:
• Other initiatives for standards development: o PM PRANAM (Programme for Restoration,
o Standards National Action Plan (SNAP) Awareness, Nourishment, and Amelioration of
o Indian National Strategy for Standardization (INSS) Mother Earth) Scheme.
o Quality Council of India (QCI) and its Scheme for o Development of Nano Urea and Neem Coated
Accreditation of Standards Developing Urea.
Organizations (SDOs) ✓ Pradhan Mantri Kisan Samruddhi Kendras
o One Nation One Standard Scheme of BIS. (PMKSK) will facilitate these fertilizers.
o GOBARdhan (Galvanizing Organic Bio-Agro
Resources Dhan), helps in preparing organic
manure.

3.8.18. UREA GOLD

• Cabinet Committee on Economic Affairs (CCEA) 3.8.19. PROTECTION OF PLANT
approved launch of Urea Gold.
VARIETIES AND FARMERS’ RIGHTS ACT
• Urea gold will support the other initiative of
government in the sphere of Environmentally Friendly • Delhi High Court permits PepsiCo to claim patent for
Fertilizers (EFFs). potato variety grown for its potato chips.
• Urea gold is a Sulphur-Coated Urea (SCU). • Judgement came on PepsiCo’s appeal under Protection
o It is a non-organic slow-release fertilizer and is of Plant Varieties and Farmers’ Rights (PPVFR) Act,
generally prepared by coating preheated urea 2001 against order of PPVFR Authority.
granules with molten sulphur. o PPVFR Authority had revoked PepsiCo’s
o Sulphur coating ensures a more gradual release of registration with respect to plant variety - FL 2027.
nitrogen. o FL 2027 is chipping potato variety with low
✓ It prolongs the urea action, thus helping plants external defects which is grown exclusively for
to stay greener for longer time. PepsiCo by some farmers.
✓ It will increase efficiency and reduce frequent ✓ It has high dry matter/high solids content and
application of fertilizer, thus enhancing soil stable sugars, making it highly suitable for
health. manufacture of chips.
o As per Indian Council of Agricultural Research • Under WTO’s TRIPS (Agreement on Trade-Related
(ICAR) study, use of SCU leads to reduction in urea Aspects of Intellectual Property Rights), it is obligatory
consumption by 25%. for a member to provide protection to new plant
• EFFs are fertilizers that can reduce environmental varieties.
pollution from nutrient loss by retarding, or even o Under this, India enacted PPVFR Act.
controlling, the release of nutrients into soil. o A plant variety which conforms to criteria of
o EFFs also include organic fertilizers such as Distinctiveness, Uniformity and Stability (DUS) is
Biocompost, Vermicompost, etc. eligible for registration under PPVFR Act.

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• PPVFR Act recognizes following rights: o Implemented as combination of:
o Farmers’ rights: Registration and protection of ✓ Centrally Sponsored Schemes in partnership
new variety, farmers' variety, and extant variety, with State Governments/ UT Administrations
rewards for conservation of plant genetic and
resources etc. ✓ Central Sector Schemes through line
o Researchers’ rights: Use of any registered variety Ministries/Departments.
for experiments.
o Breeders’ rights: Exclusive rights to produce, sell,
import or export etc.
PPVFR Authority
• It is a statutory body under PPVFR Act, established in 2005.
• Comes under Ministry of Agriculture and Farmers Welfare.
• Functions include registration of new plant varieties,
rewarding farmers engaged in conservation and
preservation of plant genetic resources, maintenance of
national register of plant varieties and national gene bank.

3.8.20. SOLAR POWER SCHEME FOR

PVTGS HABITATIONS
• President has sanctioned implementation of the
scheme under new solar power Scheme for Particularly
Vulnerable Tribal Groups (PVTGs) Habitations/ Villages.
o The scheme was launched under Pradhan Mantri
Janjati Adivasi Nyaya Maha Abhiyan (PM
JANMAN).
• Key features of scheme
o Two components: 3.8.21. ELECTRICITY (AMENDMENT)
✓ Electrification of 1 Lakh PVTG households RULES, 2024 NOTIFIED
(HHs) through Off-grid solar power
▪ Solar Home Lighting System (SHLS) for • Ministry of Power notified Electricity (Amendment)
scattered un-electrified HHs in PVTG Rules, 2024 to amend Electricity Rules, 2005.
areas. • In exercise of powers conferred by Section 176 of
▪ Solar Mini-grids for cluster of HHs in a Electricity Act 2003, government has prescribed new
PVTG habitation/ hamlet. rules for-
✓ Solarization of multi-purpose centers (MPCs) o promoting ease of doing business by industries
by installation of Off-grid Solar power pack like Green Hydrogen manufacturers, facilitate
with battery bank. energy transition and energy security.
o Implementing agency: Respective DISCOMs in • Key highlights of rules
PVTG area.
Parameters Rules Significance
o Timeline: 2023-24 to 2025-26. Transmission • Consumers having • New bulk
o Monitoring: By Ministry of New and Renewable Lines more than specified consumers will
Energy (MNRE) and Ministry of Tribal Affairs load and Energy benefit with
(MoTA). Storage Systems are affordable
o Grievance Redress mechanism: Vendors shall allowed to electricity and
operationalize helpline number in local language/ establish, operate improved grid
language of PVTG area. and maintain reliability.
• PM JANMAN dedicated • Faster industrial
o Aim: To saturate PVTG HHs and habitations with transmission lines growth and more
themselves without job creation.
basic facilities such as safe housing, clean drinking
the requirement of
water and sanitation, improved access to licence.
education, etc. Open Access • Provide • Rationalisation of
o Comprises 11 critical interventions through 9 (OA) methodologies for OA charges will
ministries, including MoTA, over 3 years. determining lead to faster
various OA charges adoption of
48 www.visionias.in ©Vision IAS
 like wheeling renewable only a single registration for NPS, instead of
charges, state energy by multiple registrations earlier.
transmission industry, thus o The timeline for disposing of applications has also
charges and reducing been reduced from 60 days to 30 days.
additional emission.
• The simplification is in line with the Union Budget 2023-
surcharge. • Facilitate
24 announcement to review regulations to reduce the
• Additional industries in
surcharge on OA getting electricity
cost of compliance and enhance the ease of doing
shall be linearly through OA at business.
reduced and get competitive • About National Pension System (NPS):
eliminated within rates. o Introduced by the Central Government in 2004 to
four years. help the individuals have income in the form of
Power Tariff • Tariff shall be cost • Ensure financial pension.
reflective and there sustainability of o Any citizen of India, whether resident or NRI, can
shall not be any power sector. join NPS.
revenue gap o It is mandatory to all employees joining services of
between approved
the Central Government (except Armed Forces)
Annual Revenue
and Central Autonomous Bodies on or after 1st
Requirement and
estimated annual January 2004.
revenue from o PFRDA regulates NPS under the PFRDA Act, 2013.
approved tariff
except under
natural calamity
conditions.

3.8.22. GLOBAL HYDROGEN TRADING

MECHANISM (GHTM)
• Indian Gas Exchange or IGX (India's only gas exchange)
and Gujarat State Petroleum Corporation (GSPC)
signed a MoU to establish a GHTM in collaboration with
IFSC-GIFT City in Gandhinagar (Gujarat).
○ They will develop a global hydrogen price index, a
benchmark for price discovery and market
information on India's growing green hydrogen
market. 3.8.24. FUTURE OF GROWTH REPORT
• Benefits: Enhance transparency, boost investor 2024
confidence, and facilitate the growth of the green • The report, published by the World Economic Forum
hydrogen market on a global scale. (WEF). introduces a multidimensional framework to
assess the quality of economic growth across 107
3.8.23. POINT OF PRESENCE (POP) countries globally.
REGULATIONS FOR NPS SUBSCRIBERS • It characterizes nations’ economic growth across four
• Pension Fund Regulatory and Development Authority dimensions: Innovativeness; Inclusiveness;
(PFRDA) notifies new point of presence regulations for Sustainability; and Resilience.
NPS subscribers. o Framework produces an aggregate result for each
• PFRDA has notified the Point of Presence (PoP) pillar on a 0-100 scale, where 100 is an ideal and
Regulations 2023, requiring only one registration for country is perfect in every pillars.
the National Pension System (NPS). Pillar Description
o POPs are the first points of interaction of the NPS Innovative- • Extent to which an economy’s trajectory
subscriber with the NPS architecture. ness can absorb and evolve in response to new
✓ The authorized branches of a POP, called Point technological, social, institutional and
of Presence Service Providers (POPSPs), will organizational developments to improve
act as collection points. the longer-term quality of growth.
o Banks and non-banks can now act as PoPs to • Global average of innovation is 45.2. India
onboard NPS subscribers, and they will require scored 40.2

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 Inclusiveness • Extent to which an economy’s trajectory vague definitions etc. are impacting development
includes all stakeholders in the benefits of safe generative AI.
and opportunities it creates. o AI Governance: Global landscape for AI
• Global average of Inclusiveness is 55.9. governance is complex and rapidly evolving, AIGA
India scored 41.7. recommended for,
o Over 75% of people in India lack basic
✓ International coordination: A multi-
social protection.
o Share of wealth owned by top 10
stakeholder approach involving government,
percentile population of India has civil society, academia, industry for legitimate
increased from 0.55 (1995) to 0.65 governance of AI.
(2021). ✓ Compatible standards: To avoid significant
Sustainability • Extent to which an economy’s trajectory differences in standards, national bodies
can keep its ecological footprint within should work together and align their efforts.
finite environmental boundaries. ✓ Flexible regulatory mechanisms: To match
• Global average of Sustainability is 46.8. AI's rapid advancements, investment in
India scored 56.0. innovation and governance frameworks must
o On current trajectories, the world is set be agile and adaptable.
to miss its Paris Agreement targets for
✓ Role of Global South: Include Global South at
global warming.
all AI stages for innovation, ensuring everyone
Resilience • Extent to which an economy’s trajectory
can withstand and bounce back from benefits and minimizing global harms.
shocks.
• Global average of Resilience is 52.8. India
scored 51.2.
o Most countries need better preparation
and proactive investment for
demographic change.

• The report also classifies clusters of countries with

similar growth characteristics into 7 groups based on
inclusion, innovation, and sustainability.
o India is grouped among countries with
traditionally efficiency-driven growth pathways,
building up innovativeness, inclusiveness and
resilience from a low base, with comparatively low
environmental footprint.
3.8.25. INCLUSIVE ACCESS TO ADVANCED
AI
• World Economic Forum’s AI Governance Alliance
(AIGA) Calls for Global Efforts for Inclusive Access to
Advanced Artificial Intelligence (AI).
• AIGA (launched in 2023) aims to accelerate the
development of ethical guidelines and governance 3.8.26. LABOUR RULES FOR WORKERS
frameworks for Generative AI. ABROAD
o Generative AI is a type of AI technology that can • Trade Unions have opposed UP and Haryana
produce various types of content, including text, governments’ recruitment of workers to work in Israel,
imagery, audio and synthetic data. primarily for construction activities.
o World Economic Forum (WEF) is an international o They have cited that it is against Indian ethos of
non-profit organization based in Geneva bringing back citizens from conflict zones.
(Switzerland) committed to improving state of the • Issues faced by migrant labourers
world. o Vulnerability to regional conflicts: Risk of conflict
• At recent WEF Annual Meeting 2024, AIGA released and violence due to volatile political landscape.
new reports on advanced AI focusing on generative AI e.g., Ongoing Israel – Hamas conflict.
governance. Key highlights are below, o Exploitation and unfair labour practices: Wage
o Challenges: Absence of a standardized theft, poor working conditions, etc., due to limited
perspective on the generative AI model lifecycle, legal knowledge and language skills.
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 o Denial of social security: Due to lack portability, o Granted by: State governments through
etc. competitive bidding.
o Other issues: Lack of proper accommodation, o Tenure: 5 years from date of execution of EL.
poor standard of living, etc. o Central government through rules can prescribe
• Measures taken by India for protection of migrant the details such as manner of auction, bidding
labourers parameters, etc.
o Bilateral and multilateral arrangements: India has • MMDR Act 1957 is the principal legislation regulating
signed Labour Manpower Agreements (LMAs) with mines and mineral sector in India.
six West Asian countries including Kuwait, Oman, o It classifies mining related activities into-
etc. ✓ Reconnaissance (preliminary survey to
o Welfare programmes: National Pension scheme determine mineral resources),
for NRIs, Indian community welfare fund, etc. ✓ Prospecting (exploring, locating, or proving
o India has signed Global Compact for Safe, Orderly mineral deposits), and
and Regular Migration (2018). ✓ Mining (commercial extraction).
o Other measures: e-Migrate Application system,
MADAD portal for grievance redressal, etc.
3.8.28. COAL/LIGNITE GASIFICATION
PROJECTS
ILO conventions for protection of migrant workers
• Migration for Employment Convention (Revised), 1949 • Cabinet approves Viability Gap Funding of Rs 8500
(No. 97): To maintain an adequate and free service to crore for promotion of Coal/Lignite Gasification
assist migrants for employment. Projects.
• Migrant Workers (Supplementary Provisions) • Key highlights of the scheme
Convention, 1975 (No. 143): For illegally employed ○ Incentive for coal gasification projects is provided
migrant workers. to Government PSUs and Private Sector under
Note: India has not ratified both conventions. three categories.
✓ Category I: For Government PSUs, upto 3
3.8.27. RULES EXPLORATION LICENSE projects will be supported.
FOR MINING ✓ Category II: For Private Sector and
• Ministry of Mines notified four rules to implement the Government PSUs.
Exploration License (EL) regime. ✓ Category III: For demonstration Projects
• Notified under the Mines and Minerals (Development (indigenous technology) and/or small-scale
and Regulation) (MMDR) Act, 1957, these rules product-based Gasification Plants.
include: ○ Selection of entities under category II and III shall
o Mineral (Auction) Amendment Rules, 2024 be carried out through a competitive bidding
o Mineral Conservation and Development process.
(Amendment) Rules, 2024 ○ Grant will be paid to the selected entity in two
o Minerals (Evidence of Mineral Contents) equal instalments.
Amendment Rules, 2024 ○ Empowered Group of Secretaries (EGoS), chaired
o Minerals (Other than Atomic and Hydro Carbons by the Secretary Coal, is fully empowered to
Energy Minerals) Concession Amendment Rules, modify the scheme's modalities except total
2024 outlay.
• Exploration License (EL) • Coal gasification
o EL means a licence granted for undertaking ○ Underground Coal gasification is a process by
reconnaissance operations or prospecting which coal is converted to useful gases without
operations or both. the need for mining.
✓ It was introduced through MMDR ✓ Gases can subsequently be used to produce
Amendment Act, 2023. heat, generate power or synthesize a variety
✓ Issued in respect of 29 minerals specified in of chemical products.
Seventh Schedule of MMRD Act including ✓ It helps in harnessing the coal reserves that are
Cobalt, Lithium, Nickel, Gold, etc. deep, scattered and covered by forests.
○ India has a target to gasify 100 million tonnes of
coal by 2030.

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 Related News
Cabinet approved two joint venture projects for coal
gasification
• Joint venture of Coal India and GAIL for Coal-to-SNG
(Synthetic Natural Gas) Project in Burdwan (West Bengal).
○ SNG is equivalent to natural gas which is mostly
methane. It can be produced from coal, biomass,
petroleum coke and solid waste.
• Joint venture of Coal India and BHEL for the Coal-to-
Ammonium Nitrate Project in Jharsuguda (Odisha).

3.8.29. STEEL MAKING

• Government is aiming to increase share of scrap in steel
making process to 50 % by 2047 says Union Minister of
Steel.
• Steel Scrap in Steel making
o Steel is a material most conducive for circular
economy as it can be used, reused and recycled
infinitely.
o While iron ore remains the primary source of steel
making, used or re-used steel in form of Scrap is
secondary raw material for steel industry.
• Benefits of Steel scrap
o Resource Conservation: Use of every ton of steel
scrap shall save 1.1 ton of iron ore, 630 kg of coking
coal and 55 kg of limestone. 3.8.30. DECLINE IN INDIVIDUAL INCOME
o Reduced carbon footprints: Use of scrap cuts INEQUALITY: SBI RESEARCH
emission by 25 % in comparison to primary route • SBI Research report reveals decline in individual
of steelmaking. income inequality in the country in past 8 years.
✓ India’s steel sector accounts for 12% of India’s • Key highlights of the report: From 2013-2014 to 2021-
CO2 emissions. 2022:
o Energy Savings: Production of steel from recycled ○ In terms of Gini coefficient, income inequality of
steel requires less energy. taxable income group has declined from 0.472 to
Recent Steps Taken 0.402.
• National Steel Policy, 2017: Aspires to achieve 300MT ○ 36.3% of taxpayers have moved from lower
of steel-making capacity by 2030 with a contribution of income to higher income tax bucket.
35-40% from EAF route. ○ Top 2.5%of taxpayer’s contribution in income has
o Electric Arc Furnaces (EAF) route produce steel declined from 2.81% to 2.28%
mostly from scrap collected for recycling. ○ Female labour force participation is rising.
o EAF and Blast Furnace-Basic Oxygen Furnace (BF- ○ Micro firms are transitioning towards small,
BOF) route are methods of steelmaking. medium and large size firms.
• Steel Scrap Recycling Policy, 2019: Enhances • These findings dispel the notion of 'K '-shaped growth
availability of domestically generated scrap to reduce or recovery.
consumption of coal in steel making. ○ K-shaped recovery happens when different
sections of an economy recover at starkly
different rates.
✓ Many experts have suggested that post the
COVID-19 pandemic, India is experiencing a 'K-
shaped' recovery, where the rich thrive while
the less privileged face challenges.

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• About Gini coefficient
○ Gini coefficient is a statistical measure of income
or wealth inequality, ranging from 0 (perfect
equality) to 1 (perfect inequality).
✓ Theoretically, values over 1 are possible due
to negative income or wealth.
○ Gini coefficient larger than 0.40 is considered high.

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