Q. India’s textile and handloom sector, embedded in the country’s cultural heritage, is now being driven by innovation, start-ups and grassroots entrepreneurship. Critically analyse the evolving role of the textile sector in India's economy and development strategy.
Introduction:
The textile and handloom sector in India has long been an embodiment of the country’s cultural diversity and traditional craftsmanship. In recent years, the sector is undergoing a transformative phase powered by start-ups, rural entrepreneurship, and women-led innovation. As Prime Minister Narendra Modi remarked during the Mann Ki Baat address (July 2025), this sector is emerging as a strength of India’s economic and social development, mirroring the spirit of Aatmanirbhar Bharat.
Body:
- Economic Significance of the Textile Sector:
- The textile industry contributes ~2.3% to India’s GDP, 12% of manufacturing GVA, and over 10% of total exports (Ministry of Textiles, 2023).
- It is the second largest employment generator after agriculture, providing direct employment to over 45 million people.
- Revival and Recognition of Handloom:
- The celebration of National Handloom Day (August 7) honours the Swadeshi Movement (1905) and repositions handloom as a symbol of indigenous resilience.
- Government schemes like National Handloom Development Programme (NHDP) and Yarn Supply Scheme (YSS) have helped artisans modernize and scale operations.
- Start-up Ecosystem and Innovation:
- Over 3,000 start-ups are active in the textile space (NITI Aayog, 2025).
- Innovations include:
- Tech-enabled marketing platforms for rural weavers.
- Natural dye usage, AI-based design tools.
- Sustainable fibres and eco-friendly weaving techniques.
- Women and Tribal Empowerment:
- 650 tribal women from Mayurbhanj (Odisha) revived the Santhali sari, showing how tribal textiles are being mainstreamed.
- Example: Kavita Dhawale, a rural artisan from Maharashtra, now earns 3x more with government facilitation.
- Global Push and Cultural Diplomacy:
- The textile sector is central to India’s soft power diplomacy.
- With rising demand for Indian khadi, Banarasi, and Paithani saris globally, Indian handlooms have gained GI tags and global markets.
Way Forward:
- Policy Integration: Link textile sector with flagship missions like Skill India, Startup India, Digital India, and Make in India.
- Cluster-based Development: Strengthen textile clusters through infrastructure, credit, and market linkages.
- R&D and Sustainability: Promote green textiles, R&D on bamboo and banana fibres, and circular economy models.
- Export Competitiveness: Simplify compliance for MSMEs under RoDTEP and PLI Scheme for Textiles (2021).
Conclusion:
India’s textile sector is undergoing a renaissance, blending tradition with technology and heritage with innovation. The rise of start-ups, participation of women and tribal communities, and increasing global recognition signal a paradigm shift. By integrating inclusive policies and sustainable practices, India can not only revive its handloom legacy but also position itself as a global leader in textile innovation and cultural entrepreneurship.
Link with Previous Year UPSC Questions:
- GS Paper III (2021): “Discuss the significance of the textile industry in India with respect to employment, exports, and rural development.”
- GS Paper I (2015): “Indian handicrafts represent the diversity and uniqueness of our culture. Examine.”
- GS Paper III (2020): “How can traditional industries be transformed into vibrant and globally competitive enterprises?”
Sources:
- Ministry of Textiles Annual Report 2024-25
- NITI Aayog Start-up India Data (2025)
- PIB Press Release on Mann Ki Baat (July 2025)
- NSSO & CMIE Employment Reports
- PM’s Address on National Handloom Day (2023, 2024)
- PLI Scheme Guidelines (Ministry of Textiles)
Q. Syllabus Linkage: GS Paper II: Welfare schemes for vulnerable sections of the population; Role of government and NGOs. GS Paper III: Indian Economy – Inclusive growth and issues arising from it; Infrastructure – MSMEs. Previous Year Questions (PYQs): 2022: “MSMEs form the backbone of the Indian economy. Examine their role and challenges.” 2020: “Women empowerment is critical for inclusive growth in India.” Discuss. 2019: “Despite having several schemes for women entrepreneurs, their access to formal finance remains a challenge.” Explain.
Introduction:
Micro, Small and Medium Enterprises (MSMEs) are a critical pillar of India’s economy, contributing 30% to GDP and 45% to exports (2024 data). Women-led MSMEs, although forming 20% of total MSMEs, face significant challenges in accessing formal credit, thereby hindering inclusive growth and gender-balanced entrepreneurship. Despite schemes like PM MUDRA Yojana and Udyam Assist Portal, financial inclusion remains uneven for women entrepreneurs.
Body:
- Extent of the Problem:
- Credit Disparity: According to SIDBI, women face a 35% credit gap, significantly higher than the 20% gap for male MSMEs.
- Disparity in Disbursement: Under PM MUDRA Yojana, although women hold 64% of total loan accounts, they receive only 41% of the total sanctioned amount (₹2.25 lakh crore out of ₹5.41 lakh crore in 2024).
- Turnover and Investment Gap: Women-led MSMEs contribute only 10% of total MSME turnover, despite receiving 11–15% of total sectoral investment.
- Informal Sector Challenges: Over 70.5% of IMEs registered under Udyam Assist Portal are women-owned, yet face limited credit access due to lack of documentation, collateral, and awareness.
- Causes of Low Credit Access for Women MSMEs:
- Low Financial Literacy: Many first-generation entrepreneurs lack awareness of loan schemes and eligibility.
- Lack of Collateral: Women often do not own property, making them less eligible for secured loans.
- Banking Bias & Perception: Studies show women need twice as many bank visits as men for the same loan—reflecting gender bias in risk perception.
- Weak Implementation of Schemes: Administrative delays and poor ground-level support by banks and agencies undermine the intent of schemes.
Way Forward:
- Strengthen Implementation and Awareness:
- Conduct nationwide awareness drives on credit schemes in vernacular languages.
- Train local bank officials and panchayats to assist women in accessing schemes.
- Incentivize Banks to Lend to Women MSMEs:
- Introduce gender-specific lending targets under Priority Sector Lending (PSL).
- Provide interest subvention and risk guarantees for women-led enterprises.
- Promote Collateral-Free Credit Expansion:
- Expand and streamline schemes like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
- Encourage fintech platforms and NBFCs to offer alternate data-based credit scoring for women.
- Strengthen IME-to-MSME Transition:
- Leverage Udyam Assist Portal to fast-track formalisation of women-run IMEs.
- Link Udyam data with digital credit systems for faster, paperless loan processing.
- Use Liquidity Window Effectively:
- The recent RBI rate cuts and increased bank liquidity must be directed towards targeted lending for women through special refinance windows.
Conclusion:
The persistence of a credit gap for women entrepreneurs reflects not a lack of intent, but ineffective implementation and structural barriers. For India to truly achieve inclusive and gender-balanced growth, women’s access to credit must be made seamless, supported by policy reforms, robust awareness mechanisms, and responsive banking practices. Empowering women-led MSMEs is not only a social imperative but an economic necessity for realizing India’s $5 trillion economy vision.
Syllabus Linkage:
- GS Paper II: Welfare schemes for vulnerable sections of the population; Role of government and NGOs.
- GS Paper III: Indian Economy – Inclusive growth and issues arising from it; Infrastructure – MSMEs.
Previous Year Questions (PYQs):
- 2022: “MSMEs form the backbone of the Indian economy. Examine their role and challenges.”
- 2020: “Women empowerment is critical for inclusive growth in India.” Discuss.
- 2019: “Despite having several schemes for women entrepreneurs, their access to formal finance remains a challenge.” Explain.
Sources:
- Ministry of MSME Annual Report 2024–25
- PM MUDRA Yojana Dashboard (2024)
- SIDBI Report on Women Entrepreneurs (2024)
- Udyam Assist Portal Data (2025)
- RBI Monetary Policy, April 2025
- International Finance Corporation (IFC) Report on Gender Finance (2023)
Q. “The Futures and Options (F&O) segment of Indian stock markets has seen a disproportionate rise in speculative activity.” Examine the risks posed by F&O manipulation to small investors and financial stability. What reforms are needed to strengthen transparency and investor protection in capital markets?
Introduction:
India’s Futures and Options (F&O) market—a derivative segment meant to hedge risk—is witnessing a surge in retail participation and speculative trading. The recent SEBI order against Jane Street, a global hedge fund, for allegedly manipulating Indian indices through simultaneous cash and derivatives trades has triggered political backlash. Concerns have been raised about regulatory delays, small investor vulnerability, and market transparency.
Body:
- Nature of the F&O Market and Recent Trends:
- F&O allows investors to speculate or hedge against price movements without owning the underlying asset.
- According to NSE data (2024), India’s F&O turnover is 20 times higher than the cash segment—highest globally.
- Retail participation has exploded, with over 40% of derivative trades attributed to non-institutional investors.
- Risks to Small Investors:
- High Leverage: Retail investors often trade with margins, leading to large losses during volatility.
- Information Asymmetry: Large players like hedge funds have access to algorithms and high-speed trading, placing small traders at a disadvantage.
- Market Manipulation: Cases like Jane Street’s manipulation reflect structural vulnerabilities in surveillance and enforcement.
- Financial Distress: SEBI’s 2024 Investor Risk Report showed that 9 out of 10 retail F&O traders incurred losses, with an average loss of ₹1.3 lakh/year.
- Regulatory Gaps:
- SEBI Surveillance Delays: Critics argue SEBI acted reactively and not proactively in the Jane Street case.
- Lack of Transactional Transparency: Complex cross-market strategies (cash + derivatives) are hard to detect in real-time.
- Limited Retail Safeguards: Despite risk disclosures, there’s insufficient investor education and limits on retail exposure.
Way Forward:
- Strengthen Regulatory Oversight:
- Real-time surveillance tools should be enhanced using AI and machine learning.
- SEBI must ensure faster detection and penalization of manipulative trades.
- Protect Small Investors:
- Cap maximum exposure of retail traders in high-risk derivative segments.
- Introduce risk-profiling and mandatory education modules before enabling F&O access.
- Greater Transparency:
- Mandate disclosure of cross-segment trades by institutions in near real-time.
- Create public dashboards on institutional derivatives activity.
- Reform Derivatives Ecosystem:
- Shift the market focus from speculative trading to hedging and real investment needs.
- Introduce transaction taxes or higher margins to disincentivize excessive speculation.
Conclusion:
The F&O segment, originally designed for hedging and price discovery, risks becoming a speculative playground for sophisticated players, undermining retail investor confidence and market integrity. While India’s capital markets have deepened post-liberalization, robust and proactive regulation by SEBI, along with financial literacy and structural safeguards, is essential to ensure that the markets remain fair, efficient, and inclusive.
Syllabus Linkage:
- GS Paper III:
- Indian Economy: Issues relating to planning, mobilization of resources, growth, development
- Investment models
- Infrastructure: Capital markets
- Effects of liberalization on the economy and transparency in governance
Previous Year Questions (PYQs):
- UPSC Mains 2021 (GS III): “What are the main challenges to Indian capital markets? Suggest measures to improve investor confidence.”
- UPSC Mains 2016 (GS III): “Discuss the role of SEBI in regulating the capital market in India.”
Sources:
- SEBI Order on Jane Street (July 2025)
- SEBI Investor Risk Report (2024)
- NSE Derivatives Statistics (2023–24)
- RBI Financial Stability Report (2024)
- PM’s Economic Advisory Council Reports on Capital Markets
Q. India has broken into the top 100 of the Global Sustainable Development Goals (SDG) Index for the first time. Critically examine the key factors behind this improvement and the challenges that remain in achieving the 2030 Agenda. Suggest a way forward to accelerate progress on SDGs.
Introduction
The Sustainable Development Goals (SDGs), adopted in 2015 by the United Nations, constitute a universal call to action to end poverty, protect the planet, and ensure peace and prosperity by 2030. The Sustainable Development Report (SDR) 2025, released by the UN Sustainable Development Solutions Network, has ranked India 99th out of 167 countries — its first entry into the top 100 with a score of 67, up from 109th in 2024. This marks a significant milestone in India’s commitment to sustainable development.
Body
- Key Factors Behind India’s SDG Performance Improvement
- Policy Initiatives and Schemes
- Swachh Bharat Mission, Jal Jeevan Mission, PM-KUSUM, National Education Policy (NEP), and Digital India have contributed to improvements in clean water, sanitation, education, and infrastructure goals (SDGs 4, 6, 7, 9).
- Social Inclusion and Poverty Reduction
- Direct Benefit Transfers (DBT), PM Garib Kalyan Yojana, and Aspirational District Programme have targeted regional and social disparities (SDGs 1, 2, 10).
- Green Energy and Climate Action
- India’s renewable energy capacity reached 180 GW in 2024, with strong emphasis on solar and wind energy (SDG 7 & 13).
- Data Monitoring and Localisation
- NITI Aayog’s SDG India Index and State-level SDG reports have enabled decentralized implementation and tracking.
- Regional and Global Context
- India’s Neighbours: Bhutan (74th), Nepal (85th), Bangladesh (114th), and Pakistan (140th), indicating India’s regional leadership in SDG progress.
- Global Trend: Despite India’s gains, the SDR 2025 warns that only 17% of global SDG targets are on track, citing conflicts and fiscal challenges.
Way Forward
- Strengthen Local Governance and Decentralised Implementation
- Promote Gram Panchayat-level SDG action plans and tracking for grassroots impact.
- Focus on Climate Resilience and Biodiversity (SDGs 13, 14, 15)
- Accelerate climate finance, promote natural farming, and protect marine and forest ecosystems.
- Private Sector and CSR Alignment
- Encourage businesses to align with SDG targets through ESG (Environmental, Social, and Governance) reporting and sustainability disclosures.
- Bridging Fiscal Gaps
- Mobilise domestic resources and enhance international partnerships and aid to overcome financial constraints.
Conclusion
India’s entry into the top 100 of the SDG Index is a commendable achievement, reflecting policy effectiveness and institutional focus. However, with less than 6 years to 2030, a whole-of-society approach is essential to meet the ambitious targets. Addressing climate vulnerabilities, inequality, and financing gaps will be crucial for transformative and inclusive growth in the coming decade.
Source(s):
- Sustainable Development Report 2025, UN Sustainable Development Solutions Network
- NITI Aayog SDG India Index
- Ministry of Statistics and Programme Implementation (MoSPI)
- Press Trust of India, 2025 Report Coverage
Syllabus Linkage:
- GS Paper III – Environment and Sustainable Development, Inclusive Growth and Issues Arising from it, Government Schemes, Infrastructure
Previous Year Questions Linkage:
- UPSC CSE Mains 2023 GS Paper III
“What are the challenges to achieving sustainable development in India? How can they be addressed?” - UPSC CSE Mains 2020 GS Paper III
“Explain intra-generational and inter-generational issues of equity from the perspective of inclusive growth and sustainable development.”
Q. The increasing use of cesses and surcharges by the Centre, and the stagnant 41% share in the divisible pool, raise concerns about fiscal federalism in India. Critically examine the challenges before the 16th Finance Commission and suggest reforms to ensure a more equitable fiscal architecture.
Introduction
India’s fiscal federalism is governed by the recommendations of the Finance Commissions under Article 280 of the Constitution. The 15th Finance Commission had recommended a 41% vertical share of the divisible tax pool to States, but this share is increasingly undermined by the Centre’s rising reliance on cesses and surcharges, which are non-divisible. As the 16th Finance Commission (SFC) prepares to submit its recommendations effective from April 1, 2026, a critical opportunity arises to reset the fiscal compact between the Union and the States.
Body
- Key Fiscal Challenges for the 16th Finance Commission
- Cesses and Surcharges Erode State Revenues
- According to budget data, non-shareable cesses and surcharges formed 18.5% of the Centre’s gross tax revenue (2020–24), up from 12.8% (2015–20).
- This has reduced the effective share of States in gross tax revenue from 35% to 31%.
- Demand for Increased Devolution
- 22 out of 28 States, including BJP-ruled ones, have demanded an increase in their share to 50%.
- However, the Centre cites pressure from rising defence and infrastructure expenditure as constraints.
- GST Impact and Revenue Dependence
- Post-GST, States have limited taxation powers (e.g., loss of power to tax major indirect sources).
- Despite growing GST collections, States remain critically dependent on central transfers.
- Horizontal Devolution Discontent
- Southern and economically progressive States argue the current formula penalizes performance due to high weightage for population (2011 Census) and income distance.
- Implications of Maintaining the 41% Status Quo
- Erodes Cooperative Federalism
- Goes against the principle of “Team India” and cooperative federalism, repeatedly emphasized by the Union Government.
- Aggravates Regional Discontent
- May fuel tensions between developed and developing States and reduce the incentive for efficient governance.
- Undermines State Capacity
- Impacts critical sectors like health, education, and welfare delivery, which are largely State responsibilities.
Way Forward
- Increase Vertical Devolution Gradually
- Consider a modest rise to 45%, balancing fiscal prudence and States’ demands.
- Cap Cesses and Surcharges
- Recommend a statutory cap on cesses (e.g., ≤10% of gross tax revenue), and include surplus collections in the divisible pool.
- Reform Horizontal Devolution Formula
- Introduce weightage for performance indicators (e.g., fiscal responsibility, HDI, environmental sustainability) to reward good governance.
- Institutional Fiscal Council
- Establish a National Fiscal Council to mediate Centre–State fiscal disputes and improve transparency.
Conclusion
The 16th Finance Commission stands at a pivotal juncture to redefine India’s fiscal federalism. Retaining the 41% devolution without addressing structural inequities in resource mobilisation, cesses, and horizontal sharing would be a missed opportunity. A balanced, transparent, and performance-sensitive formula is key to ensuring both national unity and fiscal justice, truly strengthening the roots of the federal structure.
Syllabus Linkage (GS Paper II & III):
- GS II:
- Devolution of powers and finances up to local levels
- Cooperative and competitive federalism
- GS III:
- Government budgeting
- Fiscal policy and allocation of resources
Relevant PYQs:
- GS-II, UPSC 2021: “The role of the Finance Commission in Centre-State fiscal relations has been undermined by the rising dominance of the central government.”
- GS-II, UPSC 2020: “To what extent is cooperative federalism effective in India’s current intergovernmental fiscal framework?”
- GS-III, UPSC 2017: “Among several factors for India’s potential growth, savings rate is the most effective one. Do you agree?” (linked to fiscal prudence)
Q. “Bilateral and multilateral trade negotiations are critical to India’s strategy for economic growth and global positioning.” Examine India’s evolving trade diplomacy with the U.S., EU, and U.K., in the context of ongoing FTA and BTA talks.
Introduction
In the post-pandemic world order marked by protectionism and re-shoring, India’s trade diplomacy has assumed new urgency and direction. Recent developments in India-U.S. Bilateral Trade Agreement (BTA) and Free Trade Agreements (FTAs) with EU and U.K. underscore New Delhi’s effort to secure market access, enhance export competitiveness, and safeguard strategic autonomy amid rising global uncertainties
Body
- India-U.S. Bilateral Trade Agreement (BTA): A Phased Approach
- Negotiations have intensified with U.S. delegations visiting India twice since February 2025.
- India aims to seal an early, abridged tranche by July 9, ahead of the reimposition of Trump-era reciprocal tariffs.
- A wider “tranche one” deal is expected by Fall 2025, targeting goods, services, and dispute resolution mechanisms.
- Focus areas: Tariff rationalisation, agriculture market access, pharmaceuticals, and digital services.
- Strategic Implications of India-U.S. Trade Pact
- Enhances India’s bargaining power in WTO reform talks.
- Counters China’s dominance in global supply chains.
- Encourages U.S. investments in Make in India, clean energy, and defence manufacturing.
- India-U.K. FTA: Legal Scrubbing in Final Phase
- As per the Commerce Ministry, legal review of the concluded FTA text is in progress and expected to be completed within three months.
- The deal includes chapters on labour standards, IPR, rules of origin, and e-commerce, with mutual market access in automobiles, Scotch whisky, apparel, and IT services.
- India-EU FTA: Momentum Accelerating
- A fresh round of talks is scheduled for July 7, reflecting growing momentum and reduced time gaps between negotiations.
- Key sticking points: Sustainability clauses, investment protection, and data privacy.
- A comprehensive India-EU FTA could open up a €100+ billion market, boost strategic alignment, and reinforce India’s credentials in climate-smart trade.
Way Forward
- Policy Synchronisation: Harmonize domestic industrial policies (PLI, Atmanirbhar Bharat) with global commitments in FTAs.
- Customs and Infrastructure Upgradation: Reduce transaction costs through faster border clearance, digitisation, and port connectivity.
- Stakeholder Consultation: Involve MSMEs, exporters, and farmer groups to ensure inclusive trade gains.
- Strategic Linkages: Use FTAs as geo-economic tools to build trusted supply chains (e.g., with Quad, IPEF nations).
- Trade Intelligence Mechanism: Enhance data-driven negotiation strategies through institutions like DGCI&S and IIFT.
Conclusion
India’s push to conclude a phased BTA with the U.S., along with parallel progress on EU and U.K. FTAs, marks a strategic reorientation of its trade diplomacy. These efforts are not just about tariff concessions, but about projecting India as a credible, rule-based, and competitive trade partner in a polarised global economy. A timely and balanced conclusion of these deals could help India accelerate its $5 trillion economy vision while advancing its geostrategic interests.
Syllabus Linkage:
GS Paper II – Bilateral, regional and global groupings and agreements involving India
GS Paper III – Indian Economy: International trade, liberalization, and government policies affecting growth
Previous Year Questions (PYQs):
- Q. What are the challenges and opportunities of India’s FTAs? (GS III – UPSC 2020)
- Q. How do bilateral and regional agreements affect India’s trade strategy? (GS III – Previous years)
Q. Despite the deep penetration of the Internet in India, significant disparities persist in digital access and skills across income, gender, and caste groups. Critically examine the findings of the Comprehensive Annual Modular Survey (CAMS) 2022–23 in this context. Suggest measures to ensure equitable digital inclusion.
Introduction
Digital access and proficiency are essential for achieving Sustainable Development Goal (SDG) 4, especially targets 4.4.1 and 4.4.2, which relate to ICT skills and digital literacy. The recently released Comprehensive Annual Modular Survey (CAMS) 2022–23 conducted by the NSSO, is the first large-scale attempt to map digital access and skills in India. The survey covered over 3 lakh households and 12.99 lakh individuals, offering deep insights into India’s digital landscape.
Body
- Key Findings from CAMS:
- Internet Access:
At the national level, 76.3% of households have broadband, with rural coverage at 71.2% and urban at 86.5%. States like Delhi, Goa, and Mizoram exceed 90%, while Odisha, Andhra Pradesh, and Arunachal Pradesh fall below 70%. - Social Group Disparities:
Broadband access for General Category is 84.1%, but significantly lower among OBCs (77.5%), SCs (69.1%), and STs (64.8%). - Economic Inequality:
The lowest MPCE decile shows 71.6% households without broadband, while the top decile shows only 1.9% without access, underlining the link between poverty and digital exclusion. - Mobile Usage Gaps:
Although 94.2% of rural and 97.1% of urban homes have mobile phones, only 25.3% of rural women in the General category and fewer among SC/ST women use them independently. Gender and caste intersect to deepen digital inequality. - Digital Skill Proficiency:
Only 53.6% of rural and 74% of urban population (aged 15+) can use the Internet. Email usage is lower: 20% rural vs. 40% urban. Only 37.8% of Indians can conduct online banking. Spreadsheet and advanced ICT skills remain low nationwide.
Way Forward
- Subsidise Broadband for Lower Deciles:
As per Digital India Mission, broadband should be treated as a basic utility. Targeted subsidies for bottom income groups can bridge access gaps. - Digital Literacy Campaigns at Panchayat Level:
Expand PMGDISHA (Pradhan Mantri Gramin Digital Saksharta Abhiyan) with gender-focused modules and integration with school/college curricula. - Mandate Caste-Disaggregated Reporting:
Encourage annual digital equity audits by government agencies to track improvements in SC/ST digital participation. - Public Wi-Fi and Community Tech Centers:
Leverage BharatNet infrastructure to establish free community digital hubs in underserved rural and tribal belts. - Incentivise Digital Skill Training:
Provide tax benefits or digital coupons for completing certified ICT courses, especially for women and informal sector workers.
Conclusion
While India has achieved impressive expansion in digital infrastructure, equitable access and meaningful digital inclusion remain elusive for large sections of the population. The CAMS survey has made the invisible digital divide visible. Policy must now evolve from merely increasing coverage to ensuring universal usability, access, and empowerment—especially for the marginalised, women, and the rural poor. Digital India must be not only fast, but also fair and inclusive.
Subject in UPSC Mains:
- General Studies Paper II (GS-II) – Governance and Welfare Schemes
- General Studies Paper III (GS-III) – Technology, Development, and Inclusion
Relevant GS-II / GS-III Syllabus Topics:
- Government policies and interventions for development
- Welfare schemes for vulnerable sections
- Science and Technology – Developments and their application in governance
- Awareness in the fields of ICT
Previous Year UPSC Questions (PYQs):
- GS-III 2022: “Discuss the role of digital initiatives in empowering citizens in India.”
- GS-II 2021: “Digital divide in India is an emerging challenge. Examine the steps taken by the government to bridge this divide.”
- GS-III 2015: “E-Governance is not only about utilization of the power of new technology, but also much about critical importance of the ‘use value’ of information.” Discuss.
Q. "Discuss the key components of the Union Housing and Urban Affairs Ministry’s blueprint for achieving water security under the ‘Viksit Bharat @2047’ vision. How does this initiative align with sustainable urban development goals?"
Introduction:
The ‘Viksit Bharat @2047’ initiative aims to transform India into a developed nation by 2047, with water security as a key focus area. The Union Housing and Urban Affairs Ministry has proposed a blueprint emphasizing tap water accessibility, water recycling, rejuvenation of water bodies, and groundwater recharge to ensure sustainability.
Key Components of the Blueprint:
- Shift to ‘Drink from Tap’ Facilities
- Moving away from bottled water and tankers by improving water treatment infrastructure to ensure safe, direct tap water supply.
- Public health benefits: Reduces waterborne diseases (e.g., cholera, diarrhea) by minimizing contamination risks.
- Water Recycling & Reuse
- Agriculture & Industry: Treated wastewater can be reused in farming and industrial processes, reducing freshwater dependency.
- Sustainable farming: Aligns with per-drop-more-crop under PMKSY (Pradhan Mantri Krishi Sinchayee Yojana).
- Rejuvenation of Water Bodies
- Revival of lakes, ponds, and rivers (e.g., Mission Amrit Sarovar) to enhance storage and water quality.
- Traditional water systems: Restoration of stepwells and local wells to strengthen community-level water resilience.
- Groundwater Recharge & Green Infrastructure
- Permeable urban surfaces: Rainwater absorption through green roofs, bioswales, and urban wetlands.
- Atal Bhujal Yojana: Aims at sustainable groundwater management in water-stressed regions.
Linkage with Sustainable Urban Development:
- SDG 6 (Clean Water & Sanitation): Ensures equitable water access.
- Smart Cities Mission: Integrates water-efficient infrastructure.
- AMRUT 2.0: Focuses on universal water supply and sewage management.
Conclusion:
The ‘Viksit Bharat’ water security plan promotes self-reliance, ecological balance, and climate resilience, crucial for India’s urban and rural sustainability. Effective implementation through community participation, PPP models, and tech-driven solutions will be vital.
Syllabus Linkage:
- GS-III: Infrastructure (Water Resources), Environmental Pollution & Degradation
- GS-II: Government Policies & Interventions (AMRUT, Smart Cities, Jal Jeevan Mission)
- Previous Year Questions:
- “What are the salient features of the Jal Jeevan Mission? How does it address water scarcity in rural India?” (UPSC 2022, GS-III)
- “Discuss the significance of urban water management in achieving sustainable development goals.” (UPSC 2021, GS-III)
Q. Discuss the implications of shifting global Liquefied Petroleum Gas (LPG) trade dynamics on India’s energy security, with special reference to the ongoing U.S.-China trade tensions.
Introduction
The global Liquefied Petroleum Gas (LPG) trade is witnessing a significant shift due to escalating trade tensions between the U.S. and China. As China imposes high tariffs on U.S. LPG imports, alternative sourcing from the Middle East and redirection of U.S. cargoes to other Asian markets, including India, is reshaping energy trade patterns. These changes bear important implications for India’s energy security, economic diplomacy, and strategic positioning in global energy markets.
Body
- Changing Global LPG Dynamics
- China, the second-largest importer of U.S. LPG, is shifting purchases to the Middle East, Canada, and Australia.
- U.S. LPG shipments are being diverted to countries like Japan, South Korea, and India, where demand is rising due to lower prices.
- Swelling U.S. inventories and depressed domestic prices are increasing global supply availability.
- Implications for India
- Short-term Benefits:
- Access to cheaper U.S. LPG strengthens India’s energy affordability and diversification.
- Enhanced bargaining power due to the availability of multiple suppliers.
- Strategic Leverage:
- Strengthens India’s long-term energy contracts and supply chain resilience.
- Improves India’s petrochemical competitiveness due to lower feedstock costs.
- Risks and Dependencies:
- Over-dependence on volatile global trade corridors.
- Potential geopolitical vulnerability if Middle East tensions rise.
- Energy Security Perspective
- Aligns with India’s objective of reducing import costs and diversifying energy sources.
- Supports government programs like PM Ujjwala Yojana by ensuring stable and affordable domestic LPG supply.
Way Forward
- Strategic Reserves: Build LPG strategic reserves akin to crude oil to absorb price shocks.
- Long-term Contracts: Secure diversified, long-term contracts with multiple LPG-exporting nations.
- Infrastructure Modernization: Expand import terminals, storage, and bottling capacity to accommodate shifting supply sources.
- Regional Diplomacy: Use India’s position to mediate and stabilize energy trade corridors in Asia.
Conclusion
India stands to gain in the short term from the reordering of global LPG trade flows driven by the U.S.-China trade rift. However, strategic foresight is necessary to convert this opportunity into a long-term energy security advantage. By leveraging this shift through diplomatic, infrastructural, and policy interventions, India can reinforce its energy sovereignty amidst a volatile global order.
Previous Year Linkage:
- UPSC 2023: “What are the main bottlenecks in upstream and downstream process of marketing of oil and gas in India?”
- UPSC 2021: “How is the Government of India protecting traditional knowledge of medicine from patenting by pharmaceutical companies?” (linked via international trade and economic diplomacy)
Q. Do you agree with the statement made by Union Minister Piyush Goyal at the Startup Mahakumbh in New Delhi that Indian startups are not innovating enough and are limiting themselves to grocery delivery services? Analyze the factors that hinder the scaling up of innovation in Indian startups and suggest ways to overcome these challenges.
Introduction:
The startup ecosystem in India has witnessed rapid growth in recent years, becoming an integral part of the country’s economic landscape. However, Union Minister Piyush Goyal’s recent remarks at the Startup Mahakumbh regarding the limited innovation in Indian startups, especially focusing on the grocery delivery sector, has sparked widespread debate. While some argue that startups in India are not pushing the boundaries of innovation, others believe that the lack of scaling up is more related to structural issues within the ecosystem. This essay will critically evaluate the factors limiting innovation and scaling in Indian startups, as well as suggest potential solutions for overcoming these barriers.
Body:
- Lack of Sufficient Capital for Deep-Tech Startups:
One of the primary challenges faced by Indian startups, particularly in deep-tech sectors, is the high capital requirements in the initial phase. As Thillai Rajan highlights, deep-tech startups require substantial initial investment to commercialize their technology, but funding options remain limited. Government schemes such as the Startup India Seed Fund provide only partial support, and follow-up funding from the private sector is often inadequate. The high-risk nature of deep-tech innovation, which often does not generate immediate revenue, makes it harder to attract investors.
- Limited Venture Capital Investment in High-Tech Innovations:
In the early stages of India’s startup journey, venture capitalists largely focused on consumer-driven sectors such as e-commerce, with success stories like Flipkart. However, venture capital in India has yet to significantly shift towards emerging technologies such as artificial intelligence (AI), blockchain, and electric mobility. As PK Jayadevan points out, the shift to these innovative sectors is underway, but the funds are not sufficient. This limited venture capital flow restricts the scaling up of truly innovative, high-tech startups in India.
- Government Policies and Bureaucracy:
While the Indian government has implemented several policies aimed at fostering the startup ecosystem, there remains significant bureaucratic red tape that slows down the process for startups. This issue is especially pressing in the context of public-sector policies, where the implementation is often more cumbersome than expected. Rajan emphasizes the importance of smoother processes for startups to fully benefit from government support and scale rapidly.
- Lack of Domestic Capital and Over-reliance on Foreign Investment:
Another key limitation for scaling innovation in Indian startups is the over-reliance on foreign capital, particularly from U.S.-based venture capital firms. As highlighted by PK Jayadevan, while international capital is crucial, India needs to develop more homegrown venture capital firms to foster local innovation. The absence of sufficient domestic investment impedes startups from scaling up on their own terms and limits the development of a self-sustaining ecosystem.
- Inequality and Limited Access to Innovation:
The startup culture in India has primarily catered to the needs of the urban, upper-middle-class population, with a focus on services like grocery deliveries, which have a relatively narrow consumer base. This leads to a scenario where innovation benefits only a select demographic, leaving large sections of society underserved. As PK Jayadevan points out, while the IT services sector has created significant value, foundational products and innovations are still lagging behind, which prevents startups from addressing the needs of a broader consumer base.
Way Forward:
- Enhancing Funding and Investor Engagement:
To encourage deeper innovation, it is crucial for both government and private investors to commit more capital to deep-tech startups. A possible solution is to increase the funding under schemes like the Startup India Seed Fund and ensure follow-up funding through private investors. Additionally, fostering collaborations between foreign venture capitalists and domestic investors could help bridge the funding gap.
- Simplifying Government Processes:
To promote faster scaling of startups, the government needs to work on reducing bureaucratic hurdles. Streamlining approval processes and ensuring better implementation of startup policies will help in creating an enabling environment for entrepreneurship.
- Strengthening Domestic Venture Capital:
India must focus on creating more homegrown venture capital firms that can identify and support local innovation. This could be achieved through government incentives or partnerships with established private equity firms.
- Expanding Innovation Beyond Urban Centers:
For innovation to benefit all sections of society, startups should look beyond urban-focused services and explore ways to address the needs of rural and semi-urban markets. This would not only help in bridging the inequality gap but also create a more inclusive innovation ecosystem.
Conclusion:
While the remarks by Union Minister Piyush Goyal about the limited scope of innovation in Indian startups may hold some truth, they fail to account for the complex and multi-dimensional challenges the ecosystem faces. The lack of sufficient funding, particularly in high-tech sectors, the need for smoother government processes, and the focus on urban-centric models are major obstacles to scaling innovation. However, with targeted efforts to enhance funding, streamline government procedures, and promote domestic venture capital, India can pave the way for a more robust and diversified startup ecosystem. For startups to truly scale up and innovate, a collective effort from the government, investors, and entrepreneurs is essential.
Link to Previous Year’s Questions:
This question aligns with previous years’ themes, particularly focusing on the role of innovation and entrepreneurship in India’s development. In 2022, UPSC asked about the challenges faced by Indian entrepreneurs in global markets, while in 2020, there was a question on how the startup ecosystem contributes to economic growth in India. Understanding these aspects is critical for analyzing the future trajectory of startups in India.
Q. "Examine the rationale behind the income tax slabs in the New Tax Regime (NTR) despite the no-tax limit being raised to ₹12 lakh in the Union Budget 2025. Discuss the implications of rebate, standard deduction, and marginal relief on taxpayers."
Introduction:
The Union Budget 2025 introduced significant changes in the income tax structure under the New Tax Regime (NTR), raising the no-tax threshold to ₹12 lakh while restructuring tax slabs at uniform intervals of ₹4 lakh. Despite the higher exemption limit, the retention of progressive tax slabs—with rates ranging from 5% to 30%—has raised questions about their necessity. The interplay of standard deduction, rebate under Section 87A, and marginal relief further complicates the tax liability calculation, necessitating a deeper analysis of the policy rationale and its impact on taxpayers.
Body:
- Rationale Behind Tax Slabs Despite Higher Exemption Limit:
- The tax slabs (₹0-4L: Nil, ₹4-8L: 5%, ₹8-12L: 10%, etc.) are structured to maintain a progressive taxation system, ensuring that higher earners contribute proportionately more.
- The rebate mechanism (Section 87A) ensures that those earning up to ₹12 lakh pay zero tax, as the rebate (₹60,000) offsets the tax liability (₹20,000 + ₹40,000) in the lower slabs.
- The slabs facilitate marginal relief for incomes slightly exceeding ₹12 lakh, preventing a sudden jump in tax liability (e.g., ₹12.1L taxed at ₹10,000 after relief instead of ₹61,500).
- Role of Standard Deduction and Rebate:
- Standard deduction (₹75,000) reduces taxable income, effectively extending the no-tax benefit to ₹12.75 lakh for salaried individuals.
- The rebate under Section 87A acts as a “discount” rather than a deduction, nullifying tax for incomes ≤ ₹12 lakh. However, it is not applicable beyond this threshold, creating a steep rise in liability for marginal exceedances.
- Implications for Taxpayers:
- Progressive taxation ensures equity but may disincentivize income growth near slab boundaries (e.g., ₹12.1L taxed higher than ₹12L).
- Marginal relief mitigates this but only up to ₹12.75L, beyond which taxpayers face a sharp increase in liability.
- The new 25% slab (for ₹20-24L) bridges the gap between 20% and 30%, reducing tax burden for middle-high earners.
Way Forward:
- Simplification: Merge slabs or introduce smoother transitions to reduce complexity and taxpayer anxiety near threshold limits.
- Enhanced Rebate Flexibility: Extend marginal relief to higher brackets or index thresholds to inflation.
- Awareness Campaigns: Educate taxpayers on optimal regime selection (Old vs. New Tax Regime) and deductions like NPS (Section 80CCD(2)).
Conclusion:
While the revised NTR aims to simplify taxation and provide relief to middle-income earners, the retention of multiple slabs ensures progressivity. However, the system’s complexity—especially around rebates and marginal relief—calls for further streamlining to enhance transparency and taxpayer confidence.
Previous Year Linkage:
- 2023 UPSC Mains (GS-III): “Discuss the impact of direct tax reforms on India’s fiscal policy and taxpayer behavior.” (The 2025 changes align with broader trends of simplifying tax structures while ensuring revenue adequacy.)
Q. "India’s ambition to become a $5 trillion economy is threatened by the rising burden of Non-Communicable Diseases (NCDs). Discuss the economic and social implications of NCDs and suggest measures to foster a preventive healthcare mindset in India."
Introduction
India stands at a critical juncture, aiming to achieve a $5 trillion economy while grappling with a “silent epidemic” of Non-Communicable Diseases (NCDs). NCDs, including heart disease, diabetes, cancer, and chronic respiratory illnesses, account for nearly two-thirds of all deaths in India. The economic toll is staggering, with studies estimating a 5%-10% GDP loss due to reduced productivity and healthcare costs. To secure its demographic dividend and economic aspirations, India must urgently transition from a curative to a preventive healthcare model, leveraging technology, policy interventions, and behavioral change.
Body
- Economic and Social Implications of NCDs
- Premature Mortality & Workforce Impact: NCDs affect working-age populations, with 22% of Indians above 30 at risk of premature death before 70. This undermines India’s demographic dividend, crucial for economic growth.
- Productivity Loss: Chronic illnesses lead to absenteeism, reduced efficiency, and early retirement, costing India 3.5−3.5−4 trillion (2012-2030) as per WEF-Harvard estimates.
- Healthcare Burden: Rising NCD cases strain public health infrastructure, diverting resources from development to treatment.
- Key Drivers of NCDs
- Lifestyle Factors: Sedentary habits, unhealthy diets (high sugar/salt), tobacco/alcohol use, and pollution contribute to 80% of preventable NCDs.
- Urbanization & Stress: Rapid urban growth exacerbates obesity, hypertension, and mental health disorders.
- Lack of Early Screening: Late detection increases treatment costs and mortality.
- Strategies for a Preventive Healthcare Model
- Behavioral Change & Awareness:
- Promote physical activity (yoga, walking) and balanced diets via public campaigns.
- Implement school health programs to inculcate healthy habits early.
- Policy Interventions:
- Strengthen the National Programme for Prevention and Control of NCDs.
- Expand Ayushman Bharat Health & Wellness Centres for early screening.
- Regulate junk food, tobacco, and alcohol through taxation and stricter labeling.
- Leveraging Technology:
- Use AI-driven predictive analytics for early disease detection (e.g., AI-based scans for lung cancer).
- Promote wearables and mobile health apps for real-time monitoring.
- Corporate & Community Engagement:
- Encourage workplace wellness programs (annual check-ups, fitness incentives).
- Urban planning with walkable streets, parks, and cycling tracks.
Way Forward
- Multi-sectoral Approach: Integrate health considerations into urban planning, education, and food policies.
- Public-Private Partnerships (PPPs): Scale up telemedicine and digital health solutions for rural areas.
- Research & Data-Driven Policies: Invest in epidemiological studies to tailor interventions.
Conclusion
India’s economic rise hinges on a healthy workforce. By embracing preventive healthcare, leveraging technology, and fostering policy-driven behavioral change, India can mitigate the NCD crisis. As the saying goes, “Prevention is better than cure”—this must become India’s mantra for sustainable development.
Previous Year Questions (PYQs) Linking:
- 2023: “Discuss the challenges posed by the rising burden of Non-Communicable Diseases in India and suggest measures to address them.”
- 2021: “How can digital health technologies revolutionize India’s healthcare system? Examine with examples.”
- 2019: “The demographic dividend in India is at risk due to health challenges. Critically analyze.”
By addressing NCDs proactively, India can safeguard its economic future while ensuring a healthier, more productive society.
Q. "The autonomy of financial regulators in India needs to be strengthened to ensure a stable and efficient financial system." Critically examine this statement in light of recent recommendations by the IMF-World Bank. Also, suggest a way forward to enhance regulatory independence while maintaining accountability.
Introduction
Financial regulators like the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), and Securities and Exchange Board of India (SEBI) play a crucial role in maintaining financial stability. However, recent assessments by the IMF-World Bank highlight concerns over their limited autonomy due to excessive government influence, which may hinder effective regulation.
Key Issues Highlighted by IMF-World Bank
- Government Control Over Regulators:
- Current laws allow the government to influence senior management and board appointments in regulatory bodies.
- The Ministry of Finance (MoF) acts as an appellate authority over RBI decisions, undermining its independence (e.g., the 2019 case where the government overturned RBI’s decision to revoke a cooperative bank’s license).
- Limited Powers Over Public Sector Banks (PSBs) & Insurers:
- RBI lacks authority to compel mergers in PSBs, appoint/remove board members, or supersede boards.
- IRDAI has restricted powers over state-owned insurers like LIC, limiting its ability to enforce governance reforms.
- Need for Institutional Reforms:
- The IMF recommends transferring appellate powers from MoF to an independent body to reduce conflicts of interest.
Critical Analysis
- Arguments for Greater Autonomy:
- Ensures impartial supervision, reducing political interference (e.g., loan waivers, directed lending).
- Enhances investor confidence by demonstrating strong regulatory oversight.
- Aligns India with global best practices (e.g., US Federal Reserve, European Central Bank).
- Challenges & Counter-Arguments:
- Complete autonomy may reduce government’s ability to intervene during crises (e.g., 2008 financial crisis).
- Accountability mechanisms must balance independence with democratic oversight.
Way Forward
- Legislative Reforms:
- Amend RBI Act, Banking Regulation Act, and IRDAI Act to grant regulators more operational independence.
- Establish an independent appellate tribunal (like SAT for SEBI) for RBI and IRDAI decisions.
- Governance Reforms:
- Fixed tenures for regulatory heads with removal only on proven misconduct.
- Transparent selection process for board members (e.g., recommendations by an independent committee).
- Strengthening Oversight Without Interference:
- Parliamentary committees (e.g., Standing Committee on Finance) should review regulators’ performance instead of direct MoF control.
- Mandate periodic reporting by regulators to ensure accountability.
- PSB & Insurer Reforms:
- Reduce government stakes in PSBs and insurers to enhance regulatory jurisdiction.
- Implement the “Investment and Governance Reforms” suggested by the PJ Nayak Committee (2014) for PSBs.
Conclusion
While financial regulators need greater autonomy to function effectively, a balanced approach ensuring accountability is crucial. Implementing IMF-World Bank recommendations—such as independent appellate mechanisms and reduced government interference—can strengthen India’s financial system while maintaining checks and balances.
Q. India’s policies on Electric Vehicle (EV) adoption have made progress in infrastructure and incentives, but still fall short on critical areas like technology transfer. Examine this gap and suggest measures to make India globally competitive in EV manufacturing.
Introduction:
India’s ambition to transition to sustainable mobility is being actively supported by a range of policy measures including FAME-I & II, the Production Linked Incentive (PLI) scheme for Advanced Chemistry Cells (ACC), and recently the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) (March 2024). Yet, despite these developments, India lags significantly in indigenous technology development, particularly in battery manufacturing and other core EV technologies. Technology transfer, a crucial element for long-term competitiveness and self-reliance, remains largely unaddressed.
Body:
- Overview of Current Policy Measures:
- SPMEPCI Scheme (2024): Offers 15% concessional duty on imported EVs if manufacturers invest ₹4,150 crore in India and meet 25% domestic value addition (DVA) in 3 years, rising to 50% in 5 years.
- FAME-II: ₹10,000 crore outlay for 2019–2024 to incentivize adoption of EVs.
- PLI for ACC (2021): ₹18,100 crore allocated to boost local battery cell manufacturing.
- Challenges in India’s EV Strategy:
- Delayed Start and Global Lag:
- India began EV policy push in 2015, five years after China and the US.
- In 2024, global EV sales were 17 million, of which China alone accounted for 11.3 million, vs India’s modest share (~1%).
- Lack of Technology Transfer:
- Unlike China, which mandated joint ventures for foreign EV firms until 2022, India’s policy doesn’t ensure knowledge spillover.
- India’s 25% DVA presently repurposes ICE components, without contributing to core battery or motor innovation.
- Weak Battery Ecosystem:
- India lacks upstream supply chains — mining, refining, and cell-level integration.
- Overdependence on imports undermines long-term self-reliance.
- Inadequate Charging Infrastructure:
- China has over 1 million public chargers; India is significantly behind.
Way Forward:
- Mandate Joint Ventures (JV):
- Replicate China’s model to require technology-sharing JVs for foreign EV firms to access benefits.
- Strengthen R&D Investment:
- Allocate part of the SPMEPCI and PLI funds to Indian R&D institutions for battery chemistry innovation (e.g., Sodium-ion, Solid-state).
- Strategic Mineral Access:
- Secure Lithium, Cobalt assets abroad and boost domestic exploration under KABIL (Khanij Bidesh India Ltd).
- Build Battery Recycling Ecosystem:
- Introduce standards and incentives for battery circular economy to reduce raw material dependency.
- Expand EV Charging Infrastructure:
- Integrate with public transport and urban planning; promote swapping stations for two- and three-wheelers.
Conclusion:
India’s EV transition has moved in the right direction, but without deep localisation of core technologies, it risks becoming a mere assembly hub. Strategic policy shifts toward technology transfer, battery ecosystem development, and JV mandates are essential to ensure India’s competitive and sustainable participation in the global EV revolution.
Link to UPSC Syllabus:
- GS-III (Economic Development): Industrial Policy; Infrastructure; Effects of Liberalization on the Economy.
- GS-III (Environment): Conservation, Environmental Pollution and Degradation.
- GS-III (Science & Tech): Developments and their applications and effects in everyday life.
Relevant Previous Year Questions (PYQs):
- GS-III (2022): “What are the key features of the National Electric Mobility Mission Plan (NEMMP) and FAME schemes?”
- GS-III (2020): “What are the challenges in achieving electric mobility in India? Suggest solutions with examples.”
- GS-III (2019): “‘Electric vehicles are the future of mobility in India.’ Critically examine.”
Q. India’s rise in GDP rankings masks deeper inequalities in well-being, income, and human development. Critically examine why GDP alone is not a sufficient indicator of national progress. Suggest better metrics to assess real development.
Introduction
India is projected by the International Monetary Fund (IMF) to become the 4th largest economy by 2025 in nominal GDP terms, overtaking Japan. While this milestone is widely celebrated, focusing solely on absolute GDP gives a distorted picture of economic and social well-being. India’s rise is better described as a “big economy illusion” — where aggregate size conceals low per capita income, income inequality, and developmental gaps.
Body
- GDP Size vs Lived Realities
- In 2025, India’s nominal GDP is projected at $4.18 trillion, marginally ahead of Japan.
- However, per capita GDP remains low at $2,711, placing India 144th out of 196 countries (IMF, 2024).
- Even in PPP terms, India ranks only 127th, reflecting poor income distribution.
- GDP Comparisons: Market Exchange Rate vs PPP
- Market Exchange Rate (MER) method: Reflects value in current dollars but is volatile and biased against low-wage economies.
- Purchasing Power Parity (PPP) method: Adjusts for price differences and shows India as the 3rd largest economy since 2009.
- However, PPP-based inflation of GDP often masks poverty; lower wages and prices artificially boost GDP estimates.
- Structural Development Gaps
- Employment Quality: 76% of agricultural and 70% of construction workers earn below minimum wages (ILO India Employment Report 2024).
- Informal Economy: Over 90% of employment is informal, with limited social protection.
- Health & Education: India’s Human Development Index (HDI) stands at 0.685 (2023, UNDP), categorized as “medium development”.
- Gender & Unpaid Work: GDP omits unpaid care work, mostly performed by women, underestimating actual economic contribution.
Way Forward
- Adopt a Composite Dashboard of Indicators:
- Incorporate HDI, GINI Index, Multidimensional Poverty Index, and labour force participation in policymaking.
- Shift from GDP-centric growth targets to people-centric well-being targets.
- Strengthen Social Statistics and Labour Data:
- Modernize National Sample Surveys and ensure transparent release of Periodic Labour Force Surveys (PLFS).
- Promote Formalization and Decent Work:
- Expand coverage under e-Shram, PM-SYM, and link informal workers to social security and health schemes.
- Enhance Quality of Spending:
- Increase investments in health, education, and nutrition, which directly impact productivity and well-being.
- Revisit National Accounting Systems:
- Integrate care work, informal sector contributions, and sustainability metrics into GDP calculations, in line with UN’s System of Environmental-Economic Accounting (SEEA).
Conclusion
India’s rise as the world’s fourth-largest economy in GDP terms is a symbolic achievement. However, real development lies in improving quality of life, not just quantitative expansion. The per capita experience, not per nation output, should be the guiding metric. Only when growth becomes inclusive, equitable, and sustainable, can India claim true progress towards becoming a Viksit Bharat by 2047.
Syllabus Mapping – GS Paper 3
- Indian Economy – Growth, development, and planning
- Inclusive Growth and Development
- Employment and Labour Reforms
- Statistical Systems and Measurement of Progress
Previous Year Mains Linkages
- GS3 (2023): Do you agree that steady GDP growth and low inflation have left the Indian economy in good shape?
- GS3 (2020): Economic growth does not necessarily lead to human development. Discuss.
- GS1 (2019): Regional disparities in development in India.
- GS2 (2021): Critically examine the need for measuring national progress beyond GDP.
Q. India is poised to become the fourth largest economy by 2025. However, absolute GDP growth alone does not reflect the lived realities of its people. Discuss, with relevant data and suggest how India can ensure inclusive and human-centred economic development.
Introduction
According to the International Monetary Fund (IMF, 2024), India is projected to become the 4th largest economy by 2025, overtaking Japan in terms of absolute GDP. While this signals macroeconomic momentum, it masks deep disparities in income distribution, social welfare, and human development. Comparing total GDP alone neglects per capita realities and the quality of life experienced by citizens.
Body
- GDP Size vs. GDP per Capita
- India’s GDP is estimated at $4.18 trillion (2025), up from $468 billion in 2000.
- However, India’s per capita GDP remains 12 times lower than Japan’s and 9 times lower than Poland’s.
- Absolute GDP growth is driven by scale, not necessarily by broad-based prosperity.
- Employment and Informality
- 45% of India’s workforce still employed in agriculture (2023), indicating a lag in structural transformation.
- Only 23.9% of workers are in wage or salaried jobs, compared to 91% in Japan and 80.1% in Poland.
- The high prevalence of informal labour leads to poor income security and low productivity.
- Social and Human Development Gaps
- Gross enrolment in higher education is just 32.7% in India, compared to 65–75% in Japan and Poland.
- Life expectancy in India is 72 years (2023), versus 84 in Japan and 78.5 in Poland.
- Infant Mortality Rate (IMR) in India is 24.5 per 1,000 live births, far above the <5 in Japan and Poland.
- Human Development Index (HDI)
- India’s HDI is 0.685 (UNDP, 2023), indicating medium human development.
- Japan and Poland have HDIs above 0.9, placing them in the very high development category.
- India’s developmental gains are uneven, especially across gender, caste, and rural-urban divides.
Way Forward
- Human Capital Investment
- Increase public spending on health and education to at least 6% of GDP (currently ~4% combined).
- Strengthen digital and vocational skilling under Skill India 2.0 for the informal sector.
- Inclusive Economic Policies
- Focus on labour-intensive sectors like MSMEs, agro-processing, and tourism to create formal jobs.
- Ensure minimum wage laws and universal social protection under e-Shram and PM-SYM.
- Social Infrastructure and Gender Parity
- Expand access to primary healthcare under Ayushman Bharat and Nutrition Mission.
- Promote women’s workforce participation through childcare support and safe urban infrastructure.
- Decentralized Governance
- Empower Gram Panchayats through Finance Commission grants to implement context-sensitive welfare schemes.
Conclusion
India’s macroeconomic rise is real but uneven. True development lies not in overtaking economies on GDP charts, but in enhancing people’s lives. A shift from GDP-centric metrics to human development-focused governance is essential to ensure that India’s economic growth translates into dignified lives and equitable opportunity for all.
Syllabus Mapping – GS Paper 3
- Indian Economy – Growth, development, and planning
- Inclusive Growth
- Human Development Indicators
- Employment and Informality
Previous Year Mains Linkages
- GS3 (2023): Do you agree that steady GDP growth and low inflation have left the Indian economy in good shape?
- GS2 (2021): “Poverty anywhere is a threat to prosperity everywhere.” Discuss in the context of post-pandemic recovery.
- GS3 (2020): “Economic growth does not necessarily lead to human development.” Discuss with examples.
- GS1 (2019): Discuss the regional variations in economic development in India and their implications for federal governance.
Q. India’s current growth trajectory, though stable, falls short of the pace required for a developed nation status by 2047. Critically examine the structural bottlenecks and suggest strategies to accelerate inclusive and sustainable economic growth.
Introduction
India’s provisional GDP growth rate for FY 2024–25 stands at 6.5%, with Q4 growth touching 7.4%, according to NSO data (May 2025). While this makes India the fastest-growing major economy amid a sluggish global environment, it is still insufficient for achieving the government’s ‘Viksit Bharat by 2047’ vision. As the Economic Survey 2023–24 emphasizes, India needs to sustain 8%+ annual growth for the next two decades to meet its developmental aspirations.
Body
- Recent Growth Trends: A Mixed Picture
- Q4 FY25 GDP growth (7.4%) driven by:
- Construction sector growth in double digits.
- Agriculture sector showed resilience despite erratic weather.
- Services sector remained strong and stable.
- Manufacturing slowdown: Growth fell to 4.8% in Q4 from 11.3% in Q4 FY24.
- Private Consumption: Grew only 6% in Q4, lowest in five quarters.
- Gross Fixed Capital Formation (GFCF) rose 9.4%, signaling delayed but increased public investment activity.
- Net tax revenue boost (12.7%) inflated real GDP without proportionate real activity.
- Structural Bottlenecks Hindering High Growth
- Low Job Elasticity: High GDP growth not translating into quality employment, especially for youth and women. (PLFS 2024)
- Manufacturing underperformance: Despite PLI schemes, industrial output remains volatile.
- Lag in Private Investment: Uncertainty and subdued demand inhibit private sector investment appetite.
- Informal Sector Fragility: Still contributes ~45% of GVA but lacks credit, insurance, and legal support.
- Skewed Growth: Regional and sectoral imbalances persist — high-tech sectors flourish while agrarian distress remains.
Way Forward
- Boost Private Investment:
- Ensure timely project clearances, ease compliance, and improve contract enforcement (India ranks 163rd in Enforcing Contracts, World Bank 2020).
- Incentivize domestic savings and FDI in high-employment sectors.
- Formalize Informal Economy:
- Expand Udyam registration, MSME credit access, and labor protections.
- Deepen Human Capital Investment:
- Skill India 2.0 must focus on industry-aligned apprenticeships.
- Increase public spending on health and education to 6% of GDP (currently ~2.9%).
- Reform Public Finance:
- Improve quality of expenditure, ensuring more goes into capital formation than subsidies.
- Agriculture Modernization:
- Integrate smallholders into value chains, promote agro-processing, and expand crop insurance and irrigation.
- Strengthen Institutions:
- NITI Aayog and State Planning Boards must ensure evidence-based policy, mid-course correction, and outcome tracking.
Conclusion
India is progressing, but not fast enough to match its demographic and developmental momentum. Growth must be inclusive, job-rich, and innovation-driven. The vision of a $30 trillion economy by 2047 is achievable only if policy reforms are deepened, private sector dynamism is unlocked, and human capital becomes the fulcrum of national strategy. Mere stability is not the goal—sustained acceleration must be.
Syllabus Mapping – GS Paper 3
- Indian Economy – Growth and development
- Investment models
- Inclusive growth
- Government budgeting and fiscal policy
Previous Year Mains Linkages
- GS3 (2023): Do you agree that steady GDP growth and low inflation have left the Indian economy in good shape?
- GS3 (2022): What are the challenges in realizing the goal of a $5 trillion economy?
- GS3 (2020): Investment models and their relevance for inclusive growth in India
- GS3 (2019): How far is inclusive growth in India a reality or a mirage?
Q. Despite rapid adoption, India’s virtual digital assets (VDA) sector continues to operate in a regulatory grey zone. Examine the key challenges and suggest a viable policy framework for balancing innovation with risk management.
Introduction
India is witnessing an extraordinary rise in Virtual Digital Asset (VDA) adoption. According to the Chainalysis Geography of Crypto Report 2024, India ranks first globally in grassroots crypto adoption for the second consecutive year. As per NASSCOM, Indian retail investors contributed $6.6 billion to crypto assets, with projections of 8 lakh jobs by 2030. Despite this momentum, the sector continues to face significant regulatory ambiguity, enforcement challenges, and tax compliance issues.
Body
- Evolution of India’s VDA Landscape
- The Reserve Bank of India (RBI) flagged crypto risks as early as 2013, leading to a 2018 circular banning banks from servicing crypto exchanges, later struck down by the Supreme Court in 2020.
- The Finance Act 2022 introduced:
- Section 194S: 1% TDS on transactions above ₹10,000.
- Section 115BBH: 30% capital gains tax, without allowing loss offsetting.
These fiscal policies were intended as interim measures but have effectively become the de facto regulation in the absence of a legislative framework.
- Consequences of Regulatory Vacuum
- Between July 2022 and October 2024, Indians traded over ₹3.66 trillion on offshore, non-compliant platforms, leading to:
- ₹2,488 crore in tax revenue loss.
- Over ₹60 billion in uncollected TDS.
- Measures like URL blocking failed to contain offshore trading; VPN use and mirror platforms allowed users to bypass restrictions.
- Role of VASPs and International Norms
- Global standards set by IMF, FATF, and FSB advocate risk-based, harmonised regulation.
- Indian Virtual Asset Service Providers (VASPs) have:
- Collaborated with FIU-India to strengthen AML/CTF compliance.
- Set up cybersecurity protocols, insurance funds, and self-regulatory standards after the $230 million hack in 2024.
- However, lack of regulatory clarity continues to push users toward non-compliant platforms, weakening India’s digital sovereignty and financial surveillance capacity.
Way Forward
- Comprehensive VDA Legislation:
- Introduce a Crypto Regulatory Bill defining assets, outlining compliance norms, and establishing consumer safeguards.
- Empowered Regulatory Oversight:
- Set up a dedicated authority or empower SEBI/RBI with crypto-specific technical capabilities.
- Tax Rationalization:
- Review current tax provisions; introduce graded taxation and allow loss offsetting to incentivize compliance.
- Support Domestic VASPs:
- Facilitate regulatory sandboxes, cybersecurity certifications, and financial incentives for compliant exchanges.
- Public Awareness and Digital Literacy:
- Conduct multilingual campaigns on crypto risks, taxation, and fraud prevention.
Conclusion
India stands at a pivotal juncture. With one of the largest Web3 developer ecosystems, the country has the opportunity to lead globally in digital asset innovation. However, to ensure consumer protection, financial stability, and national security, a coherent, forward-looking regulatory framework is essential. Strengthening domestic VASPs and embedding global best practices will help India convert its crypto momentum into a responsible and resilient digital economy.
Syllabus Mapping – GS Paper 3
- Indian Economy – Financial markets, resource mobilization
- Science & Technology – Recent developments and impacts
- Security – Cybersecurity and digital fraud
- Government Policies & Regulation
Previous Year UPSC Mains Questions Linkage
- GS3 (2023): Discuss the implications of the rise of cryptocurrency on the global and Indian economy.
- GS3 (2021): Explain how disruptive technologies are reshaping financial services in India.
- GS3 (2020): Discuss challenges of financial regulation in the era of digital innovation.
- GS2 (2016): Discuss the need for data privacy and cyber regulations in a digital economy.
Q. In light of recent geopolitical developments, critically examine the shifts in India’s crude oil import strategy. How does this reflect on India’s energy security and diplomatic positioning?
Introduction
India, the world’s third-largest crude oil importer, depends on overseas markets for over 85% of its oil needs. Traditionally reliant on West Asian suppliers, India’s energy strategy has undergone a significant shift since Russia’s invasion of Ukraine in 2022, driven by price volatility, global sanctions, and regional instability. As of June 2024, Russian crude oil accounts for over 40% of India’s imports — a major strategic realignment.
Body
- Shift in Oil Import Sources
- Rise in Russian Crude Imports:
In June 2024, India is projected to import 2–2.2 million barrels per day (bpd) of Russian oil — higher than combined imports from Saudi Arabia, Iraq, UAE, and Kuwait. This is a dramatic rise from less than 1% in early 2022 to over 40–44% now. - Increased Imports from the U.S.:
Imports from the U.S. jumped to 4.39 lakh bpd in June 2024, up from 2.8 lakh bpd in May, reflecting diversification beyond the traditional Gulf region. - Decline in West Asian Oil:
West Asian oil imports fell below 2 million bpd, amidst geopolitical tensions in the Strait of Hormuz, following Israel-Iran conflict escalation and U.S. military strikes in Iran.
- Reasons for Strategic Shift
- Discounted Russian Crude:
Post-sanctions, Russia has offered deep discounts on Urals crude, making it economically attractive despite longer shipping routes. - Instability in the Gulf:
Frequent disruptions in West Asia (Yemen conflict, Iran-Israel tensions, Strait of Hormuz threats) have made the region less reliable for uninterrupted supply. - Logistical Diversification:
Russian oil arrives via Suez Canal, Cape of Good Hope, or Pacific Ocean, bypassing choke points like Hormuz, ensuring supply continuity. - Refining Flexibility:
Indian refiners have developed technological adaptability to process a broader mix of crude, including heavy and sour Russian grades. - Payment Flexibility:
India has leveraged alternative payment mechanisms, including rupee-ruble trade, to circumvent SWIFT-related bottlenecks.
Way Forward
- Strengthen Strategic Oil Reserves:
Expand Strategic Petroleum Reserves (SPR) beyond current ~5.3 million tonnes to buffer against future supply shocks. - Diversify Import Basket:
Maintain a balanced mix between Russia, West Asia, Africa, and the Americas to ensure energy security and reduce geopolitical dependence. - Enhance Domestic Production:
Accelerate exploration and production via NELP and OALP schemes to reduce import dependency. - Pursue Long-term Contracts:
Secure stable, long-term contracts with non-Gulf suppliers to hedge against market and regional volatility. - Integrate Green Energy Transition:
Invest in biofuels, hydrogen, and solar to diversify energy mix and reduce oil import burden in the long term.
Conclusion
India’s evolving oil import strategy, shaped by geopolitical risks and economic pragmatism, reflects its quest for energy resilience and strategic autonomy. While dependence on Russian crude has cushioned short-term volatility, a diversified, adaptive, and forward-looking policy is crucial for securing India’s energy future amid an uncertain global order.
Link to UPSC Syllabus & PYQs
- GS Paper III – UPSC Syllabus Topics:“Infrastructure – Energy, Ports, Roads, Airports, Railways, etc.”
“Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.”
“Challenges to internal and external security through communication networks, role of media and social networking sites in internal security challenges.”
- Relevant PYQs:
- Q. What are the major challenges India faces in achieving energy security? Suggest ways to address them. (UPSC 2019)
- Q. Explain the meaning of investment in the context of Indian economy. Discuss its significance. (UPSC 2021)
- Q. “Investment in infrastructure is essential for more rapid and inclusive economic growth.” Discuss in the context of India. (UPSC 2020)