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  • FDI policy rejig for border nations spur Rs 5k cr investment: DPIIT

    Why in the News

    A relaxation in India’s rules on investment from land bordering countries has drawn 29 foreign direct investment (FDI) proposals worth ₹4,895.65 crore up to 20 August 2026. The relaxation was notified in March 2026. It permits a foreign entity carrying non controlling beneficial ownership of up to 10 per cent from a land bordering country to invest through the automatic route. Press Note 3 of 2020 had required prior government approval for any such investment, however small that land border shareholding was. What is now tested is whether a shareholding threshold can separate incidental Chinese exposure inside a global fund from Chinese strategic control of an Indian asset.

    What is Press Note 3 of 2020?

    1. The restriction: Imposed in April 2020, it made government approval mandatory for investment from any country sharing a land border with India.
    2. Stated purpose: It was aimed at preventing opportunistic takeovers of Indian firms during the Covid-19 pandemic, and stayed in force amid heightened national security concerns after the Galwan clash later that year.
    3. Country neutral drafting: The framework named no country, and China is the largest source of investment among India’s land neighbours.
    4. Uneven bite: Entities of Bangladesh and Pakistan can invest only through the government route. Flows from Nepal, Myanmar, Bhutan and Afghanistan are very small as a share of India’s total foreign investment.

    What conditions does the relaxed route carry?

    1. Indian control retained: The majority shareholding and control of the investee entity must rest at all times with resident Indian citizens, or with resident Indian entities that are themselves owned and controlled by resident Indian citizens.
    2. Threshold is a ceiling, not a waiver: A land border holding above 10 per cent still routes the investment through government approval, so the automatic route covers only diluted exposure.
    3. Time bound clearance for named goods: A 60 day deadline was approved for clearing proposals from land bordering countries, including China, in capital goods, electronic capital goods, electronic components, polysilicon, and ingot wafer for solar cells.

    Where has the relaxed route drawn money from?

    1. Sectors: The proposals span information technology, artificial intelligence, information and communication, manufacturing, pharmaceuticals, data centres and transport services.
    2. Jurisdictions: They were reported by investors and entities based in Mauritius, the United States, the Republic of Korea, Japan, Singapore, Luxembourg and the Cayman Islands, among others.
    3. Stated gain: The government’s own assessment is that the reform gives investors greater certainty, cuts transaction time and strengthens ease of doing business in India.

    Where has the Centre gone further than the ownership threshold?

    1. A strategic sector joint venture: In July 2026 the Centre cleared a joint venture between Dixon Technologies (India) Limited and Vivo Mobile India Limited for manufacturing electronic devices and smartphones, one of the first major approvals to Chinese investment in a strategic sector.
    2. Entry into power tenders: The Finance Ministry in July allowed four Chinese power equipment manufacturers with factories in India to bid for government tenders on critical power projects.
    3. A procurement exemption: TBEA Energy, Nanjing Electric India, New Northeast Electric India and Taikai Electric (India) were exempted from the public procurement rule requiring entities from land bordering countries to register with the relevant Indian authority before bidding.
    4. What is at stake in that equipment: The four firms make transformers, wires, high voltage switchgear and gas insulated switchgear used in transmission lines. New Northeast Electric India lists at least 11 transmission line projects across India.

    Challenges to the revised land border investment framework

    1. Beneficial ownership is hard to trace through layers: A 10 per cent test presumes the ultimate holder is visible, which layered holding structures defeat. Eg. Several of the reported proposals came through Mauritius and the Cayman Islands. The ultimate holder is not on the local register in either jurisdiction. Fix. Require a declaration of the ultimate beneficial owner at every layer, verified against the significant beneficial ownership register maintained under the Companies Act, 2013.
    2. A shareholding cap does not bound influence: Control travels through contracts as much as through equity. Eg. A minority holder with board nomination rights or a sole technology licence can direct a joint venture without owning a majority. Fix. Test control by board composition and contractual veto rights, not by shareholding percentage alone.
    3. Screening capacity is spread thin: No single body owns the security review of an inbound proposal. Eg. Screening runs across the Department for Promotion of Industry and Internal Trade, the Ministry of Home Affairs and the administrative ministry, each with its own timeline. Fix. Constitute a standing inbound investment security review committee with a statutory disposal deadline.
    4. Technology dependence persists in the sectors being opened: Approval eases entry without changing who owns the process knowledge. Eg. India imports most of its polysilicon and ingot wafer requirement for solar cells. Fix. Tie approval in those goods to a phased technology transfer and a rising domestic sourcing commitment.
    5. The government route stays slow for everyone else: Only the notified goods got a deadline, so other proposals still face open ended review. Eg. Land border proposals outside the notified list have historically taken well over a year to clear. Fix. Extend the 60 day discipline to every proposal on the government route, with reasons recorded for any extension.

    Conclusion

    The relaxed framework has been operative since March 2026 and has produced 29 reported proposals in five months. Press Note 3 itself stays on the books for any land border holding above the threshold, so the restriction has been narrowed rather than withdrawn. The next milestone is disposal of proposals under the 60 day window for the notified goods, and whether the Dixon and Vivo clearance becomes a template for a wider, sector by sector opening.

    Foreign Direct Investment in India

    1. About: Foreign direct investment is cross border investment that establishes a lasting interest in an enterprise abroad, in the definition used by the Organisation for Economic Cooperation and Development.
    2. Routes: Most sectors permit 100 per cent foreign investment through the automatic route, and the remainder require prior government approval.
    3. Cumulative scale: India’s cumulative inflows crossed about $1.14 trillion between April 2000 and December 2025, with nearly 70 per cent of that arriving in the last decade.
    4. Recent flows: Gross inflows reached a three year high of $81 billion in 2024-25, led by services and manufacturing.

    Laws and Rules Governing Foreign Investment

    1. Foreign Exchange Management Act, 1999: The parent statute governing cross border transactions and capital account flows into and out of India.
    2. Foreign Exchange Management (Non-debt Instruments) Rules, 2019: Notified by the Finance Ministry, these fix sectoral caps, entry routes and pricing guidelines for equity investment.
    3. Consolidated FDI Policy Circular: A single compiled statement of sectoral policy, which Press Notes amend between editions.
    4. Competition Act, 2002: Acquisitions above notified thresholds need Competition Commission of India clearance.

    Challenges in Attracting Foreign Direct Investment

    1. Policy unpredictability: Rules that change mid cycle force investors to restructure entities already built. Eg. Repeated shifts in e-commerce foreign investment norms forced marketplace operators to redraw their seller structures. Fix. Publish a standstill period between the notification of a sectoral rule change and its taking effect.
    2. Land acquisition: Site control is the binding constraint on greenfield manufacturing. Eg. POSCO abandoned its Odisha steel project after a decade of unresolved land disputes. Fix. Build titled, pre cleared land banks held by state industrial corporations and offered on long lease.
    3. Geographic concentration: Inflows cluster in services and a few urban states. Eg. A handful of states absorb the bulk of equity inflows reported each year. Fix. Offer differential incentives for greenfield investment in aspirational districts.
    4. Intellectual property enforcement: Weak enforcement raises the risk premium on technology intensive investment. Eg. India remains on the United States Priority Watch List on intellectual property enforcement. Fix. Create dedicated commercial intellectual property benches with fixed disposal timelines.
    5. Clearance friction across governments: A central approval does not deliver the state permissions a project actually needs. Eg. The National Single Window System still does not carry every state level clearance. Fix. Make full state onboarding to the single window a condition for central infrastructure co-funding.

    Back2Basics: Department for Promotion of Industry and Internal Trade

    1. Parent ministry: It sits under the Ministry of Commerce and Industry. It was the Department of Industrial Policy and Promotion until internal trade was added in 2019.
    2. Policy mandate: It frames and administers the Consolidated FDI Policy and issues the Press Notes that amend it.
    3. Programmes run: It runs Startup India and Make in India, and maintains the National Single Window System.

    “[2020] With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

    (a) It is the investment through capital instruments essentially in a listed company.

    (b) It is a largely non-debt creating capital flow.

    (c) It is the investment which involves debt-servicing.

    (d) It is the investment made by foreign institutional investors in the Government securities.

  • Centre notifies key scheme to manufacture mobile phones

    Why in the News

    The Ministry of Electronics and Information Technology (MeitY) has notified the Mobile Phone Manufacturing Scheme (MPMS), a ₹62,500 crore programme incentivising domestic assembly of smartphones and greater local value addition. The Union Cabinet approved the scheme on 15 July 2026. It succeeds the Production Linked Incentive Scheme for Large Scale Electronics Manufacturing, which ran from 2020 to the last financial year and rewarded incremental handset output from any qualifying firm. The new scheme splits that single track in two, creating a separate and richer channel for brands owned by Indian citizens and holding their intellectual property in India. What is contested is whether incentive design alone can move India from assembling other countries’ brands to owning its own.

    Components of the Mobile Phone Manufacturing Scheme

    1. Two parts: The notification divides the scheme in two, one part incentivising mobile phone manufacturing and one part supporting Indian mobile phone brands.
    2. Part 1, the assembly incentive: A base incentive on assembly tapers from 2.75 per cent to 2.25 per cent across the five year tenure. Applicable rates run from 2.25 per cent to 5 per cent depending on the year and on incremental sales.
    3. The domestic sourcing add on: An additional 1.5 per cent is payable on domestic component sourcing, built up from individual component incentives ranging from 0.2 per cent to 0.5 per cent.
    4. Part 2, the Indian brand track: An Indian owned brand draws a flat 5 per cent incentive for the full tenure, plus a domestic design and research and development incentive of 3 per cent.

    How does a firm actually earn the incentive?

    1. Turnover gate: Mobile phone companies, including electronics contract manufacturers, need a turnover of ₹10,000 crore in 2025-26 to qualify. Electronics manufacturing services firms with 51 per cent Indian ownership qualify at ₹1,000 crore.
    2. Growth gate: Incentives are disbursed only on sales beyond 115 per cent of the previous financial year’s production. A unit that produced ₹10 crore worth of phones in the preceding year and ₹12 crore in the next draws incentive on ₹50 lakh alone.
    3. Sourcing condition: The 1.5 per cent additional incentive applies only where a firm sources domestically for at least a quarter of the phones it sells in that financial year.
    4. No earmarking: The corpus is fungible overall, so no amount is reserved for domestic players. Foreign phonemakers face a higher bar to draw incentive, and they draw it from the same pool.

    What does the scheme change for Indian brands?

    1. Ownership test: An Indian brand must be majority owned by Indian citizens and incorporated in India, with intellectual property and trademarks held locally.
    2. No sales floor: Indian brands are exempt from the minimum sales threshold that applies to other brands, and their baseline is fixed at 2025-26.
    3. Stated intent: The Union Minister for Electronics and Information Technology framed the shift as one of Indian brand, Indian design and Indian intellectual property.
    4. Discretionary channel: An empowered committee will make recommendations to the government on Indian brand applications for incremental incentives and for non fiscal support.

    What has the assembly led phase achieved, and where has it stopped?

    1. Import to export: Around 70 per cent to 75 per cent of phones sold in India were imports in 2014-15, and the country is now an exporter of finished handsets.
    2. Global position: India is the second largest phone manufacturer in the world, and practically all phones sold in the country are made in it.
    3. Shallow value: Domestic value addition in mobile phone manufacturing stands at 23 per cent, so most of the value in an Indian assembled handset is still created abroad.
    4. A ceiling exists: The benchmark set by Chinese phone assembly units is itself bounded, because components in electronics value chains crisscross the globe several times before a device is finished.

    What does the scheme set out to achieve by 2030-31?

    1. Production: Cumulative production, measured as the combined sale value of finished products, is targeted at ₹39 lakh crore by the end of the scheme.
    2. Exports: Cumulative exports over the same period are targeted at ₹5 lakh crore.
    3. Value addition: The stated goal is to double overall domestic value addition from a band of 18 per cent to 23 per cent up to a band of 35 per cent to 40 per cent.
    4. Employment: The Secretary of the Ministry of Electronics and Information Technology put direct job creation under the scheme at 60,000.

    Why does the government treat phone assembly as a gateway sector?

    1. Skill and technology spillover: Technology and skill transfer from handset lines is stated to enable adjacent hardware production, in laptops, tablets and smart watches.
    2. New device categories: The same capability base is expected to carry into gaming consoles, drone manufacturing and medical devices.
    3. Beyond electronics: Components and automobile windshields are named as further beneficiaries of the manufacturing ecosystem the sector builds.

    Challenges to the Mobile Phone Manufacturing Scheme

    1. Incentive concentrates in a few assemblers: A single fungible pool rewards volume, and volume already sits with a small set of contract manufacturers. Eg. Under the earlier electronics scheme, most disbursed incentive flowed to a handful of contract assemblers serving Apple and Samsung. Fix. Ring fence a defined tranche of the corpus for the Indian brand track instead of leaving the whole corpus open to competition.
    2. The turnover gate excludes the firms the scheme names: A ₹1,000 crore revenue floor sits above what the surviving Indian handset brands turn over. Eg. Micromax and Lava operate at a fraction of the revenue of the contract assemblers they would compete with for the same pool. Fix. Add a staged eligibility ladder with a lower entry threshold and a rising production commitment.
    3. The sourcing bonus has a thin supplier base to draw on: Displays, camera modules and application processors are not made in India at scale. Eg. Display panels and camera modules for handsets assembled in India are imported largely from China, South Korea and Vietnam. Fix. Sequence disbursement under the Electronics Component Manufacturing Scheme ahead of assembly incentive, so a supplier base exists before the bonus is claimed.
    4. A demand slump erases a year’s eligibility: Incentive accrues only above a fixed growth threshold over the prior year, so a flat year pays nothing. Eg. Covid disruption in 2020-21 left applicants under the earlier electronics scheme unable to meet their first year incremental production targets. Fix. Allow an unmet incremental target to be carried into the following year within the same tenure.
    5. Locally held intellectual property can be bought rather than built: The Indian brand test rests on registered ownership, which an assignment satisfies without design capability moving to India. Eg. Contract design houses in Shenzhen supply reference designs that brands across Asia rebadge as their own. Fix. Tie the design and research incentive to audited domestic engineering headcount and to patents filed from India.

    Conclusion

    The Mobile Phone Manufacturing Scheme has moved from Cabinet approval to notification, with operational guidelines issued on 21 August 2026 and a tenure running to 2030-31. The next milestone is the application round. Assemblers file against the turnover gate. Indian brands file separately for the brand track. Whether the second track becomes a genuine channel or a minority claim on a shared pool will be visible in the empowered committee’s first set of recommendations.

    “[2025, GS3, 15 marks] Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?”

  • How will Gaganyaan’s thermal shield protect the crew?

    Why in the News

    The Gaganyaan crew module will hit the atmosphere at 7,500 to 8,000 metres per second on return, with its exterior reaching 1,800 degrees Celsius while the structure must stay below 150 degrees Celsius. The shield chosen to hold that gap is a sacrificial ablative layer 30 to 35 millimetres thick, a choice driven by the mission’s single use design and India’s own re entry heritage rather than by peak performance.

    What is a thermal protection system?

    1. What it does: A thermal protection system is the outer layer that keeps a re entering vehicle’s structure and interior within survivable temperature while its exterior is exposed to the heat of atmospheric entry.
    2. Why it is needed: Almost all of the crew module’s kinetic energy is dissipated into the atmosphere as heat energy, and the small portion directed back towards the module is still intense enough to melt it.
    3. What it protects: It maintains the module’s structural integrity and keeps the interior within the temperature limit the structure and the crew can tolerate.
    4. How it is classified: Systems are grouped by how they remove heat, into ablative, radiative and heat sink types.

    What is heat flux?

    1. Definition: Heat flux is the rate at which heat energy passes through a unit area of a surface, measured in watts per square metre.
    2. Why it varies on a capsule: It is highest at the point of the vehicle that meets the airflow first, which is why the nose cap carries the most demanding shield material.

    What is a boundary layer?

    1. Definition: The boundary layer is the thin region of gas immediately next to a moving vehicle’s surface, where the flow is slowed by contact with that surface.
    2. Why it matters in ablation: Gases escaping from the decomposing shield thicken and cool this layer, which blocks intense heat from being transferred into the module.

    Why is atmospheric re entry harder than ascent for a crewed mission?

    1. Ascent is controlled and gradual: A rocket accelerates slowly through the atmosphere on the way up specifically to keep the mechanical loads on the vehicle to a minimum.
    2. Re entry cannot be aborted: Once the descent begins there is no provision to abort the mission, so every system must work through to splashdown.
    3. The crew cannot intervene: There is only a limited role for the crew to intervene and correct any system non conformance during descent.
    4. The event is too fast for human correction: Atmospheric descent is incredibly fast and the deceleration forces change constantly, and human response times are simply too high to manually correct a sudden system abnormality.
    5. What follows from this: All systems must therefore be made robust enough to withstand the scorching conditions of re entry on their own, since design margin substitutes for intervention.

    What thermal conditions must the Gaganyaan crew module survive?

    1. Entry velocity: The crew module will hit the atmosphere at a speed of 7,500 to 8,000 metres per second on return from its orbit around the earth.
    2. Energy dissipation: More than 99 per cent of that kinetic energy will be dissipated into the atmosphere as heat energy.
    3. Exterior temperature: The exterior of the module will encounter temperatures as high as 1,800 degrees Celsius in some regions.
    4. Shield thickness: The thermal protection system is just 30 to 35 millimetres thick.
    5. Interior limit: That layer must keep the module’s temperature safely below 150 degrees Celsius while performing the task of maintaining structural integrity.

    How do ablative, radiative and heat sink systems each remove heat?

    1. Ablative: A single use system that removes heat energy by sacrificing its own layers through chemical and physical processes, absorbing extreme quantities of thermal energy and chemically decomposing into a protective layer of solid char and outgassing vapours.
    2. The decomposition physically carries heat away from the module as the material burns off, and the escaping gases create a cooler boundary layer that blocks heat transfer into the module.
    3. Carbon phenolic and silica phenolic are examples of ablative materials.
    4. Radiative: A system that absorbs the extreme heat of re entry and then releases it back into space as electromagnetic radiation, primarily in the infrared spectrum and also as visible light when it is extremely hot.
    5. It remains intact and withstands the heat without melting or degrading, which makes it suited to reusable re entry vehicles.
    6. Heat sink: A system that absorbs heat energy and raises its own temperature without melting or changing phase in any other way.
    7. Copper and aluminium are examples of heat sink materials.

    Why has the Indian Space Research Organisation chosen an ablative shield for the crew module?

    1. It matches the mission’s design philosophy: The Gaganyaan crew module is a single use vehicle, and an ablative system is a single use system, so the shield’s life and the module’s life are the same.
    2. It is proven and robust: The Indian Space Research Organisation (ISRO) has selected it as a proven and highly robust solution rather than the highest performing one available.
    3. It tolerates fluctuating heat loads: Ablative heat shields can easily handle fluctuating heat loads to protect the structure underneath, which matters when the descent profile varies.
    4. Radiative systems are less forgiving: Any design error in a radiative system can quickly cause dangerous overheating, so its margin for error is narrower.
    5. It avoids a maintenance burden: An ablative system withstands an extreme thermal load without requiring complex or delicate surface maintenance between flights.
    6. It avoids the reusable system’s cost structure: By avoiding the expensive manufacturing, specialised inspection and complex installation processes associated with a reusable radiative system, ISRO has taken the safer and more cost effective option.

    Does choosing a single use shield trade away reusability for safety?

    1. What is given up: A sacrificial shield is consumed on every flight, so a new heat shield must be manufactured and installed for each mission rather than inspected and reflown.
    2. The recurring cost consequence: Per flight cost stays flat across a programme instead of falling with flight rate, which is the opposite of the economics a high cadence programme needs.
    3. Why the trade is correct for this mission: Reusability only pays back over a high flight rate, and a first generation crewed programme flying occasional missions never reaches that rate.
    4. Where the trade stops working: A sustained crew rotation programme to an orbital station changes the flight rate, at which point the reusable radiative option becomes the economically relevant one.
    5. The safety side of the trade: The ablative system’s tolerance of fluctuating heat loads and its independence from surface inspection are precisely the properties a programme flying its first crew needs most.

    What does India’s own re entry heritage contribute to the Gaganyaan shield?

    1. The first re entry mission: The Space Capsule Recovery Experiment, India’s maiden re entry mission, used a carbon phenolic ablative to protect the module’s nose cap, where heat flux was the highest.
    2. The crew module demonstration: The Launch Vehicle Mark-3 (LVM3) flew the Crew Module Atmospheric Re-entry Experiment (CARE) in 2014. That flight successfully demonstrated crew module re entry using an ablative thermal protection system.
    3. What that established: The 2014 mission established the foundational technology that is now being used in the Gaganyaan programme, so the shield is an inheritance rather than a new development.
    4. Why heritage reduces risk: Material characterisation, manufacturing process and flight data already exist for the ablative route, which removes the qualification uncertainty a new material class would carry.
    5. The programme position: The Gaganyaan crew module is built on this ablative heritage and on the lessons learned from both earlier missions.

    What does the SpaceX Crew Dragon comparison show about ablative shield design choices?

    1. United States, the Crew Dragon shield: The Crew Dragon capsule of SpaceX uses an ablative material named phenolic impregnated carbon ablator, or PICA, a lightweight carbon fibre matrix filled with a phenolic resin.
    2. The shared design logic: A crewed capsule operator with a very different cost structure has arrived at the same ablative class of solution, which indicates the choice follows from the capsule form rather than from budget constraint.
    3. The design feature that differs: PICA’s lightweight carbon fibre matrix trades density for mass saving, while carbon phenolic of the kind flown on India’s first re entry mission is denser and carries higher heat flux at the nose.
    4. The limit of this comparison: This is the single foreign system named in the evidence here, so it establishes that ablative shielding is the standard choice for crewed capsules, not a ranked comparison of national capsule programmes.

    Challenges to the Gaganyaan thermal protection system

    1. Ground testing cannot reproduce full re entry: No ground facility reproduces the combined velocity, heat flux and duration of an orbital re entry, so qualification relies on partial simulation and analysis. Eg. Arc jet plasma facilities test coupons at representative heat flux but not at the full 7,500 to 8,000 metres per second entry velocity.
    2. Bond line integrity over a curved surface: A 30 to 35 millimetre layer must adhere uniformly over the module’s full curvature, and a bond defect creates a local hot path into the structure. Eg. Shuttle era thermal protection failures originated in localised damage to the protective layer rather than in the material’s bulk performance.
    3. Predicting the recession rate: Ablative design depends on predicting how much material burns off, and an over prediction adds dead mass while an under prediction risks burn through. Eg. Nose cap regions carry the highest heat flux and therefore the largest uncertainty in recession estimates.
    4. Mass penalty on the launch vehicle: A sacrificial shield sized with margin is heavy, and every kilogram of shield reduces the payload the human rated launcher can carry. Eg. The human rated LVM3 has to lift the crew module, service module and shield together to a 400 kilometre orbit.
    5. Manufacturing repeatability: Each mission needs a newly manufactured shield, so process variation between production batches becomes a flight safety variable rather than a quality issue. Eg. Carbon phenolic layup is a manual intensive process where resin content and fibre orientation must be reproduced identically each time.
    6. Recovery environment after splashdown: A charred shield must survive water impact and sea recovery without compromising the crew compartment. Eg. India’s first re entry mission was recovered from the Bay of Bengal, which is the recovery zone the crewed programme also plans to use.
    7. Single point criticality: With no abort provision once descent begins and limited crew intervention, the shield has no backup system to fall back on. Eg. Human response times are too high to correct a sudden thermal abnormality during a descent where deceleration forces change constantly.

    Conclusion

    The Gaganyaan crew module’s protection against a 1,800 degrees Celsius re entry rests on a 30 to 35 millimetre ablative layer that sacrifices itself to carry heat away and hold the structure below 150 degrees Celsius. The choice of an ablative over a radiative system follows from the module’s single use design, its tolerance of fluctuating heat loads and the technology base established by India’s first re entry mission and the 2014 crew module demonstration. The programme’s current status is that the shield is qualified on this heritage, with the first uncrewed test flight launching shortly.

    Human Spaceflight Programme of India

    1. What it is: Gaganyaan is India’s human spaceflight programme, aimed at demonstrating the capability to launch a crew to low earth orbit and return them safely to Indian waters.
    2. Mission profile: The mission is designed to carry a crew of up to three to an orbit of about 400 kilometres for a mission duration of up to three days, followed by splashdown recovery.
    3. The launch vehicle: The launcher is a human rated version of the LVM3, designated the Human rated Launch Vehicle Mark-3 (HLVM3), modified with additional redundancy and a crew escape system.
    4. The orbital module: The crew module and the service module together form the orbital module, with the crew module being the pressurised habitable segment that returns.
    5. Institutional base: The Human Space Flight Centre was established at Bengaluru in 2019 to lead the programme, with the Vikram Sarabhai Space Centre responsible for launch vehicle and re entry systems.
    6. The longer roadmap: India’s stated goals extend to the Bharatiya Antariksh Station by 2035 and a crewed lunar landing by 2040.

    Laws and Treaties Governing Space Activities

    1. Outer Space Treaty, 1967: Makes States internationally responsible for national space activities, whether carried on by governmental or non governmental entities, and bars national appropriation of outer space.
    2. Rescue Agreement, 1968: Obliges States to assist astronauts in distress and to return them and any recovered space objects to the launching authority.
    3. Liability Convention, 1972: Makes a launching State absolutely liable for damage caused by its space object on the surface of the earth or to aircraft in flight.
    4. Registration Convention, 1975: Requires launching States to maintain a national registry of space objects and to furnish details to the United Nations.
    5. Moon Agreement, 1979: Declares the Moon and its resources the common heritage of mankind, and India has signed but not ratified it.
    6. Indian Space Policy, 2023: Defines the roles of ISRO, the Indian National Space Promotion and Authorisation Centre, NewSpace India Limited and non governmental entities in the Indian space ecosystem.
    7. Space Activities Bill, 2017: A draft domestic law to license and regulate private space activity in India, which was circulated for comment and never enacted.
    8. Satellite Communications Policy and spectrum rules: Govern authorisation of satellite services, with spectrum assignment handled under the Telecommunications Act, 2023.

    “[2025] Consider the following space missions:

    I. Axiom-4

    II. SpaDeX

    III. Gaganyaan

    How many of the space missions given above encourage and support microgravity research?

    (a) Only one

    (b) Only two

    (c) All the three

    (d) None

  • Beyond blasphemy: how laws can curtail the possibility of social reform

    Why in the News

    Section 295A and the provisions that succeeded it have been turned against writers, artists and reformers, with arrest, mob campaigns and pre emptive withdrawal delivering the harm long before any verdict. India simultaneously runs statutes that direct the State to attack religious and superstitious practice, so the same legal system both punishes criticism of religion and mandates it.

    What is Section 295A?

    1. What it penalises: Section 295A of the Indian Penal Code, 1860 punished deliberate and malicious acts intended to outrage the religious feelings of any class by insulting its religion or religious beliefs.
    2. Successor provision: The corresponding offence is now Section 299 of the Bharatiya Nyaya Sanhita, 2023.
    3. What the offence turns on: Liability rests on the intent to outrage and not on the truth or falsity of what was said.
    4. How it operates in practice: The offence is cognisable, so a complaint can produce arrest and judicial custody before any court assesses whether malice existed.

    What is the heckler’s veto?

    1. Heckler’s veto: A heckler’s veto is the suppression of expression because a hostile audience threatens disruption or violence, so the objector rather than the law decides what may be said. Speech is stopped in order to keep the peace, which transfers the power of censorship to whoever protests loudest.

    What is a sacrilege law?

    1. Sacrilege law: A sacrilege law criminalises damage to or desecration of a religious text or object, as distinct from an offence aimed at outraging feelings through speech or writing. State level sacrilege provisions of this kind carry punishment extending to imprisonment for life.

    What does the law on outraging religious feelings currently cover in India?

    1. The core offence: Section 299 of the Bharatiya Nyaya Sanhita, 2023 penalises deliberate and malicious acts intended to outrage religious feelings by insulting religion or religious beliefs, whether by words, writing, signs or visible representation.
    2. Adjacent offences: Section 298 covers injuring or defiling a place of worship with intent to insult a religion, Section 300 covers disturbing a religious assembly and Section 302 covers uttering words with deliberate intent to wound religious feelings.
    3. Group enmity provisions: Section 196 penalises promoting enmity between groups on grounds of religion, race, place of birth, language or caste, and Section 197 covers imputations prejudicial to national integration.
    4. No standalone blasphemy statute: India has no offence of blasphemy as such, and the protection is assembled from provisions aimed at intent to outrage rather than at the content of any belief.
    5. State level escalation: Some States have enacted sacrilege provisions carrying punishment up to imprisonment for life, which sets the penalty far above the central provision.
    6. Judicial test applied: In Amish Devgan v Union of India (2020) the Supreme Court laid down a three part contextual test examining the content of the speech, the intent of the speaker and the harm caused or likely to be caused.
    7. Truth is not a defence: Courts have held that a wholly true statement can still outrage religious feelings, so accuracy does not absolve the speaker.

    Constitutional Provisions Related to Free Speech and Religious Freedom

    1. Article 19(1)(a): Guarantees every citizen the right to freedom of speech and expression.
    2. Article 19(2): Permits reasonable restrictions on that right on enumerated grounds, including public order, decency, morality, defamation and incitement to an offence.
    3. Article 25(1): Guarantees freedom of conscience and the right freely to profess, practise and propagate religion, subject to public order, morality and health.
    4. Article 25(2)(a) and Article 25(2)(b): Permit the State to regulate secular activity associated with religious practice, and to provide for social welfare and reform including throwing open Hindu religious institutions to all classes.
    5. Article 26: Gives every religious denomination the right to manage its own affairs in matters of religion, subject to public order, morality and health.
    6. Article 14: Requires that a penal classification rest on an intelligible differentia bearing a rational nexus to the object of the provision.
    7. Article 21: Protects life and personal liberty, which is what arrest and pre trial custody in a speech case directly curtails.
    8. Article 15(1) and Article 17: Bar discrimination on grounds of religion and caste and abolish untouchability, which are the constitutional basis for statutes attacking exploitative religious practice.
    9. Article 51A(h): Makes it a fundamental duty of every citizen to develop the scientific temper, humanism and the spirit of inquiry and reform.
    10. Preamble: Declares India a secular republic, and secularism has been held to be part of the basic structure and therefore beyond amendment.

    How has the provision been used against writers, artists and film?

    1. Angarey, 1932: A small collection of Urdu short stories attacking obscurantist customs and the sexual hypocrisy of some religious figures was banned soon after publication, and its authors faced threats.
    2. The Satanic Verses, 1988: The government banned import of Salman Rushdie’s novel, making India one of the first countries in the world to act against it, and a secular one at that.
    3. The Da Vinci Code, 2006: Seven Indian States banned the film and the book on the ground that they offended Christian sentiment, and two States lifted the ban only after High Court intervention.
    4. The Hindus: An Alternative History, 2014: Wendy Doniger’s book was withdrawn by Penguin India after a civil suit invoking Section 295A, so the withdrawal followed a civil filing rather than any conviction.
    5. Madhorubagan, 2015 and 2016: Perumal Murugan faced a criminal complaint and a mob campaign over the novel and announced his own death as a writer in 2015; a Madras High Court judgment of 2016 quashed the case and closed with the appeal to let the author be resurrected to what he is best at, write.
    6. M.F. Husain: The painter was hounded into exile and death abroad after decades of prosecutions and threats over his nude depictions of Hindu deities.
    7. Taslima Nasrin: Her writing has met comparable treatment through bans, threats and constraints on where she may live and publish.

    Why does the harm occur before any verdict?

    1. Rehana Fathima, 2018: Weeks after the Supreme Court lifted the traditional ban on women of menstruating age entering the Sabarimala temple, the Kerala activist was arrested under Section 295A over a Facebook photograph of herself dressed as an Ayyappa devotee.
    2. Cost imposed without trial: She spent over two weeks in judicial custody and was suspended by her employer within days of the arrest, all over an image rather than an argument.
    3. Amish Devgan, 2020: The television anchor called the Sufi saint Khwaja Moinuddin Chishti a lootera during a live debate, apologised within days for what he said was an inadvertent slip for a different historical name, and still faced seven separate first information reports across five States.
    4. Multiplicity as the punishment: The Supreme Court declined to quash any of the seven and merely clubbed them together in Ajmer, so the burden of defending across five jurisdictions was reduced rather than removed.
    5. Conviction is not the point: These cases rarely end in conviction and the prosecution more often goes nowhere, so the process itself operates as the penalty.
    6. Three channels of harm: The damage is delivered through arrest, through the heckler’s veto of an aggressive and sometimes violent audience, and through the pre emptive caution of publishers and film certifiers who calculate that no book or film is worth the trouble.

    Which laws run in the opposite direction?

    1. Constituent Assembly position, 2 December 1948: During the debate on whether personal law should be shielded from legislative reform, B.R. Ambedkar rejected the idea that religion could claim a veto over social legislation merely because a custom carried religious sanction.
    2. The reasoning he gave: He said he did not understand why religion should be given a vast, expansive jurisdiction covering the whole of life and preventing the legislature from encroaching upon that field, since this liberty exists in order to reform the social system, so personal law cannot be excluded from the jurisdiction of the State.
    3. Maharashtra, 2013: The Prevention and Eradication of Human Sacrifice and Other Inhuman, Evil and Aghori Practices and Black Magic Act was passed after the assassination of the rationalist campaigner Narendra Dabholkar.
    4. What that Act criminalises: It penalises a long list of exploitative religious practices, ranging from claiming to cure disease through faith healing to inducing self flagellation.
    5. Karnataka, 2017: The State passed a comparable law against inhuman evil practices and black magic.
    6. Sati (Prevention) Act, 1987: It criminalises not only the act of widow immolation but its glorification, treating celebratory speech about a religious practice as itself an offence.
    7. The mirror image rather than the opposite: A law punishing praise of a religious practice uses the same technique as a law punishing criticism of one, since both make speech about religion a criminal question.
    8. What the coexistence exposes: Indian law has no coherent theory of when religious sentiment deserves protection, and what governs is a case by case political calculation about which practices are currently unpopular enough, or which constituencies currently powerful enough, to tip the balance.

    Why does the reformer fall on the wrong side of a blasphemy law?

    1. The State of Mysore versus Henry Rodrigues, 1961: A Catholic editor was tried under Section 295A over an article in his Konkani language magazine Crusader, titled “Honour to Mary or Dishonour?”, which accused Catholic priests of exploiting the credulous by falsely attributing miracles to the Virgin Mary.
    2. The defence offered: He argued that since the criticised beliefs and practices were superstitious and contrary to the Bible itself, the truth of his charge ought to absolve him.
    3. The court’s answer: Following an earlier Allahabad High Court ruling, the Mysore High Court rejected this outright, holding that even a wholly true statement can outrage religious feelings and that the provision punishes the intent to outrage rather than the accuracy of what is said.
    4. The insider treated as the stranger: A believer’s sincere and internally argued complaint against his own clergy was treated exactly as the law treats a stranger’s contempt.
    5. Jyotirao Phule: He spent the 1870s attacking Brahminical religious authority as the theological scaffolding of caste oppression, recasting Hindu myth in his tract Gulamgiri to expose it as a device for keeping the lower castes subjugated.
    6. Hamid Dalwai: A century later he founded the Muslim Satyashodhak Mandal explicitly on Phule’s model, marched a handful of Muslim women to the Maharashtra Assembly to demand an end to triple talaq and polygamy, and was ostracised and abused for it.
    7. The pair the law cannot separate: The offence does not distinguish a Phule or a Dalwai from a bigot baiting a rival faith for sport, since both are trying to make believers feel bad about what they believe.
    8. A line a police station cannot draw: What should separate them is whether the critic is trying to improve the community or merely humiliate it, and an officer recording a complaint is poorly placed to make that assessment.

    Major debates surrounding blasphemy and sacrilege law in India

    1. Public order against expression: A targeted law applied with judicial restraint and the safeguard of proven intent is defended as a proportionate response to sentiment that has repeatedly proved combustible, rather than as an assault on free thought.
    2. Restraint in principle against the record in practice: The historical record of Section 295A, and now of State sacrilege law, gives little confidence that restraint is what actually happens once a complaint is registered.
    3. Discussion, advocacy and incitement: Shreya Singhal v Union of India (2015) held that only incitement carrying a direct and proximate connection to public disorder may be criminalised, and that discussion and advocacy remain protected even where unpopular.
    4. Intent against effect: Whether liability should turn on what the speaker meant or on the disorder that followed, since the intent test is applied only after an audience has already reacted.
    5. Truth as a defence: Whether a demonstrably accurate factual claim about a religious practice should absolve the speaker, which the 1961 ruling denied outright.
    6. Proportionality of punishment: Whether imprisonment for life for an insult to a text can be reconciled with a Constitution whose secularism is held unamendable.
    7. New law against enforcement: In Ashwini Kumar Upadhyay v Union of India (April 2026) the Supreme Court dismissed a batch of petitions seeking fresh hate speech legislation, holding that creating criminal offences belongs to the legislature and that the real problem is an enforcement deficit.
    8. Empirical gap: Data under these provisions is not published in a form that sets arrests, days in custody and withdrawn publications against convictions, so the argument runs on cases rather than on measured outcomes.

    Challenges to reforming laws on religious offence

    1. Cognisability delivers the punishment: An offence that permits arrest on a complaint produces custody before a magistrate examines whether malice existed. Eg. In Imran Pratapgarhi v State of Gujarat (2025) the Supreme Court extended the preliminary inquiry safeguard to first information reports in speech cases precisely to interpose a check before registration.
    2. Forum multiplicity: A single utterance can be prosecuted in every jurisdiction where a complainant chooses to file. Eg. Clubbing seven first information reports at Ajmer in 2020 consolidated the defence without removing the cost of defending in a distant State.
    3. Self censorship leaves no record: A publisher or certifier that withdraws before any order removes the work without producing a judicial decision that can be appealed. Eg. Penguin India withdrew and destroyed copies of The Hindus: An Alternative History in 2014 with no conviction and no court direction requiring it.
    4. Mob campaign as the real enforcement mechanism: The threat of disruption achieves what a prosecution cannot. Eg. Perumal Murugan withdrew from writing in 2015 after a mob campaign and a local shutdown, and resumed only after the Madras High Court judgment of 2016.
    5. State level bans without central legislation: Executive bans multiply at the State level and are reversed only through litigation. Eg. Seven States banned The Da Vinci Code in 2006 and two lifted the ban only after their High Courts intervened.
    6. Penalty escalation at the State level: A State provision can prescribe imprisonment for life for an offence against a text, which exceeds the penalty for many offences against the person. Eg. State sacrilege provisions carry punishment extending to imprisonment for life against a maximum of a few years under the central provision.
    7. Recodification carried the provision forward: The most recent opportunity to narrow the offence was not used. Eg. The Bharatiya Nyaya Sanhita, 2023 re-enacted Section 295A as Section 299 unchanged, instead of confining it to incitement to violence.

    Conclusion

    Section 295A and its successor punish the intent to outrage rather than the falsity of what is said, so a reformer criticising his own faith is caught by the same words as a bigot baiting a rival one. India runs that regime alongside statutes that direct the State to criminalise faith healing, black magic and the glorification of sati, which shows there is no settled principle about when religious sentiment deserves protection. What remains unresolved is whether these provisions will be narrowed to their original and defensible purpose of preventing incitement to actual violence, leaving criticism, satire and reform of religious practice to public argument rather than to the criminal courts.

    What is Secularism?

    1. About: Secularism is the principle that the State holds no religion of its own and treats every faith on the same footing in law and in the distribution of public benefits.
    2. Rationale: It exists to keep the coercive power of the State out of the hands of any religious majority or clergy, and to make citizenship independent of belief.
    3. Strict separation model: The State and religion operate in mutually exclusive spheres, with the State neither aiding nor interfering with any religion, which is the model associated with the United States and France.
    4. Principled distance model: The State keeps no religion of its own and retains the power to intervene in religious practice for social reform and equality, which is the model the Indian Constitution follows.
    5. Positive neutrality: Equal treatment is delivered through equal respect rather than equal indifference, so the State may fund, regulate and administer religious institutions on a non preferential basis.
    6. Constitutional location: The word secular was inserted in the Preamble by the Constitution (Forty second Amendment) Act, 1976, and S.R. Bommai v Union of India (1994) held secularism to be part of the basic structure.
    7. Essential religious practices doctrine: Courts decide the reach of religious freedom by asking whether a practice is essential to the religion, which places the determination of religious content with the judiciary.

    Key Concerns Regarding Secularism in India

    1. State entanglement with religious administration: Endowment departments and statutory boards administer the institutions of some faiths and not others, so the State’s distance is uneven across religions.
    2. Judicial determination of religious content: The essential religious practices test requires judges to decide questions of theology, a function courts were not designed or equipped for.
    3. Asymmetric reform power: Article 25(2)(b) expressly permits the opening of Hindu religious institutions, and comparable reform in other communities has proceeded largely through litigation rather than legislation.
    4. Personal law plurality against Article 44: The directive for a uniform civil code remains unimplemented, so family law continues to differ by religion.
    5. Majoritarian capture of neutral language: A formally neutral provision protects the practices of the dominant community more effectively, since those practices attract fewer complaints and fewer prosecutions.
    6. No horizontal anti discrimination remedy: Discrimination on religious grounds by private landlords and employers has no general statutory remedy, since constitutional guarantees bind the State.

    Laws and Rules Governing Religious Offence in India

    1. Indian Penal Code, 1860: Chapter XV grouped the offences relating to religion and remained the governing law until 2024.
    2. Section 295A was inserted by the Criminal Law Amendment Act, 1927 following the Rangila Rasul prosecution.
    3. Sections 295 to 298 covered defiling a place of worship, disturbing a religious assembly, trespass on burial places and wounding religious feelings by word.
    4. Bharatiya Nyaya Sanhita, 2023: Replaced the Indian Penal Code with effect from 1 July 2024 and carried this chapter forward.
    5. Section 299 corresponds to Section 295A, Section 298 to Section 295, Section 300 to Section 296 and Section 302 to Section 298.
    6. Bharatiya Nagarik Suraksha Sanhita, 2023: Provides for a preliminary inquiry before registration of a first information report in specified categories of offence, and for prior government sanction before a court takes cognisance of certain offences relating to religion.
    7. Cinematograph Act, 1952: Empowers the certifying authority to refuse or condition certification of a film on grounds mirroring Article 19(2), including public order and decency.
    8. Information Technology Act, 2000: Section 69A permits blocking of online content on grounds that track the restrictions in Article 19(2).
    9. Sati (Prevention) Act, 1987: Criminalises the act of sati, its abetment and its glorification, and provides for Special Courts to try these offences.
    10. Maharashtra Prevention and Eradication of Human Sacrifice and Other Inhuman, Evil and Aghori Practices and Black Magic Act, 2013: Criminalises a listed set of exploitative practices including faith healing claims and induced self flagellation.
    11. Karnataka Prevention and Eradication of Inhuman Evil Practices and Black Magic Act, 2017: Enacts a comparable prohibition in that State.
    12. Protection of Civil Rights Act, 1955: Penalises the enforcement of religious disabilities arising out of untouchability, including denial of temple entry.

    Back2Basics: Jyotirao Phule

    1. Life: Born in 1827 in a family of the Mali caste in present day Maharashtra, and died in 1890 in Pune.
    2. First school: Opened a school for girls at Bhide Wada in Pune in 1848, among the earliest such schools established by an Indian.
    3. Extension to the excluded castes: Opened a school in 1851 for children of the castes then treated as untouchable.
    4. Organisation founded: Founded the Satyashodhak Samaj, the Society of Truth Seekers, on 24 September 1873 in Pune, to secure social justice for the lower castes without priestly mediation.
    5. Principal writings: Wrote Gulamgiri in 1873, which read Hindu myth as a record of the subjugation of the lower castes, and Shetkaryacha Asud in 1883 on the condition of the cultivator.
    6. Vocabulary contributed: Popularised the term Dalit for the oppressed castes, which entered later political usage.
    7. Social work: Opened a home for widows and a centre for the prevention of infanticide, and supported widow remarriage.
    8. Title conferred: Given the title Mahatma in 1888 at a public gathering in Bombay.
    9. Partnership: Worked with Savitribai Phule, who taught at the Bhide Wada school and is counted among India’s first women teachers.
    10. Later influence: His model was invoked directly by Hamid Dalwai in founding the Muslim Satyashodhak Mandal in 1970.

    Way Forward

    1. Narrow the offence to incitement: Confine Section 299 of the Bharatiya Nyaya Sanhita, 2023 to speech carrying a direct and proximate connection to violence, in line with the Shreya Singhal test.
    2. Make the offence non cognisable: Remove the power to arrest on a bare complaint, so that custody does not precede any judicial assessment of deliberate and malicious intent.
    3. Require prior sanction and preliminary inquiry: Make registration of a first information report conditional on a preliminary inquiry and on sanction by a designated senior officer, extending the Imran Pratapgarhi safeguard to every provision in this chapter.
    4. Consolidate multiple complaints by statute: Provide that all first information reports arising from a single publication or utterance are transferred to one jurisdiction as a matter of right, rather than case by case.
    5. Introduce a public interest defence: Allow truth combined with a reformist or scholarly purpose as a statutory defence, so an insider critic is separated from a speaker seeking only to humiliate.
    6. Cap the penalty: Bring State sacrilege provisions within a central ceiling so that an offence against a text cannot carry imprisonment for life.
    7. Protect the publisher and the certifier: Bar interim injunctions and pre publication restraints on books and films except on a judicial finding of imminent violence, so withdrawal is not the cheapest option.

    “[2014, GS2, 12.5] What do you understand by the concept “freedom of speech and expression”? Does it cover hate speech also? Why do the films in India stand on a slightly different plane from other forms of expression? Discuss.”

  • US: Will impose toughest sanctions in history on Iran

    Why in the News

    The United States Treasury Secretary announced on 20 August 2026 that Washington will impose the toughest sanctions in history on Iran, to be layered on an existing naval blockade, with the stated objective of collapsing the Iranian government. The United States President separately warned that any country whose financial institutions, businesses, airports or government entities provide any type of lifeline to Iran will itself face economic consequences. That warning converts a bilateral war into a compliance problem for every third country that trades with Iran.

    What are secondary sanctions?

    1. Definition: Secondary sanctions penalise persons and firms in third countries for dealing with a sanctioned state, even where that dealing is lawful in their own jurisdiction. They extend a national measure into an extraterritorial one.
    2. How they bite: The penalty is exclusion, since a firm that trades with the target loses access to the sanctioning state’s financial system, markets and correspondent banking.
    3. Why the currency matters: Their reach depends on the sanctioning state’s currency being used for settlement, which is why United States measures affect countries that have no dispute with Washington.

    What is a naval blockade?

    1. Definition: A naval blockade is the use of warships to prevent vessels entering or leaving a state’s ports or coastline. It operates through force, unlike sanctions, which operate through law and financial exclusion.

    What does the announced sanctions package actually threaten?

    1. Stated severity: The United States Treasury Secretary said Washington will impose the toughest sanctions in history on Iran.
    2. Combination with the blockade: He described the approach as combining the existing blockade on Iran with the new sanctions, rather than replacing one with the other.
    3. Stated objective: He said the approach would work in Iran and that Washington was going to collapse the government there.
    4. Announced framing: The United States President promised economic warfare and isolation on an unprecedented scale, although details were scant.
    5. Detail still pending: The Treasury Secretary said he would hold a press conference on Monday to set out the specifics.

    Why does the lifeline warning make this a problem for third countries?

    1. The categories named: The warning covers any country that allows its financial institutions, businesses, airports or government entities to provide any type of lifeline to Iran.
    2. The threatened consequence: Such a country would itself face economic consequences, stated as tremendous in scale.
    3. The timing: The warning was issued on Wednesday, ahead of the sanctions announcement, which places third countries on notice before the measures are published.
    4. Breadth of the categories: Airports and government entities extend the threat beyond banking to transport and to state to state dealings.
    5. Absence of a threshold: No minimum value or category of transaction was specified, so the scope of what counts as a lifeline remains undefined.

    Why have the two ceasefires failed to hold?

    1. Origin of the war: The United States began the war alongside Israel nearly six months before the sanctions announcement.
    2. Two attempts: The United States and Iran twice announced ceasefire deals, in April and in June.
    3. Their stated purpose: Both aimed to restore the free flow of shipping through Hormuz as a path towards ending the conflict.
    4. Both collapsed: Both deals quickly crumbled, even as Israel largely withdrew from the fighting.
    5. Leadership transition in Tehran: A 40 day commemoration ceremony for the former Iranian Supreme Leader was held in Karbala on 20 August 2026, attended by Iran’s Parliament Speaker.

    What is Iran’s counter-position?

    1. Characterisation of the measures: Iran’s foreign ministry condemned the fresh United States economic and trade sanctions, saying they targeted ordinary Iranians.
    2. The legal charge: The ministry described the measures as economic terrorism and as crimes against humanity.
    3. Attribution of motive: The Iranian Foreign Minister called the announcement an attempt to divert American public opinion from domestic financial problems, including record debt and rising interest rates.
    4. The wider claim: He argued that American economic terrorism threatens the global economy and the national sovereignty of countries around the world.
    5. The retained lever: Tehran continues its own economic pressure campaign by keeping the Strait of Hormuz largely closed.

    Why has Oman become the pivot of the Hormuz question?

    1. A separate negotiation: Iran has been negotiating an agreement on managing the Strait of Hormuz with Oman, and has said several times in recent weeks that an agreement was close.
    2. The American response: The United States President responded to those negotiations on Monday by warning that he might bomb the Gulf state if it gets in the way.
    3. The anomaly in that threat: Oman is a longstanding United States security partner, which makes the threat a warning to an ally rather than to an adversary.
    4. Oman’s stated position: The Omani Foreign Minister said lasting security in the strait required a permanent peace in the region and rejected further escalation.
    5. Its diplomatic posture: He made the statement after meeting his Japanese counterpart, which places the strait’s management within a wider set of energy importing interests.

    What does the escalation mean for India?

    1. Energy route exposure: A large share of India’s crude, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) imports transits the Strait of Hormuz, so the strait’s closure raises India’s landed energy costs regardless of who supplies the cargo.
    2. Precedent of forced exit: India stopped importing Iranian crude in May 2019 after United States waivers under the sanctions regime lapsed, ending what had been one of its largest supply relationships.
    3. Connectivity investment at risk: India signed a ten year contract in May 2024 to operate the Shahid Beheshti terminal at Chabahar port in Iran, an asset whose viability depends on the sanctions environment.
    4. Corridor implications: The International North South Transport Corridor to Russia and Central Asia runs through Iranian territory, so secondary sanctions affect a route India built to bypass Pakistan.
    5. Existing exposure to secondary measures: India has already navigated the Countering America’s Adversaries Through Sanctions Act, 2017 over its purchase of the S-400 air defence system, which shows the compliance question is not new.

    Challenges to a sanctions-led approach

    1. Poor record at producing regime change: Comprehensive sanctions rarely dislodge governments and often consolidate them. Eg. Cuba has been under a United States embargo since 1962 without a change of political system.
    2. Humanitarian burden falls on civilians: Restrictions on banking and shipping obstruct food and medicine even when formally exempted. Eg. Iran’s foreign ministry stated that the measures targeted ordinary Iranians and amounted to crimes against humanity.
    3. Evasion through parallel networks: Targets build shadow fleets, front companies and barter arrangements that blunt enforcement. Eg. United States sanctions on Hezbollah have repeatedly targeted courier networks and exchange houses used as fronts for cash movement.
    4. Erosion of the sanctioning currency’s role: Extraterritorial reach pushes third countries to settle trade outside the dollar. Eg. India has implemented the Special Rupee Vostro Account framework for invoicing, payment and settlement of international trade in rupees.
    5. Alliance friction: Threats against partners weaken the coalition needed for enforcement. Eg. The United States President warned he might bomb Oman, a longstanding American security partner, over its Hormuz negotiations with Iran.
    6. Counter escalation by the target: A sanctioned state with a chokepoint can impose costs on the sanctioning coalition’s own economies. Eg. Iran keeps the Strait of Hormuz largely closed, which carries 20 percent of global oil and 20 percent of global LNG.
    7. Legal contestation of extraterritoriality: Third states dispute the authority of one country to regulate transactions between two others. Eg. The European Union’s Blocking Statute was updated in 1996 and again in 2018 to shield European firms from United States extraterritorial sanctions on Iran.

    Conclusion

    The United States has moved from military coercion to declared economic warfare against Iran, pairing an existing naval blockade with sanctions described as the toughest in history and aimed openly at collapsing the government in Tehran. The lifeline warning extends the measures to third countries, while Iran retains its own lever by keeping the Strait of Hormuz largely closed and negotiating its management with Oman. The next milestone is the United States Treasury Secretary’s announced press conference on Monday setting out the details, with the Iran Oman understanding on the strait the other outstanding variable.

    About Economic Statecraft

    1. About: Economic statecraft is the use of economic instruments, positive and negative, to change another state’s behaviour without resorting to force.
    2. Rationale: It exists because military action is costly and diplomatic protest is weak, so states seek an intermediate instrument that imposes real cost while remaining below the threshold of war.
    3. Positive inducements: Aid, trade preferences, market access and investment offered to secure a policy change.
    4. Comprehensive sanctions: Blanket restrictions on trade and finance with an entire economy, which impose broad cost but weak targeting.
    5. Targeted or smart sanctions: Asset freezes, travel bans and entity listings aimed at named individuals, firms and sectors, designed to spare the general population.
    6. Primary sanctions: Prohibitions binding on the sanctioning state’s own persons, firms and jurisdiction.
    7. Secondary sanctions: Penalties on third country persons for dealing with the target, which give a national measure global reach.
    8. Multilateral sanctions: Measures mandated by the United Nations Security Council under Chapter VII, binding on all member states.

    Key Concerns Regarding Economic Statecraft

    1. Sovereignty and extraterritoriality: Secondary sanctions require states to enforce another state’s foreign policy inside their own jurisdiction. Eg. The French bank BNP Paribas paid about $8.9 billion to United States authorities in 2014 for processing transactions involving Sudan, Iran and Cuba.
    2. Humanitarian spillover: Financial de-risking by banks blocks exempted humanitarian trade because compliance officers avoid any exposure to a sanctioned jurisdiction. Eg. The Swiss Humanitarian Trade Arrangement was created in 2020 because ordinary banking channels would not carry payments for food and medicine to Iran.
    3. Fragmentation of the payments system: Repeated use of currency dominance as leverage accelerates the construction of alternative settlement channels and reduces future leverage. Eg. Russia built the System for Transfer of Financial Messages in 2014 as a domestic substitute for international bank messaging channels.
    4. Weak exit mechanism: Sanctions are politically easy to impose and hard to lift, so they persist beyond the objective they were designed to achieve. Eg. The Jackson Vanik amendment of 1974 remained applicable to Russia until its repeal in 2012, long after the emigration restrictions it targeted had ended.
    5. Measurement problem: There is no agreed method to establish that a policy change was caused by sanctions rather than by other pressures, which makes evaluation contested. Eg. Iranian oil exports fell sharply after the reimposition of sanctions in 2018 while the nuclear programme expanded, leaving both outcomes attributed to the same measures.

    Laws and Instruments Governing Sanctions

    1. Charter of the United Nations, 1945: Article 41 empowers the Security Council to decide measures not involving the use of armed force, including complete or partial interruption of economic relations, which are binding on all member states.
    2. International Emergency Economic Powers Act, 1977: The principal United States statute allowing the President to declare a national emergency and regulate or block transactions with foreign persons.
    3. Iran Sanctions Act, 1996: Originally the Iran and Libya Sanctions Act, it introduced penalties on foreign firms investing in Iran’s energy sector, establishing the secondary sanctions template.
    4. Comprehensive Iran Sanctions, Accountability and Divestment Act, 2010: Widened the reach of energy sector sanctions and brought refined petroleum supply to Iran within their scope.
    5. Countering America’s Adversaries Through Sanctions Act, 2017: Codified sanctions against Iran, Russia and North Korea and limited the President’s discretion to waive them.

    India’s Measures to Manage Sanctions and Energy Risk

    1. Special Rupee Vostro Account framework: A Reserve Bank of India mechanism for invoicing, payment and settlement of international trade in rupees, reducing dependence on third currency settlement.
    2. Chabahar port agreement: A ten year contract signed in May 2024 to operate the Shahid Beheshti terminal, giving India a sea route to Afghanistan and Central Asia that bypasses Pakistan.
    3. International North South Transport Corridor: A multimodal ship, rail and road route linking India to Russia and Central Asia through Iran, shortening transit time against the Suez route.
    4. Strategic Petroleum Reserve: Underground crude caverns at Visakhapatnam, Mangaluru and Padur operated by Indian Strategic Petroleum Reserves Limited to cushion supply interruptions.
    5. Supplier diversification: Term and spot procurement spread across Russian, West Asian, West African and American grades to reduce dependence on any single sanctioned or chokepoint dependent source.

    Key Facts about United States Iran Relations

    1. 1979 Islamic Revolution: Ended the monarchy and was followed by the seizure of the United States embassy in Tehran and the severing of diplomatic relations.
    2. 1984 designation: The United States designated Iran a state sponsor of terrorism, which triggered a standing set of trade and aid restrictions.
    3. Joint Comprehensive Plan of Action, 2015: Concluded in July 2015 between Iran and the P5+1 group, it limited Iran’s enrichment in exchange for sanctions relief.
    4. 2018 withdrawal: The United States withdrew from the agreement in May 2018 and reimposed sanctions under a maximum pressure strategy.
    5. India’s exit from Iranian crude: India ended imports of Iranian crude oil in May 2019 after United States waivers expired.
    6. Strait of Hormuz weight: The strait carries about 20 million barrels of oil a day, 20 percent of global oil and 20 percent of global LNG.

    Back2Basics: Strait of Hormuz

    1. Designation: A maritime chokepoint connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea.
    2. Littoral states: Iran lies on the northern shore and controls seven of the eight islands in the strait, while Oman controls the southern entrance through the Musandam exclave.
    3. External presence: The United States Fifth Fleet, headquartered in Bahrain, acts as the external guarantor of transit through the strait.
    4. Energy weight: It carries the highest concentration of energy flow of any chokepoint in the world.
    5. Comparative chokepoints: The Strait of Malacca carries 23.7 percent of global seaborne trade and 80 percent of China’s energy imports, Bab el Mandeb carries 8.7 percent of global trade as the sole southern gateway to the Suez Canal, and the Suez Canal itself carries 12 percent of global maritime commerce with closure adding 9 to 17 sailing days.

    Challenges in the West Asian Security and Energy Order

    1. Chokepoint dependence with no land alternative: Pipeline bypasses cover only a fraction of the volume that moves by sea. Eg. Closure of the Strait of Hormuz affects 20 million barrels a day, which no existing pipeline network can absorb.
    2. Non state armed actors controlling shorelines: Sea lanes can be closed by groups that hold coastline without holding a state. Eg. The Houthis control the eastern Yemeni shore of Bab el Mandeb in practice.
    3. Proxy networks that survive sanctions on the principal: Financial pressure on a state does not disable the armed groups it funds. Eg. The United States redesignated Hezbollah for service to the Iranian government under the command of the Islamic Revolutionary Guard Corps Quds Force.
    4. Overlapping external guarantors: Multiple outside powers with competing objectives raise the risk of miscalculation. Eg. The United States threatened to strike Oman over its Hormuz talks while relying on Omani mediation with Iran.
    5. Absence of a regional security architecture: There is no equivalent of a regional organisation with dispute settlement authority for the Gulf. Eg. The management of the Strait of Hormuz is being negotiated bilaterally between Iran and Oman rather than through any regional body.
    6. Energy revenue concentration in importing economies: Importing states have limited fiscal room to absorb a price shock. Eg. Every $1 per barrel increase raises India’s oil import bill by up to $2 billion on an annualised basis.
    7. Recognition and legitimacy disputes: Contested political authority complicates any negotiated settlement. Eg. Iran’s own leadership transition was marked by a 40 day commemoration for the former Supreme Leader in August 2026.

    Way Forward

    1. Seek carve outs early rather than after listing: India should engage the United States Treasury on humanitarian, food and connectivity carve outs before the sanctions text is notified.
    2. Protect the Chabahar exemption: Press for the continuation of the project specific exemption that has allowed the Shahid Beheshti terminal to operate, given its Afghanistan and Central Asia connectivity function.
    3. Accelerate non dollar settlement channels: Expand the Special Rupee Vostro Account framework and rupee invoicing so that legitimate trade is not hostage to correspondent banking access.
    4. Diversify the maritime route, not only the supplier: Build term contracts with Atlantic basin and West African producers whose cargoes do not transit Hormuz.
    5. Support de-escalation through the Oman channel: Back a negotiated framework for managing the strait, since reopening it does more for importing economies than any adjustment to sanctions design.
    6. Insulate the corridor investments: Structure International North South Transport Corridor participation through non sanctioned entities and multilateral instruments to limit exposure.
    7. Build reserve depth ahead of escalation: Complete Phase II of the Strategic Petroleum Reserve so that a sanctions driven supply interruption does not translate immediately into a price shock.

    “[2018, GS2, 15] In what ways would the ongoing US-Iran Nuclear Pact Controversy affect the national interest of India? How should India respond to this situation?”

  • Iran war pushes India’s oil & gas import bill up 43%

    Why in the News

    India’s net oil and gas imports rose 43.4 percent in value in April to July of the current financial year, to $57.8 billion from $40.3 billion a year earlier. Import volumes barely moved, so the increase is almost entirely a price effect created by supply tightness and stifled energy flows through the Strait of Hormuz. With 88.3 percent of crude requirement met by imports, India has prioritised supply security over price, and the cost of that choice lands on the trade balance.

    What are net oil and gas imports?

    1. How the figure is built: Net oil and gas imports are arrived at by deducting petroleum product exports from oil, natural gas and petroleum product imports.
    2. Why the deduction matters: India is a net exporter of petroleum products because of its refining capacity, so gross import figures overstate the true external drain.
    3. What it still includes: India also imports some petroleum products, notably liquefied petroleum gas, so the netting does not remove product imports entirely.
    4. Why it is the tracked number: It measures the actual foreign exchange outgo on energy, which is what feeds into the trade balance and the current account.

    What is the Petroleum Planning and Analysis Cell?

    1. What it is: The Petroleum Planning and Analysis Cell (PPAC) is the data and analysis body under the Ministry of Petroleum and Natural Gas. It compiles India’s official import, consumption, production and pricing statistics for petroleum and natural gas.

    What is liquefied natural gas?

    1. What it is: Liquefied natural gas (LNG) is natural gas, primarily methane, cooled to minus 162 degrees C so that it becomes liquid and can be shipped in cryogenic carriers. It must be regasified at a terminal in the importing country before use.
    2. How it is priced: Spot LNG in Asia is priced against the Japan Korea Marker, with Henry Hub and the Title Transfer Facility serving the American and European markets.

    What is liquefied petroleum gas?

    1. What it is: Liquefied petroleum gas (LPG) is propane and butane, produced as a byproduct of oil refining or natural gas processing, and used for domestic cooking, industrial heating and autogas.
    2. How it is priced: It is priced against the Saudi Aramco Contract Price, which is loosely linked to Brent crude.

    Why did the import bill rise 43 percent when volumes barely moved?

    1. Volumes were nearly flat: Oil and LNG imports were only marginally higher in volume terms across April to July.
    2. Crude price did the work: The average landed price of imported crude was about $106 per barrel in April to July, sharply higher than about $68 per barrel in the corresponding period of last year.
    3. Value rose without volume: The crude oil import bill surged by over 56 percent year on year to $63.4 billion even as volumes rose only slightly, to 81.9 million tonnes or about 600 million barrels, from 81.5 million tonnes.
    4. The stated priority: India has been prioritising supply security over price considerations, so it imported at extremely high rates rather than curtail volumes.
    5. Product trade moved the same way: Petroleum product export volumes fell while export value rose, and product import volumes fell faster than product import value, both reflecting high international prices.

    How did each component of the energy trade basket move?

    1. Crude oil imports, volume: 81.9 million tonnes against 81.5 million tonnes a year earlier, a rise of 0.5 percent.
    2. Crude oil imports, value: $63.4 billion against $40.5 billion, a rise of 56.5 percent.
    3. Petroleum product imports, volume: 9.0 million tonnes against 16.4 million tonnes, a fall of 45.1 percent.
    4. Petroleum product imports, value: $5.6 billion against $7.6 billion, a fall of 26.3 percent.
    5. LNG imports, volume: 11,867 million standard cubic metres against 11,269 million standard cubic metres, a rise of 5.3 percent.
    6. LNG imports, value: $5.6 billion against $4.5 billion, a rise of 24.4 percent.
    7. Petroleum product exports, volume: 16.5 million tonnes against 20.1 million tonnes, a fall of 17.9 percent.
    8. Petroleum product exports, value: $16.7 billion against $12.4 billion, a rise of 34.7 percent.
    9. Net oil and gas imports: $57.8 billion against $40.3 billion, a rise of 43.4 percent.

    How exposed is India’s energy basket to the Strait of Hormuz?

    1. Crude dependence: India depends on imports to meet over 88 percent of its crude oil requirement, and its dependence on imported oil for the four months ended July was 88.3 percent, almost flat year on year.
    2. Gas dependence: About half of India’s natural gas consumption is met by imports, brought in as LNG.
    3. Share routed through the strait: Around 40 percent of India’s crude oil imports, 60 percent of its LNG imports and 90 percent of its LPG imports came from West Asia through the strait.
    4. Where the disruption showed: Petroleum product imports declined 45.1 percent in volume to 9.0 million tonnes because supply of major products India imports, such as LPG, was hit by the West Asia conflict.
    5. Why exports fell: India’s petroleum product export volumes fell almost 18 percent year on year to 16.5 million tonnes as domestic fuel supplies were prioritised amid the global supply crunch.

    Why does an oil price shock transmit into the wider economy?

    1. The volume multiplier: India annually imports 1.8 to 2 billion barrels of oil, so every $1 per barrel increase raises the oil import bill by up to $2 billion on an annualised basis.
    2. Share of total imports: Energy imports are a major component of India’s overall imports, so any meaningful increase moves the aggregate import number.
    3. Trade balance and current account: A higher energy bill widens the merchandise trade deficit and feeds directly into the current account deficit.
    4. Inflation channel: Higher landed crude costs pass into transport and freight costs and into the prices of petroleum linked goods.
    5. Exchange rate channel: A larger dollar outgo on energy adds to demand for foreign exchange and weighs on the rupee’s exchange rate.

    Challenges to managing India’s oil and gas import bill

    1. Demand is price inelastic in the short run: Refiners cannot cut crude intake without cutting fuel supply, so a price shock passes straight into the bill. Eg. Crude import volumes rose 0.5 percent even as the crude bill rose 56.5 percent in April to July.
    2. Concentration of LPG sourcing: A single region supplies almost the entire LPG import basket, leaving no substitute route in a disruption. Eg. The West Asian share of India’s LPG imports moves entirely through the Strait of Hormuz, with no second corridor available if the strait closes.
    3. Fixed rupee excise blocks pass through of relief: Central excise duty is levied as a fixed amount per litre rather than as a percentage, so falling crude prices accrue to revenue rather than to consumers. Eg. When Brent fell from $80 to $60 per barrel in early 2025, Delhi petrol fell by only about Rs 2 to 3 per litre.
    4. Strategic reserve cover below international norms: The buffer available to ride out a supply interruption is short of the accepted benchmark. Eg. India’s total crude cover of 74 days sits below the International Energy Agency norm of 90 days of net import cover.
    5. No strategic reserve for gas at all: The gas basket has an operational buffer but no strategic cushion. Eg. India’s LNG storage tanks at regasification terminals give roughly 10 days of operational buffer, with no strategic LNG reserve in existence.
    6. Spot LNG volatility deters utilisation: When spot prices spike, importers switch to coal or fuel oil, stranding regasification capacity. Eg. India’s roughly 42.5 million tonnes per annum of LNG regasification capacity runs at 60 to 65 percent utilisation because switching becomes rational above $15 per MMBtu.
    7. Refinery configuration ties India to sour crude sources: Indian refineries have invested in desulphurisation capacity built around Middle Eastern grades, which limits how fast the basket can be re-sourced. Eg. Most Middle Eastern crude India buys is priced against Dubai and Oman, and Saudi, Iraqi and UAE grades track that benchmark.

    Conclusion

    India’s net oil and gas import bill rose to $57.8 billion in April to July from $40.3 billion a year earlier, a 43.4 percent increase driven almost wholly by price rather than volume. At 88.3 percent crude import dependence and with the West Asian shares of crude, LNG and LPG all routed through the Strait of Hormuz, a chokepoint disruption converts directly into a macroeconomic shock. The figures are provisional data from the Petroleum Planning and Analysis Cell, and the next reading will show whether the price effect persists once Hormuz flows normalise.

    About India’s Crude Oil Procurement and Pricing

    1. Who buys: State owned refiners account for 73 percent of India’s procurement through Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited, with private refiners Reliance Industries and Nayara Energy accounting for 27 percent.
    2. How buying works: Each refiner independently forecasts demand two to three months ahead and negotiates bilaterally with suppliers such as Rosneft, Saudi Aramco and Iraq’s State Organisation for Marketing of Oil.
    3. How it is priced: All contracts are priced as Brent plus or minus a negotiated discount, and Middle Eastern grades track the Dubai and Oman benchmark.
    4. Where crude lands: Crude is received by tanker at Paradip, Mumbai, Kochi and Vadinar.
    5. Quality determines price: Sulphur content and American Petroleum Institute (API) gravity, the measure of a crude’s density, together determine refining cost and product yield, with sweet crude defined as sulphur content below 0.5 percent and sour crude requiring additional processing.

    Regulatory Framework Governing India’s Petroleum and Natural Gas Sector

    1. Ministry of Petroleum and Natural Gas: The apex policy body, which sets the framework for exploration, refining, marketing, pricing and strategic reserves, awards production sharing contracts, and exercises ownership over the public sector oil companies.
    2. Petroleum and Natural Gas Regulatory Board: Regulates refining, processing, storage, transportation, distribution, marketing and sale of petroleum products and natural gas, authorises City Gas Distribution networks, and determines pipeline tariffs on a common carrier basis.
    3. Directorate General of Hydrocarbons: The technical regulator for upstream exploration and production, which manages block allocations, monitors production sharing contracts, verifies reserves, approves field development plans and maintains the National Data Repository.
    4. Oil Industry Development Board: Funded by a statutory cess on domestic crude production, it finances oil industry development and wholly owns Indian Strategic Petroleum Reserves Limited, which operates the underground reserve caverns.
    5. Deregulated retail pricing: Petrol was deregulated in 2010 and diesel in 2014, so the Ministry does not directly set retail pump prices.

    Government Initiatives in the Petroleum and Gas Sector

    1. Strategic Petroleum Reserve: Phase I comprises 5.33 million tonnes of crude across three underground rock caverns at Visakhapatnam, Mangaluru and Padur, with a Phase II commercial cum strategic expansion under public private partnership models.
    2. Hydrocarbon Exploration and Licensing Policy, 2016: Replaced the earlier New Exploration Licensing Policy with a uniform licence covering all hydrocarbons, open acreage licensing and revenue sharing in place of production sharing.
    3. Administered Price Mechanism for domestic gas: The Ministry sets the administered price for domestic natural gas indexed monthly at 10 percent of the Indian Crude Basket price, following the Kirit Parikh Committee recommendations, subject to a floor and ceiling for legacy fields.
    4. Direct Benefit Transfer for LPG: LPG is subsidised through direct transfer, with Rs 300 per cylinder for Ujjwala beneficiaries.
    5. City Gas Distribution expansion: India’s city gas distribution network now covers 98 cities, supplying compressed natural gas for vehicles and piped natural gas for households from a mix of domestic gas and regasified LNG.

    Key Facts about Global Oil Benchmarks and India’s Reserves

    1. Brent crude: North Sea origin, 38 API and 0.37 percent sulphur, traded on the Intercontinental Exchange in London, accounting for 75 to 80 percent of global oil trade and serving as the reference against which all other grades are a premium or discount.
    2. West Texas Intermediate: Cushing, Oklahoma origin, 39.6 API and 0.24 percent sulphur, traded on the New York Mercantile Exchange, accounting for 15 to 20 percent of global trade and typically Brent minus $0 to $5 per barrel.
    3. Dubai and Oman: Persian Gulf origin, 31 to 33 API and 1.0 to 2.0 percent sulphur, traded on the Dubai Mercantile Exchange, accounting for 5 to 10 percent of global trade and typically Brent minus $5 to $15 per barrel.
    4. Why OPEC does not set the price: OPEC controls 40 percent of production but Brent sets 75 to 80 percent of global prices, since markets price oil hundreds of thousands of times a day while OPEC announces targets once and has no enforcement mechanism against quota cheating.
    5. Reserve position: India’s total crude cover is 74 days, made up of 9.5 days from the Strategic Petroleum Reserve and 64.5 days of oil marketing company commercial stocks, against the International Energy Agency norm of 90 days.
    6. LPG and LNG cover: LPG cavern capacity of about 140,000 tonnes gives roughly 22 days of cover against consumption of about 3 million tonnes a month, while LNG has about 10 days of operational buffer and no strategic reserve.
    7. Volatility of spot gas: The Japan Korea Marker swung from $3 per MMBtu in mid 2020 to $70 per MMBtu in August 2022.
    8. Committee recommendation on storage: The Parliamentary Standing Committee on Petroleum in December 2023 recommended equipping refineries with two to three days of smaller strategic storage at five to six additional locations, which could add 15 to 20 days of capacity.

    Back2Basics: Strait of Hormuz

    1. Location: A narrow sea passage connecting the Persian Gulf to the Gulf of Oman and onward to the Arabian Sea.
    2. Control: Iran controls the northern shore and seven of the eight islands in the strait, Oman controls the southern entrance, and the United States Fifth Fleet acts as the external guarantor of transit.
    3. Oil traffic: About 20 million barrels a day pass through it, amounting to 20 percent of global oil movement.
    4. Gas traffic: It carries 20 percent of global LNG trade, which makes closure hit gas hardest given Qatar’s dominance in LNG supply.
    5. Strategic character: It carries the highest concentration of energy flow of any maritime chokepoint in the world.

    Challenges in India’s Energy Security

    1. Stagnant domestic crude production: Falling domestic output pushes import dependence upward regardless of demand. Eg. Cess collections of the Oil Industry Development Board have declined in real terms because domestic crude production has stagnated.
    2. Regulatory conflict of interest: The same ministry sets the pricing environment and owns the companies whose losses that environment creates. Eg. The Ministry of Petroleum and Natural Gas simultaneously regulates the sector and holds ownership rights over Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited.
    3. Gaps in the regulatory perimeter: No single regulator covers the full chain from wellhead to pump. Eg. The Petroleum and Natural Gas Regulatory Board has no jurisdiction over upstream exploration, wellhead gas pricing or LPG retail pricing.
    4. Upstream reservoir disputes slow output: Technical disputes between operators delay field development and carry royalty implications. Eg. The gas migration dispute between ONGC and Reliance Industries in the Krishna Godavari basin required adjudication by the Directorate General of Hydrocarbons.
    5. Chokepoint concentration across all three fuels: Crude, LPG and LNG share the same maritime chokepoint, so diversification of supplier does not diversify route. Eg. LPG moves with crude tankers or on dedicated carriers through the same Strait of Hormuz.
    6. Tax structure blunts price signals: Taxes form roughly 60 percent of the retail pump price, weakening the link between global prices and consumer behaviour. Eg. Delhi petrol at Rs 96 to 97 per litre carried Rs 13 of central excise and Rs 15 to 18 of State value added tax before the crisis.
    7. Storage build out lags the exposure: Reserve expansion depends on capital and cavern geology, both of which take years. Eg. Phase II of the Strategic Petroleum Reserve is being pursued through public private partnership because budgetary funding alone has not delivered the capacity.

    Way Forward

    1. Complete Phase II of the Strategic Petroleum Reserve: Bring the commercial cum strategic caverns on stream to move total cover towards the 90 day International Energy Agency norm.
    2. Adopt the refinery level storage recommendation: Implement the Parliamentary Standing Committee’s December 2023 proposal on refinery level storage, which remains a recommendation rather than sanctioned capacity.
    3. Create a strategic gas reserve: Extend the reserve architecture to LNG, which today has only an operational buffer at regasification terminals.
    4. Shift excise from a fixed levy to an ad valorem levy: This would let consumers receive part of the benefit when crude prices fall, restoring the price signal.
    5. Diversify sourcing away from a single chokepoint: Expand term contracts with Atlantic basin, West African and North American suppliers so that a Hormuz disruption does not strike crude, LNG and LPG supply simultaneously.
    6. Raise domestic production through open acreage: Accelerate block awards under the Hydrocarbon Exploration and Licensing Policy to arrest the decline in domestic output.
    7. Separate ownership from regulation: Move ownership of the public sector oil companies out of the administering ministry so that pricing policy is not set by their shareholder.

    “[2025, GS2, 15] “Energy security constitutes the dominant kingpin of India’s foreign policy, and is linked with India’s overarching influence in Middle Eastern countries.” How would you integrate energy security with India’s foreign policy trajectories in the coming years?”

  • India, Japan sign maritime security pact to deepen defence cooperation

    Why in the News

    India and Japan signed a Memorandum of Arrangement on Maritime Security Cooperation on 20 August 2026, after bilateral talks between the two Defence Ministers in New Delhi. The arrangement converts a relationship built on periodic exercises into a standing operational framework covering maritime domain awareness, logistics access and ship repair. It also opens naval shipbuilding and design to joint development, moving the partnership from equipment transfer towards co-production.

    What is the Memorandum of Arrangement on Maritime Security Cooperation?

    1. Nature of the instrument: A Memorandum of Arrangement is a signed framework document recording the agreed areas of cooperation between two defence establishments. It creates a standing basis for activity without the binding force of a treaty.
    2. Parties it links: The arrangement connects the Indian Navy with the Japan Maritime Self-Defense Force.

    What is Maritime Domain Awareness?

    1. Definition: Maritime Domain Awareness (MDA) is the effective understanding of everything in the maritime space that affects security, safety, economy or the environment. It rests on tracking, identifying and sharing information on vessel movements.
    2. Why it is built with partners: No single navy can watch an entire ocean, so MDA depends on pooling radar, satellite and automatic identification system feeds across countries.

    What are Sea Lines of Communication?

    1. Definition: Sea Lines of Communication (SLOCs) are the primary maritime routes along which trade, energy and naval forces move between ports. Disruption of a SLOC affects supply rather than territory.
    2. Why they are defended jointly: A SLOC crosses several jurisdictions and the high seas, so its protection depends on coordinated patrolling and port access rather than any one state’s territorial control.

    What is the UNICORN antenna system?

    1. What it is: UNICORN is a Japanese shipborne integrated communications antenna system that houses multiple antennas inside a single composite mast. It lowers a warship’s radar cross section by removing external antenna clutter.

    What is ATLA?

    1. Full form and role: The Acquisition, Technology and Logistics Agency (ATLA) is Japan’s defence procurement and technology development body under its Ministry of Defense. It is the counterpart to India’s Defence Research and Development Organisation (DRDO) for joint technology work.

    What is the Japan India Special Strategic and Global Partnership?

    1. The label: It is the highest tier of India’s bilateral relationships, adopted in 2014, under which defence, economic and technology cooperation between the two countries is organised.

    What does the arrangement operationally commit the two navies to?

    1. Information sharing: The two sides agreed to deepen operational cooperation through information sharing, naval exercises, ship repair and logistics support.
    2. Maritime domain awareness and rescue: The framework covers maritime domain awareness, search and rescue, and humanitarian assistance and disaster relief between the Japan Maritime Self-Defense Force and the Indian Navy.
    3. Protection of sea lanes: The Ministers agreed to strengthen coordination for the protection of Sea Lines of Communications through reciprocal naval visits, joint exercises, and personnel and subject matter expert exchanges.
    4. Logistics and port access: Logistical support was extended to include access to ports and maintenance and repair facilities.
    5. Mine countermeasures: The two countries will move towards greater cooperation in mine countermeasures.

    How does the partnership move beyond equipment transfer into co-development?

    1. Naval shipbuilding and design: The two sides will explore joint development in naval shipbuilding and design, leveraging Japan’s technological expertise and India’s production capabilities.
    2. Make in India framework: They will discuss greater use of India’s shipbuilding capabilities under the Make in India framework.
    3. Reciprocal ship repair: Both countries will work towards reciprocal provision of ship repair facilities.
    4. First equipment marker: The shipborne UNICORN integrated communications antenna system was identified as the symbol of the growing defence equipment partnership, with a commitment to its early realisation.
    5. Research and industry channels: DRDO and ATLA will deepen cooperation in advanced defence technologies, and a Defence Industry Forum will be convened.

    What does the expansion of joint exercises signal about interoperability?

    1. Existing exercise set: The Ministers welcomed the expansion of bilateral military exercises, including Dharma Guardian and the Japan India Maritime Exercise (JIMEX), the two navies’ bilateral maritime exercise.
    2. Veer Guardian 26: The planned Veer Guardian 26 air exercise will see Japanese fighter aircraft participate in an exercise in India for the first time.
    3. Greater complexity: The two sides agreed to enhance the complexity of bilateral exercises rather than repeat existing formats.
    4. Unmanned systems and short notice drills: They agreed to integrate unmanned systems and to explore short notice joint exercises, which test readiness rather than choreography.
    5. Special forces and theatre commands: The two countries will promote exchanges between their Special Operations Forces and pursue cooperation with India’s integrated theatre commands after their establishment.

    What institutional machinery will carry the cooperation forward?

    1. A standing Working Group: The two sides agreed to establish a Working Group headed at the Director General and Joint Secretary level.
    2. Domains it coordinates: The Working Group spans operational, intelligence, equipment, technology and industrial domains.
    3. Industry channel: A Defence Industry Forum will be convened alongside the research level cooperation.
    4. Ministerial channel: The two sides agreed to accelerate discussions for the fourth India Japan 2+2 Foreign and Defence Ministerial Dialogue, to be held in Tokyo this year.
    5. Political framing: Both reaffirmed their commitment to deepen defence cooperation under the Japan India Special Strategic and Global Partnership and to work towards a free and open Indo Pacific amid heightened global tensions.

    Challenges to the India Japan maritime security arrangement

    1. Japan’s own legal constraints on transfers: Article 9 of Japan’s 1947 Constitution and the Three Principles on Transfer of Defence Equipment and Technology limit what Tokyo can sell or co-develop abroad. Eg. The US 2 amphibious aircraft deal, negotiated with India for over a decade, lapsed without an order.
    2. Cost and schedule risk in Japanese technology tie ups: High specification Japanese systems carry costs that Indian procurement budgets absorb poorly. Eg. The Mumbai Ahmedabad High Speed Rail Project, built on Japanese technology and a Japanese loan, slipped from its 2022 target to 2027 or later.
    3. Thin use of the existing logistics pact: Reciprocal access agreements deliver value only when used outside exercise windows. Eg. The Acquisition and Cross Servicing Agreement signed in September 2020 has been used largely around scheduled exercises rather than for continuous deployments.
    4. Naval balance shifting faster than the partnership: The regional force ratio is moving against both partners while the arrangement is still being institutionalised. Eg. The People’s Liberation Army Navy crossed 340 battle force ships by 2021, overtaking the United States fleet in numbers.
    5. Indian yard capacity limits co-production: Joint naval shipbuilding assumes yard capacity India has not yet built. Eg. India’s share of global shipbuilding is under 1 percent, in a sector dominated by China, South Korea and Japan.
    6. Incomplete theatre command reform: Cooperation with India’s integrated theatre commands is conditional on those commands existing. Eg. The Inter Services Organisation (Command, Control and Discipline) Act, 2023 created the legal basis for joint commands, but no theatre command had been stood up when the arrangement was signed.
    7. Chokepoint risks a bilateral pact cannot fix: Sea lane disruption often originates from non state actors outside either navy’s operating area. Eg. Houthi attacks in the Red Sea forced shipping to reroute around the Cape of Good Hope, adding weeks to voyages.

    Conclusion

    India and Japan have moved from periodic exercises to a signed operational framework covering maritime domain awareness, logistics access and ship repair, with naval shipbuilding and design opened to joint development. The arrangement’s institutional carrier is a Working Group at Director General and Joint Secretary level spanning operational, intelligence, equipment, technology and industrial domains. The next milestone is the fourth India Japan 2+2 Foreign and Defence Ministerial Dialogue, to be held in Tokyo this year, with the Veer Guardian 26 air exercise bringing Japanese fighter aircraft to India for the first time.

    “[2019, GS2, 10] ‘The time has come for India and Japan to build a strong contemporary relationship, one involving global and strategic partnership that will have a great significance for Asia and the world as a whole.’ Comment.”

  • Centre set to expand mechanised sanitation scheme to rural India

    Why in the News

    The Social Justice Ministry has moved a proposal to extend the National Action for Mechanised Sanitation Ecosystem scheme from towns and cities to rural parts of the country. The scheme profiles sewer and septic tank workers as the route to its benefits, and coverage is being widened ahead of a delivery channel that approves capital subsidy for a small fraction of those profiled.

    Components of NAMASTE

    1. Profiling and identification: Sanitation workers are enumerated at camps run by urban local bodies, and that profile is the entry point to every other component of the scheme.
    2. Occupational safety: Profiled workers are given safety training and personal protective equipment for the work they already perform.
    3. Capital subsidy for self employment: A profiled worker or a Private Sanitation Service Organisation may apply for a capital subsidy to buy mechanised equipment and set up a sanitation enterprise.
    4. Emergency Response Sanitation Units: Urban local bodies are supported to set up standing units equipped with suction and jetting machines, so that a sewer or septic tank is cleaned by machine instead of by human entry.

    What is manual scavenging?

    1. Manual scavenging: Manual scavenging is the manual handling, carrying or disposing of human excreta from an insanitary latrine, an open drain, a pit or a railway track. The Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013 prohibits both the practice and the employment of any person for it.

    Who is a sewer and septic tank worker (SSW)?

    1. Sewer and septic tank worker: A sewer and septic tank worker (SSW) is a person engaged in cleaning sewer lines, manholes and septic tanks, whether employed directly or engaged through a contractor. The category is distinct from manual scavenging in law, since the work is lawful when performed with mechanised equipment and prescribed safety gear.

    What is a Private Sanitation Service Organisation (PSSO)?

    1. Private Sanitation Service Organisation: A Private Sanitation Service Organisation (PSSO) is a private entity providing mechanised sanitation services that can propose projects for capital subsidy under the scheme. It is one of two proposal routes, the other being an application by an individual worker.

    What is the Safai Udyami Yojana?

    1. Safai Udyami Yojana: The Safai Udyami Yojana is the self employment component under which sewer and septic tank workers receive capital subsidy to set up their own sanitation enterprise. It is one of the two self employment routes in which the National Commission for Scheduled Castes has flagged rejections.

    What does the proposed expansion change?

    1. Geographic extension: The proposal takes the scheme’s scope from towns and cities to rural parts of the country for the first time.
    2. New worker categories: Coverage will be widened to include drain cleaners, and workers in sewage treatment plants and faecal sludge treatment plants.
    3. Outlay and horizon: The Ministry has proposed around ₹498.73 crore for the expanded scheme, to be spent from this fiscal year to 2030-31.
    4. Second widening of scope: The scheme initially covered only sewer and septic tank workers and was first expanded to include waste pickers, so the rural extension is the second enlargement.
    5. Original aim retained: The scheme was started in 2023-24 with the aim of eradicating sewer and septic tank deaths, and the expansion does not alter that objective.

    Why has the scheme’s delivery record become the central concern?

    1. Profiling against approval: 90,915 sewer and septic tank workers have been profiled across the country, and only 810 have been approved for capital subsidies.
    2. Approval against disbursal: Of the 810 approved, 147 had actually received their funds as on 31 March 2026.
    3. Subsidy covers only part of the cost: The capital subsidy meets up to 50 per cent of total project cost, so an approved worker still has to raise the balance before the enterprise can start.
    4. Manual scavengers identified: Only 2,652 projects have been approved against the 58,000 manual scavengers identified under the scheme.
    5. Both routes inside the count: The 2,652 approvals include projects proposed by Private Sanitation Service Organisations as well as by individuals, so the figure is not a count of individual entrepreneurs alone.
    6. Waste picker coverage: 1.3 lakh waste pickers have been profiled alongside the sewer and septic tank workers, per the Ministry’s annual report for 2025-26.

    What has the National Commission for Scheduled Castes flagged?

    1. Repeated correspondence: The Commission has written repeatedly to the Social Justice Ministry since last year on the continued rejection of applications under the self employment and capital subsidy components.
    2. Rejections identified as the cause: It has held that one reason for the low number of approved projects is the high rate of rejections.
    3. Rejections across every part: It has noted rejections under each part of the capital subsidy component, and asked that these be examined.
    4. The August 2025 letter: That letter flagged rejections in the self employment components, both in the Safai Udyami Yojana and in the component for Private Sanitation Service Organisations.
    5. Source of the mandate: The Commission acts under Article 338, which empowers it to investigate and monitor safeguards for the Scheduled Castes and to inquire into specific complaints.

    Why do sewer and septic tank deaths persist under a statutory prohibition?

    1. Deaths on record: 498 people died across the country while engaged in the hazardous cleaning of sewers and septic tanks from 2019 to June 2026, per the Social Justice Ministry’s reply to Parliament in August 2026.
    2. Enforcement rests with the employer: The Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013 bars hazardous cleaning without protective gear, and the duty to enforce falls on local authorities who are frequently the employers themselves.
    3. Contracting layer: Sewer cleaning is routinely outsourced, which separates the municipal principal from the worker who enters the tank.
    4. Rehabilitation lag: A worker whose capital subsidy application is rejected returns to the same work, so profiling without disbursal leaves the occupational risk untouched.
    5. Rural gap unmeasured: Rural areas have been outside the scheme until this proposal, so deaths in village septic tanks have had no dedicated scheme response.

    Challenges to NAMASTE

    1. Rejection concentrated in the subsidy pipeline: The bottleneck sits between profiling and approval rather than between approval and identification. Eg. The National Commission for Scheduled Castes has recorded rejections under every part of the capital subsidy component and has asked the Ministry to explain them.
    2. Balance financing after subsidy: The worker must raise the uncovered share of project cost as a loan against negligible collateral. Eg. National Safai Karamcharis Finance and Development Corporation term loans routed through State channelising agencies have carried low utilisation and weak recovery.
    3. Urban local body capacity: Emergency Response Sanitation Units need trained crews and maintained machines, which small municipalities cannot sustain. Eg. The Safaimitra Suraksha Challenge launched in 2020 enrolled 246 cities to become sewer death free, and participation was concentrated in large municipal corporations rather than small towns.
    4. Contractor liability gap: Outsourcing lets the principal employer distance itself from a death inside a manhole. Eg. In Delhi Jal Board v National Campaign for Dignity and Rights of Sewerage and Allied Workers (2011), the Supreme Court held that the principal employer cannot escape liability by engaging contractors for sewer cleaning.
    5. No rural delivery cadre: Rural sanitation is administered by gram panchayats, which have no wing equivalent to an urban local body’s sanitation department. Eg. Faecal sludge emptying in villages is done by informal private operators outside any municipal register, which leaves no employer to profile a worker against.
    6. Monitoring by profiling count: Progress is reported as workers profiled rather than as workers rehabilitated, so the headline number rises without entitlement delivery following it. Eg. The Ministry’s annual report for 2025-26 leads with profiling totals for sewer and septic tank workers and waste pickers, and not with the count of workers placed in an alternative livelihood.

    Conclusion

    The Social Justice Ministry has proposed extending the National Action for Mechanised Sanitation Ecosystem scheme to rural India, to drain cleaners and to treatment plant workers. The proposal is at the stage of a Ministry submission and has not yet been notified, and the next milestone is approval of the expanded scheme and its outlay. The delivery record it inherits is a profiling count far ahead of the number of capital subsidy cases funded, alongside 498 sewer and septic tank deaths between 2019 and June 2026.

    “[2016] ‘Rashtriya Garima Abhiyaan’ is a national campaign to

    (a) rehabilitate the homeless and destitute persons and provide them with suitable sources of livelihood

    (b) release the sex workers from their practice and provide them with alternative sources of livelihood

    (c) eradicate the practice of manual scavenging and rehabilitate the manual scavengers

    (d) release the bonded labourers from their bondage and rehabilitate them

  • Centre’s fiscal outlook faces geopolitical, revenue risks

    Question (2025, GS2): “Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India?”
    Linkage: The Centre’s reliance on new cesses and duties to meet its budget goals, rather than expanding the core tax base itself, directly impacts fiscal federalism. Cesses and surcharges do not go into the divisible pool shared with states, altering Centre-State financial dynamics.

    Mentor comment

    Controller General of Accounts data show the Centre’s gross tax revenues growing only 3.7% in the first quarter of 2026-27, with Goods and Services Tax collections contracting and Union excise duties falling more than a fifth. The fiscal arithmetic is being held near its budgeted position by a larger nominal Gross Domestic Product denominator, by non-tax receipts led by the Reserve Bank of India dividend, and by new cesses and duties, rather than by the tax base itself.

    What is the divisible pool of central taxes?

    1. About: The divisible pool is that part of the Centre’s gross tax revenue which is shared with the States, arrived at after deducting collection costs, cesses and surcharges.
    2. The States’ share: The Sixteenth Finance Commission retained the share of States in the divisible pool of central taxes at 41%.
    3. From gross to net: The Centre’s net tax revenue is what remains after devolution, and a factor of 65% of gross tax revenue reflects the ratio of net to gross tax revenues in 2025-26 and in the 2026-27 Budget Estimates.
    4. Why cesses matter to it: A cess levied for a specified purpose sits outside the divisible pool, so the same rupee raised through a cess rather than a tax does not reach the States as devolution.

    What is tax buoyancy?

    1. About: Tax buoyancy measures how far tax revenue grows for each unit of growth in nominal Gross Domestic Product, capturing both the natural response of the tax base and the effect of policy changes.
    2. What zero buoyancy means: Personal income tax revenue growth in 2025-26 was only 0.037%, which implies a buoyancy of zero, so the tax raised nothing extra despite the economy expanding.

    What is the Implicit Price Deflator?

    1. About: The Implicit Price Deflator is the ratio of nominal to real Gross Domestic Product, and it captures the average price change across everything the economy produces rather than a fixed consumption basket.
    2. How it is used here: An Implicit Price Deflator based inflation of 5% to 5.5% is what converts an expected real growth of about 7% into nominal Gross Domestic Product growth of 12.5% to 13% in 2026-27.

    What is a cess?

    1. About: A cess is a levy imposed for a specified purpose, collected over and above the base tax, and its proceeds are meant to be applied only to that stated purpose.
    2. Its fiscal effect: Cess proceeds are not shareable with the States, so a shift from taxes to cesses reduces the shareable pool while leaving gross collections unchanged.

    Why did the Centre’s gross tax revenues grow only 3.7%?

    1. Two large taxes were rationalised: Personal income tax and Goods and Services Tax were both subjected to substantive modifications in 2025-26, with extensive rate rationalisation in both cases and a substantive rate reduction in the case of the Goods and Services Tax.
    2. The stated expectation: Those reforms were expected to entail an initial revenue sacrifice, with subsequent expansion of the tax base offsetting the loss over time.
    3. The carry-forward into this year: Personal income tax showed growth of 6.8% in the first quarter of 2026-27, and Goods and Services Tax revenues contracted 11%.
    4. The 2025-26 baseline: Goods and Services Tax revenue growth for the second half of 2025-26 was 4.67%, and personal income tax growth over the same year was effectively nil.
    5. The excise duty cut: As retail fuel prices rose on the West Asian crisis, the government reduced excise duties to ease the burden on consumers, and revenue from Union excise duties contracted 22.4% in the first quarter of 2026-27.

    What three remedial measures has the government taken?

    1. A new cess replacing a discontinued one: A Health Security and National Security Cess was introduced with effect from 1 February 2026, even as the Goods and Services Tax Compensation Cess was discontinued.
    2. A higher windfall tax on fuel exports: The windfall tax on exports of diesel, petrol and aviation turbine fuel was increased with effect from 3 August 2026.
    3. Higher import duties on precious metals: Import duty rates were raised on gold and silver bullion and on other specific precious metal articles, sweepings and clad metals.

    How does a higher nominal GDP change the fiscal picture?

    1. The budgeted assumption is being exceeded: The Budget assumed nominal Gross Domestic Product growth of 10.04%, well short of the growth now expected for the year.
    2. The consistency check: That deflator range is consistent with Consumer Price Index inflation at 3.9% and Wholesale Price Index inflation at 9.3% in the first quarter of 2026-27.
    3. The level, not the growth rate, is lower: On the 2022-23 base series, nominal Gross Domestic Product is estimated at Rs 391 lakh crore, below the budgeted level of Rs 393 lakh crore.
    4. The net effect on revenue: Taken together, estimated gross tax revenue would be realised or fall short by a small margin.

    What has happened to transfers to the States?

    1. A sharp contraction in the first quarter: Tax devolution to the States contracted 19.5% in the first quarter of 2026-27, with an expectation of higher assignment of central tax revenues in subsequent months.
    2. The shareable pool narrows at the margin: The introduction of the non-shareable Health Security and National Security Cess produces a marginal reduction in the shareable pool, though some part of its revenues may reach the States as grants outside the Finance Commission route.
    3. Finance Commission grants are budgeted lower: Based on the Sixteenth Finance Commission’s recommendation, Finance Commission grants for the States are budgeted to contract by Rs 23,556 crore in 2026-27.
    4. The devolution share itself is unchanged: The contraction is in the amounts flowing, not in the entitlement, since the States’ share in the divisible pool stays at 41%.

    What is holding the revenue account together?

    1. The central bank dividend: The Reserve Bank of India transferred dividends to the Centre in May 2026, so 77% of the budgeted dividends and profits for the full year were already covered in the first three months.
    2. Weight of non-tax revenue: The Centre’s non-tax revenues contributed 37% of its net revenue receipts in the first quarter of 2026-27.
    3. Other receipts on track: The budgeted amounts for non-tax and non-debt capital receipts are expected to be realised.
    4. Subsidy pressure on the other side: Major subsidies had to be increased 37.4% in the quarter because of the unexpected rise in global crude oil prices.
    5. Revenue expenditure held down: Growth in revenue expenditure was contained at 7.4% over the same quarter.
    6. Capital expenditure front-loaded: Capital expenditure grew 23.7% in the first quarter of 2026-27, against a contraction of 23.3% in the fourth quarter of 2025-26.
    7. The full-year subsidy overshoot: Extrapolating first-quarter subsidies to the year, realised subsidies are expected to exceed the budgeted amount by about Rs 50,000 crore.

    Where do the deficit numbers stand, and what could push them off track?

    1. First-quarter deficit position: The fiscal deficit accounted for 18.2% of the annual budgeted magnitude in the first quarter, and the corresponding share of the revenue deficit was 0.4%.
    2. Why the revenue account looks strong: The revenue account balance is held up mainly by the contribution of non-debt receipts, not by tax collections.
    3. The full-year estimates: Fiscal deficit calculated as the increment in debt is estimated at Rs 18.16 lakh crore, giving a fiscal deficit-to-Gross Domestic Product ratio of 4.6% on the new series, with the debt-to-Gross Domestic Product ratio at 55.8%.
    4. Three named slippage risks: A shortfall in tax revenues, an unbudgeted increase in revenue expenditure arising from additional subsidies, and a slightly higher external debt amid sustained pressure on the Indian rupee.
    5. The overriding risk: An escalation of the war in West Asia would deliver a major jolt to the economy and to central finances.
    6. The unwound measure: The reduction in excise duty on fuel must be restored at some suitable time, since it is a temporary relief carried at a permanent revenue cost.

    What challenges does the Centre’s fiscal consolidation path face?

    1. Rate rationalisation without base expansion: A tax cut delivers the revenue sacrifice immediately and the base expansion only over an uncertain horizon. Eg. Personal income tax delivered a buoyancy of zero in 2025-26, the year its rationalisation took effect.
    2. Subsidy exposure to imported energy prices: Subsidy outgo is set by global crude prices rather than by a domestic policy decision. Eg. Major subsidies rose 37.4% in the first quarter of 2026-27, putting the full year on course to overshoot its budgeted provision.
    3. Reliance on a single large non-tax transfer: A dividend from the central bank is a discretionary, year-specific receipt that cannot be assumed to repeat. Eg. 77% of the full year’s budgeted dividends and profits were covered in the first three months of 2026-27.
    4. Revenue relief that is politically hard to withdraw: An excise duty cut given when fuel prices rise is difficult to reverse when they fall. Eg. Union excise duties contracted 22.4% in the first quarter of 2026-27 following the cut.
    5. Deficit ratios improved by a denominator effect: A higher nominal Gross Domestic Product lowers the deficit ratio without any change in borrowing. Eg. Nominal growth running ahead of the budgeted 10.04% flatters the 4.6% fiscal deficit ratio.
    6. Interest burden crowding out capital spending: A debt-to-Gross Domestic Product ratio near 56% commits a large share of revenue receipts to interest before any programme is funded. Eg. Capital expenditure was front-loaded 23.7% in the first quarter after contracting 23.3% in the preceding quarter, a pattern that shifts rather than raises the annual total.
    7. Exchange rate pressure raising external liabilities: A weaker rupee raises the rupee cost of external debt service without any new borrowing. Eg. Sustained pressure on the rupee is named as one of the three sources of possible slippage from budgeted outcomes.

    Conclusion

    The Centre’s 2026-27 outcomes are likely to stay close to budgeted levels, and the reasons are a larger nominal Gross Domestic Product, front-loaded non-tax receipts and three new revenue measures, not a tax base that is delivering. Gross tax revenue growing at barely a third of the pace of nominal output is the number that has to change, since the rate rationalisations of 2025-26 were justified on the promise of base expansion that has not yet appeared. The immediate unresolved decisions are when the excise duty cut on fuel is restored and how far an escalation in West Asia pushes subsidies beyond the overshoot already projected.

    What is Fiscal Federalism?

    1. About: Fiscal federalism is the division of taxation powers, expenditure responsibilities and transfer arrangements between the Union and the States in a federal system.
    2. Rationale: Revenue-raising powers concentrate at the Centre because major tax bases are mobile, while expenditure responsibilities concentrate at the States because services are delivered locally. Transfers exist to close that gap.
    3. Vertical fiscal imbalance: The mismatch between the Union’s revenue capacity and the States’ expenditure responsibilities, addressed through devolution of a share of central taxes.
    4. Horizontal fiscal imbalance: The mismatch across States in revenue capacity and expenditure need, addressed through the Finance Commission’s distribution formula among States.
    5. Third tier imbalance: The mismatch between the functions devolved to panchayats and municipalities and the revenue sources available to them, addressed through State Finance Commissions and grants.
    6. The transfer instruments: Tax devolution from the divisible pool, Finance Commission grants, and centrally sponsored schemes with a matching State contribution.

    Key Concerns Regarding Fiscal Federalism

    1. Shrinking divisible pool through cesses and surcharges: Levies outside the divisible pool raise Union revenue without expanding what is shared, so the effective transfer falls below the headline share.
    2. Erosion of State taxation autonomy under the Goods and Services Tax: States surrendered independent rate-setting on most indirect taxes, and rate decisions now require a collective decision in a council.
    3. Weak third tier finances: Local bodies depend on transfers rather than own revenue, and State Finance Commissions are constituted irregularly in several States.
    4. Contested horizontal distribution criteria: Weighting population, income distance and demographic performance sets States that have controlled population growth against those with larger populations.
    5. Conditionality attached to central transfers: Centrally sponsored schemes tie State spending to Union priorities, reducing the discretion that devolution is meant to confer.
    6. Off-budget and contingent liabilities: Borrowing routed through State-owned entities and guarantees sits outside the headline deficit at both levels, obscuring the true fiscal position.

    Constitutional Framework Governing Union Finances

    1. Article 265: No tax shall be levied or collected except by authority of law.
    2. Article 266: Establishes the Consolidated Fund and the Public Account of India and of each State.
    3. Article 267: Provides for the Contingency Fund of India, placed at the disposal of the President for unforeseen expenditure.
    4. Article 112: Requires the annual financial statement of estimated receipts and expenditure to be laid before Parliament.
    5. Article 246 and the Seventh Schedule: Distribute legislative and taxation powers between the Union and the States through the Union, State and Concurrent Lists.
    6. Article 246A: Confers concurrent power on Parliament and State legislatures to make laws on the Goods and Services Tax.
    7. Article 269A: Provides for the levy and collection of the Goods and Services Tax on inter-State supply and its apportionment between the Union and the States.
    8. Article 270: Provides for the distribution of taxes levied and collected by the Union between the Union and the States, and excludes cesses and surcharges from that distribution.
    9. Article 271: Empowers Parliament to levy a surcharge on specified taxes for the purposes of the Union, the proceeds of which accrue wholly to the Union.
    10. Article 275: Provides for grants-in-aid from the Union to States in need of assistance.
    11. Article 279A: Provides for the constitution of the Goods and Services Tax Council.
    12. Article 280: Provides for the constitution of a Finance Commission every fifth year to recommend the distribution of taxes and the principles governing grants-in-aid.
    13. Article 282: Permits the Union or a State to make any grant for any public purpose, the provision under which centrally sponsored schemes are funded.
    14. Article 292 and Article 293: Govern borrowing by the Union and by the States, with State borrowing subject to Union consent where the State is indebted to the Union.
    15. Article 360: Provides for a proclamation of financial emergency.

    Laws Governing Government Budgeting in India

    1. Fiscal Responsibility and Budget Management Act, 2003: Requires the Centre to limit the fiscal deficit and to lay medium-term fiscal policy statements before Parliament.
    2. Amended in 2018 to shift the primary anchor from the revenue deficit to a debt-to-Gross Domestic Product target, with an escape clause for specified circumstances.
    3. Fiscal Responsibility and Budget Management Rules, 2004: Prescribe the form of the disclosure statements and the quarterly review requirement.
    4. Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971: Provides the basis for audit of Union and State accounts and for the reports laid before the legislatures.
    5. State fiscal responsibility legislation: Every State has enacted its own fiscal responsibility law setting deficit and debt limits, complementing the Union statute.
    6. Appropriation and Finance Acts: The Appropriation Act authorises withdrawal from the Consolidated Fund, and the Finance Act gives effect to the taxation proposals for the year.

    Government Initiatives in Public Financial Management

    1. Public Financial Management System: An end-to-end platform tracking fund release and utilisation from the Union to the last implementing agency, reducing float in the system.
    2. Direct Benefit Transfer: Routes subsidy and benefit payments to bank accounts directly, cutting duplication and leakage in the transfer chain.
    3. Single Nodal Agency mechanism: Requires each centrally sponsored scheme in a State to operate through one designated account, so unspent balances are visible.
    4. Special Assistance to States for Capital Investment: Provides fifty-year interest free loans to States tied to capital expenditure and to specified reforms.
    5. National Monetisation Pipeline: Raises resources by leasing operating public assets while retaining ownership, supplementing tax revenue for capital spending.
    6. Goods and Services Tax Network: The common technology platform for registration, return filing and invoice matching that generates the data underlying indirect tax collections.

    Back2Basics: Sixteenth Finance Commission

    1. What it is: A constitutional body constituted under Article 280 to recommend the distribution of net tax proceeds between the Union and the States, the allocation among States, and the principles governing grants-in-aid.
    2. Constitution: Constituted in December 2023, chaired by a former Vice Chairman of NITI Aayog.
    3. Award period: Its recommendations cover the five years beginning 2026-27.
    4. Advisory Council: The Commission is assisted by an Advisory Council of economists and public finance specialists.
    5. Status of recommendations: Its report is laid before Parliament along with an explanatory memorandum on the action taken, and the recommendations are advisory rather than binding.
    6. Additional terms of reference: Beyond devolution, the Commission examines disaster management financing and the review of State fiscal positions.

    Challenges in India’s Public Finances

    1. A low tax-to-Gross Domestic Product ratio: India’s combined tax collection relative to output remains below that of comparable middle-income economies, which caps what can be spent without borrowing. Eg. Gross tax revenue in the first quarter of 2026-27 grew at less than a third of the nominal output growth expected for the year.
    2. Narrow direct tax base: A small share of the population files and pays income tax, so any rate change transmits through a thin base. Eg. Personal income tax raised no more in 2025-26 than in the year before, despite nominal output expanding through that year.
    3. Rigidity of committed expenditure: Interest, salaries, pensions and statutory transfers consume most revenue receipts before discretionary spending begins. Eg. The debt-to-Gross Domestic Product ratio is estimated at 55.8% for 2026-27.
    4. Exposure to imported commodity prices: Fuel and fertiliser subsidies move with global prices rather than with domestic policy. Eg. Major subsidies rose 37.4% in the first quarter of 2026-27 on the unexpected rise in global crude oil prices.
    5. Volatility of non-tax receipts: Dividends, disinvestment proceeds and spectrum receipts are lumpy and cannot be relied on across years. Eg. Non-tax revenues contributed 37% of net revenue receipts in the first quarter of 2026-27.
    6. State-level fiscal stress and guarantees: Contingent liabilities from State-owned distribution companies and guaranteed borrowings sit outside headline deficits. Eg. Tax devolution to the States contracted 19.5% in the first quarter, tightening State cash positions in the same period.
    7. Weak link between capital spending and outcomes: Front-loading capital expenditure raises the quarterly number without ensuring project completion. Eg. Capital expenditure grew 23.7% in the first quarter of 2026-27 after contracting 23.3% in the preceding quarter.

    Way Forward

    1. Restore the excise duty on fuel on a stated schedule: Announcing the timing in advance converts a politically difficult reversal into a pre-committed step, as the analysis itself recommends.
    2. Publish base expansion metrics alongside rate rationalisation: Reporting the change in the number of filers and in registered taxpayers would test the premise on which the 2025-26 rationalisation was justified.
    3. Cap the share of revenue raised through cesses and surcharges: A ceiling would stop the divisible pool narrowing through instruments that bypass Article 270.
    4. Insulate subsidy budgeting from a single price assumption: Building a price band and a contingency provision into the subsidy estimate would prevent an overshoot of this size appearing mid-year.
    5. Treat central bank dividends as a windfall, not a base receipt: Directing above-trend transfers to debt reduction rather than to recurring expenditure would stop a one-off receipt becoming a structural assumption.
    6. Smooth capital expenditure across quarters: Front-loading followed by contraction disrupts contractor payment cycles and project execution, so a steady release profile serves outcomes better than a strong first quarter.
    7. Bring off-budget and guaranteed borrowing into the disclosure statements: Consolidated reporting at both Union and State levels is the precondition for the debt path to mean what it states.

    “[2019, GS3, 10] The public expenditure management is a challenge to the Government of India in context of budget making during the post liberalization period. Clarify it.”

  • CRPF forms core group to review self-harm cases after a spate of suicides

    Why in the News

    The Central Reserve Police Force (CRPF) has constituted a high level core group to conduct monthly reviews of self harm cases among its personnel. Deaths by suicide in the force touched a five year high of 59 in 2025, which moves the response from unit level handling of individual incidents to a standing headquarters mechanism.

    What is the Central Reserve Police Force?

    1. Mandate: The Central Reserve Police Force is the Union’s principal internal security force, deployed on requisition to States for counter insurgency, anti Left Wing Extremism operations, law and order duty and election security.
    2. Command: It functions under the Ministry of Home Affairs and is headed by a Director General, with operations organised through executive battalions and specialised wings.
    3. Scale: It is the largest of the Central Armed Police Forces, with a sanctioned strength above three lakh personnel spread across every State and Union Territory.

    What do the suicide figures in the force since 2021 show?

    1. Five year peak in 2025: Fifty nine CRPF personnel died by suicide in 2025, the highest figure in the five year series and the trigger for the present review mechanism.
    2. The full series: The force recorded 57 such deaths in 2021, 43 in 2022, 57 in 2023, 46 in 2024 and 59 in 2025.
    3. The current year: Nineteen such deaths were reported till 30 May 2026.
    4. No downward trend: The numbers oscillate within a narrow band rather than falling, which indicates that existing unit level welfare measures have not shifted the underlying pattern.
    5. Deaths on duty: The figures from 2021 to May 2026 show that several of these deaths took place while the personnel were on duty, not while on leave or at home.

    Why has a headquarters level core group been created rather than leaving reviews to individual units?

    1. A structured mechanism: Senior officers at a meeting in the CRPF headquarters earlier this month identified the absence of a structured mechanism to examine such incidents as the gap to be closed.
    2. Recurring risk factors: A unit examining a single death cannot detect a factor that repeats across battalions, so pattern identification requires a body sitting above the unit.
    3. Command level ownership: The core group is headed by the Director General of the force, which places accountability for prevention at the apex of the command chain rather than with the battalion commandant.
    4. Fixed periodicity: The group is to meet every month, converting review from an event triggered by a death into a standing calendar obligation.
    5. Four review heads: Each monthly meeting is to cover the self harm incidents reported, the causes and circumstances behind them, the availability and use of welfare or psychological support, and the preventive steps taken by the unit concerned.

    What drives self harm among central armed police force personnel?

    1. Prolonged separation from family: Personnel serve long tenures in field formations away from their home States, with leave frequently curtailed during active operations.
    2. Operational stress in insurgency theatres: Extended deployment in Left Wing Extremism affected districts and in Jammu and Kashmir combines physical risk with an absence of privacy and rest.
    3. Domestic and financial distress: Land disputes, family illness and debt at the home station cannot be attended to from a field posting, and the inability to act is itself a stressor.
    4. Grievance and leave denial: Perceived unfairness in leave sanction, posting and promotion converts an administrative decision into a personal grievance with no accessible appeal.
    5. Stigma around psychological help: Seeking counselling is read within the force as an admission of unfitness for armed duty, which suppresses the demand for the support that does exist.

    What does the National Human Rights Commission’s intervention add to the response?

    1. External scrutiny: The National Human Rights Commission took note of the rising figures last week and sought reports from the Ministry of Home Affairs and the Director General of the force.
    2. Reframing the issue as a rights question: The Commission’s entry treats deaths in service as a question of the State’s obligation to its own personnel rather than as an internal personnel matter.
    3. A reporting obligation: A requisition from the Commission compels a written response from both the administrative ministry and the force, creating a record that survives changes in command.
    4. Timing: The core group’s formation and the Commission’s notice fall in the same month, so the force’s internal mechanism now operates under an external deadline.

    Challenges to the CRPF’s self harm prevention mechanism

    1. A review body without a treatment capacity: A monthly review can classify causes but cannot supply the clinical care the classification points to, and psychiatrist and counsellor strength in the central armed police forces remains far below the deployed strength. Eg. Composite hospitals of the central armed police forces routinely operate with a single mental health specialist serving several battalions spread across districts.
    2. Under reporting of distress: Personnel avoid recording psychological symptoms because a medical entry can affect weapon issue, posting and promotion prospects. Eg. Screening drives in armed forces and central police organisations consistently record self reported distress far below the levels found in anonymous surveys of the same units.
    3. Housing and family accommodation deficit: Family accommodation available to central armed police force personnel falls well short of the authorised requirement, which keeps families separated even at peace stations. Eg. The Parliamentary Standing Committee on Home Affairs has repeatedly recorded a housing satisfaction ratio below half the sanctioned entitlement across the central armed police forces.
    4. Leave and rotation practice: Announced entitlements are overridden by operational exigency in the very theatres where the stress is highest. Eg. The force’s initiative to give personnel around 100 days with their families each year has proved hardest to implement in the Left Wing Extremism theatre where deployment density is greatest.
    5. Weapon access at the point of crisis: Personnel on duty carry service weapons continuously, which removes the interval between intent and act that prevention depends on. Eg. Several of the deaths recorded between 2021 and May 2026 occurred while the personnel were on duty, when the service weapon was in hand.
    6. Fratricide and grievance escalation: Unresolved interpersonal grievance within a small deployed unit escalates into violence against colleagues as well as self harm. Eg. Fratricide incidents in central armed police force camps have prompted the Bureau of Police Research and Development to study stress and grievance handling in deployed units.

    Conclusion

    The Central Reserve Police Force has moved suicide prevention from ad hoc unit level handling to a monthly review chaired by its Director General, after 2025 recorded the highest figure in five years. The immediate status is that the core group stands constituted and the National Human Rights Commission has sought reports from the Ministry of Home Affairs and the force. The next expected step is the submission of those reports and the first monthly review sitting of the core group.