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GS Paper: GS3-12.Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

  • [12th May 2025] The Hindu Op-ed: A fundamental reset to drive manufacturing growth

    PYQ Relevance:

     [UPSC 2023] Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.

    Linkage: The importance of the manufacturing sector for economic growth and asks about government policies concerning it, including MSMEs. This aligns perfectly with the theme of driving manufacturing growth as discussed in the article.

     

    Mentor’s Comment:  Global manufacturing and trade are quickly changing, focusing more on products that use advanced technology and innovation. This shift is being powered by strong research and development (R&D), modern technology, skilled workers, and complex supply chains. Also, the high tariffs recently introduced by the United States are expected to further change how the manufacturing industry works.

    Today’s editorial talks about how global manufacturing and trade are changing because of the use of advanced technology and innovation. This topic is useful for GS Paper II (International Relations and Policy Making) and GS Paper III (Manufacturing Sector).

    _

    Let’s learn!

    Why in the News?

    As global changes are set to reshape the manufacturing industry, it is important to focus on technical education, core engineering skills, and new ideas (innovation).

    What challenges hinder India’s efforts to match global manufacturing standards?

    • Low Manufacturing Productivity: India’s manufacturing sector is far less efficient compared to global benchmarks. Eg: In 2023, India’s productivity stood at $8.9K, while the global average was $32K, and the U.S. reached $159K.
    • Limited R&D Investment: Innovation-driven manufacturing requires substantial R&D support, which remains inadequate in India. Eg: India spends just 0.65% of its GDP on R&D, while China spends 2.4% and South Korea 4.5%.
    • Skills Mismatch and Weak Technical Education: The gap between academic training and industrial skill requirements slows the shift to high-tech manufacturing. Eg: Most engineering institutions focus on theory, grading, and rote learning, with less than 50% emphasis on practical training.
    • Underdeveloped Industrial Infrastructure: India lacks world-class manufacturing ecosystems with integrated supply chains and R&D support. Eg: Unlike China’s fully equipped industrial parks, many Indian parks lack plug-and-play facilities, design labs, and testing centers.
    • Low Per Capita Manufacturing Output: India’s contribution to manufacturing per individual is among the lowest in major economies. Eg: In 2023, India’s per capita value added was $0.32K, while the global average was $2K.

    Why must India reform technical education for innovation-led manufacturing?

    • Lack of Practical Skill Development: Engineering education in India emphasizes theoretical knowledge over hands-on experience. Eg: Less than 50% of curriculum time is dedicated to lab work or industry projects, reducing readiness for real-world manufacturing tasks.
    • Weak Focus on Creativity and Problem-Solving: Entrance exams and academic culture focus on rote learning rather than fostering innovation. Eg: Students are trained to solve predefined problems, but lack the ability to tackle open-ended, real-world challenges in engineering and design.
    • Outdated Laboratory and Workshop Infrastructure: Many technical institutions lack modern facilities to train students in advanced manufacturing techniques. Eg: Few colleges have tool rooms, CNC machines, or 3D printing labs, which are standard in global manufacturing training programs.
    • Disconnect Between Industry Needs and Curriculum: The current syllabus often fails to align with rapidly evolving industrial technologies and skills. Eg: Courses in AI integration, robotics, and IoT in manufacturing are still missing or underdeveloped in most core engineering streams.
    • Limited Industry-Academia Collaboration: Technical education lacks structured partnerships with manufacturing companies for internships, research, and product development. Eg: Unlike Germany’s dual education model, Indian students rarely work on live industry problems during their course of study.

    How do state-specific manufacturing parks boost industrial ecosystems?

    • Accelerate Industrial Setup with Plug-and-Play Infrastructure: Ready-to-use facilities reduce time and cost for new manufacturing units. Eg: Tamil Nadu’s SIPCOT parks offer land, power, and water connections upfront, attracting auto and electronics manufacturers quickly.
    • Encourage Localized Skill Development and Employment: Parks drive local job creation and training programs aligned with industry needs. Eg: Gujarat’s Dholera SIR includes skill centers to train youth for electronics, EV, and robotics industries.
    • Foster Innovation and Prototype Development: Dedicated facilities help companies develop, test, and refine products. Eg: Karnataka’s Aerospace SEZ near Bengaluru hosts R&D labs, testing units, and design centers supporting aerospace startups.
    • Build Industry Clusters and Supply Chains: Concentration of allied industries creates efficient ecosystems with shared logistics and services. Eg: Andhra Pradesh’s Sri City SEZ houses over 180 companies across sectors like consumer goods and automotive, fostering collaboration.
    • Attract Investment Through Tailored State Policies: State-specific incentives aligned with local strengths draw both domestic and foreign investors. Eg: Maharashtra’s Aurangabad Industrial City (AURIC) offers tax benefits and sector-specific infrastructure to attract high-tech industries.

    Way forward: 

    • Revamp Technical Education and Skilling: Align curricula with industry 4.0 needs, strengthen practical training, and build strong industry-academia partnerships to boost innovation-led manufacturing.
    • Strengthen Industrial Ecosystems: Expand world-class infrastructure, ensure faster regulatory clearances, and scale up R&D investment to create globally competitive manufacturing hubs.

  • FTA with UK: How a stitch in time can boost India’s textile sector

    Why in the News?

    On May 6, India and the UK signed an important Free Trade Agreement (FTA), which was called a historic achievement by Prime Minister Narendra Modi. The FTA creates new opportunities for the textile sector, which now needs to match global styles and standards

    What are the key benefits of the India-UK Free Trade Agreement (FTA)?

    Benefit Description Eg
    1. Enhanced Market Access India gains zero-duty access to UK markets for industrial and agricultural goods; UK exporters get reduced tariffs in India. Indian processed foods earlier faced 10–12% tariffs — now duty-free in the UK. Tariffs on British whiskey reduced from 150% to 40% over 10 years.
    2. Boost to Key Domestic Sectors Labour-intensive Indian sectors like textiles, apparel, toys, and footwear benefit; UK gains in automobiles and spirits. Indian apparel now gets zero-tariff access to UK.

    Tariffs on British cars slashed from 100% to 10%.
    3. Job Creation & Economic Growth Trade expansion leads to employment generation and investment in both countries. India’s textile sector, employing 45+ million people, can boost jobs through increased exports.
    4. Diversification of Trade Partners India reduces dependency on US/EU; UK diversifies beyond EU post-Brexit. India currently holds just 1.8% share in UK imports — FTA targets major increase.
    5. Foundation for Future FTAs Sets a model for India’s trade negotiations with other major economies like the EU and US. Learnings from tariff cuts and ESG compliance can aid future deals with EU/US.

    How can India improve its Textiles and Apparel sector to capitalize on the FTA with the UK?

    • Strengthen the Value Chain and Infrastructure: India must address its fragmented and geographically dispersed T&A value chain. Fast-tracking the operationalization of PM MITRA parks can create integrated textile hubs, reduce logistics costs, and improve delivery timelines. Eg: Bangladesh delivers apparel orders in 50 days compared to India’s 63 days — a more integrated value chain can help India match or exceed this efficiency.
    • Promote Manmade Fibre (MMF) Production: India needs to resolve the inverted GST structure and ease quality norms to boost MMF-based products, which dominate global demand for technical textiles, athleisure, and activewear. Eg: MMF garments are taxed higher at the input stage than at the finished product level, making Indian exports less competitive globally.
    • Focus on Compliance, Design, and Market Relevance: Indian exporters must align with global fashion trends and strengthen ESG (Environmental, Social, Governance) compliance, especially in anticipation of EU and UK sustainability regulations. Eg: The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) will require traceable, ethical supply chains by 2029 — Indian exporters must prepare accordingly.

    Why is the operationalisation of PM MITRA parks important for India’s textile industry?

    • Integrated Value Chain and Reduced Costs: PM MITRA parks aim to bring together the entire textile value chain — from spinning, weaving, processing to garmenting — in one location, reducing logistics costs, delays, and inefficiencies. Eg: Currently, cotton is grown in Gujarat, yarn spun in Tamil Nadu, and garments stitched elsewhere, leading to high costs and long lead times. An integrated park would streamline this process.
    • Boost Export Competitiveness: These parks can help scale up production, attract investment, and improve quality standards for global markets like the UK, where India now enjoys zero-duty access under the FTA. Eg: By focusing PM MITRA parks in export-oriented regions like Navsari (Gujarat) and Virudhunagar (Tamil Nadu), India can cater more efficiently to UK and EU demand.

    Where does India lag behind in terms of manmade fibre (MMF) production compared to global competitors?

    • Inverted GST Duty Structure: The GST on raw materials (like MMF yarn at 12%) is higher than on finished products (5%), leading to increased production costs and reduced global competitiveness. Eg: Indian MMF garments are costlier compared to those from Vietnam or Bangladesh, where tax structures are more balanced.
    • Restrictive Quality Norms and Compliance Issues: Outdated or complex quality standards limit innovation and access to high-performance MMF products demanded in global markets. Eg: Indian firms struggle to meet the quality requirements for technical textiles used in athleisure and activewear segments.
    • Lack of Investment in High-End Functional Fabrics: India has limited capacity for producing value-added MMF fabrics such as moisture-wicking, stretchable or anti-bacterial textiles, unlike China or South Korea. Eg: While China leads in exporting performance-based textiles, India still focuses on basic polyester products.

    Way forward: 

    • Reform Tax Structure & Boost Incentives: Rationalize the GST structure to eliminate the inverted duty issue and offer production-linked incentives (PLI) for MMF textiles to enhance global competitiveness.
    • Invest in R&D and Modern Manufacturing: Encourage investment in high-performance MMF fabric production, innovation, and compliance infrastructure to meet international standards in technical textiles and sustainability.

    Mains PYQ:

    [UPSC 2017] Account for the failure of the manufacturing sector in achieving the goal of labor-intensive exports. Suggest measures for more labor-intensive rather than capital – intensive exports.

    Linkage: Textiles and Apparel (T&A) sector as a labour-intensive sector that employs over 45 million people and can benefit significantly from the FTA by gaining access to high-end markets. This question directly asks about promoting labour-intensive exports, aligning perfectly with the potential benefits highlighted for the T&A sector through the FTA.

  • [pib] Credit Guarantee Scheme for Startups (CGSS)

    Why in the News?

    The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, has announced the expansion of the Credit Guarantee Scheme for Startups (CGSS).

    About Credit Guarantee Scheme for Startups (CGSS):

    • The CGSS was launched on October 6, 2022, as part of the Startup India Action Plan.
    • The scheme is designed to provide collateral-free credit to eligible startups through recognized financial institutions.
    • It offers credit guarantee cover for loans extended by Scheduled Commercial Banks, All India Financial Institutions (AIFIs), Non-Banking Financial Companies (NBFCs), and SEBI-registered Alternative Investment Funds (AIFs).
    • The guaranteed coverage is available in 2 formats:
      1. Transaction-based (for individual borrowers) and
      2. Umbrella-based (for Venture Debt Funds).
    • The scheme helps startups access funding through instruments such as working capital, term loans, and venture debt.
    • The DPIIT is responsible for the oversight and implementation of the scheme.
    • The scheme is operated by the National Credit Guarantee Trustee Company Limited (NCGTC).
    • A Management Committee (MC) and a Risk Evaluation Committee (REC) have been constituted to supervise and review the operations of the scheme.
    • It aligns with the objective of encouraging innovation, supporting early-stage entrepreneurship, and driving economic self-reliance.

    Key Changes in the Expanded CGSS:

    • Guarantee ceiling increased from ₹10 crore to ₹20 crore per borrower.
    • Guarantee cover enhanced to:
      • 85% for loans up to ₹10 crore.
      • 75% for loans exceeding ₹10 crore.
    • Annual Guarantee Fee (AGF) reduced from 2% to 1% p.a. for startups in 27 Champion Sectors.
    • The Champion Sectors are identified under the ‘Make in India’ initiative to strengthen domestic manufacturing and services.
    [UPSC 2023] Consider the following statements with reference to India:

    1. According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006’, the ‘medium enterprises’ are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.

    2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.

    Which of the statements given above is/are correct?

    Options: (a) 1 only (b) 2 only* (c) Both 1 and 2 (d) Neither 1 nor 2

     

  • Competition Commission issues norms to assess Predatory Pricing

    Why in the News?

    The Competition Commission of India (CCI) has introduced new Cost Regulations 2025 to check if companies are selling below cost to unfairly drive out competitors.

    About Competition Commission of India (CCI):

    • The CCI was established on 14 October 2003 and became fully operational in May 2009.
    • It aims to eliminate anti-competitive practices, prevent abuse of dominant positions, and promote fair competition.
    • It was formed under the Competition Act, 2002, later amended in 2007, replacing the Monopolies and Restrictive Trade Practices Act, 1969 based on Raghavan Committee recommendations.
    • The headquarters is located in Kidwai Nagar (East), New Delhi, and the Commission includes 1 Chairperson and up to 6 Members, all appointed by the Central Government.
    • Members must have at least 15 years of experience in areas such as law, economics, business, finance, or public administration.
    • Jurisdiction of CCI:
      • It is a quasi-judicial statutory body under the Ministry of Corporate Affairs.
      • It has the authority to initiate cases suo motu or respond to public/institutional complaints, and can impose penalties for violations.
      • Its jurisdiction spans all sectors across India, and it is empowered to frame its own regulations under the Act.

    New Cost Definitions under Cost Regulations, 2025:

    • Under the Cost Regulations 2025, Average Variable Cost (AVC) is used to measure cost, calculated by dividing total variable costs by total output.
    • Variable cost excludes fixed costs and overheads and varies with production.
    • Although a sector-specific approach was considered, the CCI adopted a case-by-case evaluation after stakeholder feedback.
    • The new framework is sector-agnostic, allowing flexibility for diverse industries, including the digital economy, and supports better adaptation to market dynamics.
    [UPSC 2020] With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?

    1. Quantitative restrictions on imports by foreign investors are prohibited. 2. They apply to investment measures related to trade in both goods and services. 3. They are not concerned with the regulation of foreign investment.

    Select the correct answer using the code given below:

    Options: (a) 1 and 2 only (b) 2 only (c) 1 and 3 only* (d) 1, 2 and 3

     

  • UK-India Free Trade Agreement (FTA) signed

    Why in the News?

    India and the United Kingdom signed a Free Trade Agreement (FTA), ending nearly 3 years of negotiations, with an aim to boost trade and investment between the two nations.

    Free Trade Agreement

    What is Free Trade Agreement (FTA)?

    • An FTA is an agreement between two or more countries to reduce or eliminate customs tariffs and non-tariff barriers on trade between them.
    • Objective: To promote trade by making it easier and more cost-effective for businesses to import and export goods and services.
    • FTAs can cover goods, services, investment, and intellectual property rights.
    • By reducing trade barriers, FTAs also benefit consumers by offering a wider range of products at lower prices.
    • FTAs play a key role in boosting economic growth and job creation by facilitating trade between countries.
    • India’s FTAs:
      • India has signed FTAs with 16 countries or regional blocs as of May 2025. 
      • These FTAs cover major partners such as Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, South Korea, Japan, Australia, UAE, Mauritius, ASEAN (10 countries), and EFTA (4 countries).

    Key terms of the UK-India FTA:

    • Trade Growth: Expected to boost bilateral trade by £25.5 billion annually by 2040.
    • Whisky and Gin Tariffs: Tariffs reduced from 150% to 75%, eventually to 40% over 10 years.
    • Automobile Tariffs: India to reduce automotive tariffs from over 100% to 10%.
    • Other Goods: Tariffs reduced on cosmetics, aerospace, medical devices, chocolate, and more.
    • Services and Work Permits: Increased quotas for Indian workers in IT and healthcare, with 100 new visas annually for professionals.
    • Carbon Tax: Dispute over UK’s proposed carbon tax on metal imports.
    • Supply Chain Resilience: FTA aims to reduce reliance on China and improve supply chain security.
    [UPSC 2017] The term ‘Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and:

    Options: (a) European Union* (b) Gulf Cooperation Council (c) Organization for Economic Cooperation and Development (d) Shanghai Cooperation Organization.

     

  • Growth pangs: On industrial activity

    Why in the News?

    India’s average Index of Industrial Production (IIP) for fiscal year 2025 has dropped to 4%, the lowest level in the past four years, showing a clear slowdown in industrial growth.

    What are the main factors contributing to the slowdown in India’s Index of Industrial Production (IIP) in FY25?

    • Global Economic Uncertainty: The global economic outlook remains uncertain, affecting India’s external trade and exports. This slowdown in global demand impacts industrial growth. Eg: India’s goods exports grew at a slower pace in FY25, which strains industrial output as global demand weakens.
    • Lower Domestic Consumption Demand: Slower-than-expected growth in domestic consumption has affected industries that rely on the domestic market, such as consumer goods and durable products. Eg: Consumer non-durables showed a negative growth of -1.6% in FY25, reflecting weak demand despite a fall in retail inflation.
    • Reduced Private Capital Expenditure (Capex): A decline in private sector investment (capital expenditure) impacts industrial growth, especially in infrastructure and manufacturing. Eg: The dip in capex lending rates, though lower, did not spark sufficient investment, reflecting cautious private sector sentiment in an uncertain economic environment.
    • Decline in Key Industrial Sectors: Sectors like mining, manufacturing, and electricity witnessed slower growth in FY25 compared to FY24, contributing to the overall slowdown in industrial production. Eg: Mining’s growth plummeted from 7.5% in FY24 to 2.9% in FY25, and manufacturing also saw a decline, affecting overall industrial output.
    • Weak Goods Exports: India’s goods exports, particularly in the MSME sector, showed limited growth due to strained trade relations, especially with major trading partners like the United States. Eg: The flat growth in FY25’s goods exports, especially from MSMEs, highlights the challenges faced by small businesses and the manufacturing sector in expanding their global market share.

    Why has rural consumption remained strained despite a drop in retail inflation?

    • Lingering Effects of High Food Inflation: Although retail inflation dropped, the high food inflation experienced in the last fiscal year (October to December) continues to affect rural households, leaving them with reduced disposable income. Eg: In FY24, the spike in food prices, particularly for essential items like pulses and vegetables, strained rural budgets, and recovery from this shock has been slow.
    • Reduced Farm Incomes: Despite lower retail inflation, farm incomes have been negatively impacted by factors like erratic weather, reduced crop yields, and rising input costs, which affects rural consumption. Eg: Poor monsoon and drought in some regions led to crop failures, reducing farmers’ incomes and limiting their purchasing power.
    • Limited Impact of Inflation Reduction: While overall retail inflation decreased, the price drops were not significant enough in rural areas to translate into meaningful gains in consumption, especially for low-income families. Eg: The fall in vegetable prices towards the end of FY25 helped urban consumers, but rural households still struggled due to stagnant or low farm output and income.
    • Structural Economic Challenges: Rural India still faces structural challenges like inadequate infrastructure, low wages, and high dependence on agriculture, which limits overall consumption despite lower inflation. Eg: Many rural households rely on agriculture, which remains vulnerable to climate change and market volatility, restricting their ability to consume more even when prices drop.

    How has the performance of different industrial sectors (like mining, manufacturing, and electricity) changed in FY25 compared to FY24?

    Sector FY24 Growth (%) FY25 Growth (%) Conclusion with example
    Mining 7.5% 2.9% Mining sector saw a significant decline. This slowdown could be due to reduced demand for raw materials and lower production in key mining areas. Eg: A dip in coal mining output due to lower power demand during certain months.
    Manufacturing 5.5% 4% Manufacturing growth slowed down slightly, likely due to lower consumer demand and sluggish export growth. Eg: Lower production in sectors like automobiles and textiles, impacted by weaker global demand.
    Electricity 7% 5.1% Electricity sector growth showed a slight decline, though power production still surged during peak summer months. Eg: Increased power generation in March (6.3%) due to seasonal demand, but overall growth reduced for the year.

    What steps can the government take to boost private investment and protect MSME jobs?

    • Enhance Domestic Demand through Targeted Public Spending: The government can invest in rural infrastructure, housing, and public services to stimulate consumption, which in turn will encourage private sector production and investment. Eg: Increased spending under schemes like PM Awas Yojana or rural roads (PMGSY) can boost demand for cement, steel, and consumer goods produced by MSMEs.
    • Strengthen Trade and Market Access for MSMEs: By finalizing beneficial trade agreements and easing export procedures, the government can open more markets for MSMEs. Eg: Concluding a bilateral trade deal with the US could reduce tariffs and give India’s 60 million MSMEs better access to one of the world’s largest markets.
    • Expand Credit Support and Reduce Compliance Burden: Provide low-interest loans and simplify regulatory procedures to ease doing business for small enterprises. Eg: Extending the Emergency Credit Line Guarantee Scheme (ECLGS) and digitizing compliance through platforms like Udyam Assist can help micro-industries scale up with less red tape.

    Way forward: 

    • Stimulate Demand and Investment: Boost domestic consumption through targeted rural and infrastructure spending while incentivizing private capital expenditure with tax benefits and interest subvention.
    • Empower MSMEs for Global Competitiveness: Strengthen MSME access to credit, simplify compliance, and finalize trade deals to expand their global market footprint and protect employment.

    Mains PYQ:

    [UPSC 2024] What are the causes of persistent high food inflation in India? Comment on the effectiveness of the monetary policy of the RBI to control this type of inflation.

    Linkage: High food prices, mentioned in the article, are putting pressure on rural spending and slowing down the economy.

  • CSR Spending in India

    Why in the News?

    In 2023-24, India’s listed companies spent Rs 17,967 crore on Corporate Social Responsibility (CSR), 16% higher than Rs 15,524 crore in 2022-23.

    As per the PRIME Database report, this increase was due to an 18% rise in the companies’ net profits.

    CSR Spending in India

    About Corporate Social Responsibility (CSR) and Obligations Under It

    • CSR is a self-regulating business model through which companies become socially accountable to themselves, stakeholders, and the public.
    • It includes initiatives that assess and take responsibility for the company’s social and environmental impact.
    • India is the first country to mandate CSR spending w.e.f. April 1, 2014, through Section 135 of the Companies Act, 2013.
    • It provides a structured framework for CSR activities.
    • CSR provisions apply to companies that, in the preceding financial year, have:
      • Net worth ≥ ₹500 crore, or
      • Turnover ≥ ₹1,000 crore, or
      • Net profit ≥ ₹5 crore
    • CSR Spending Obligation:
      • Companies must spend at least 2% of their average net profits of the last 3 financial years on CSR.
      • Newly incorporated companies should calculate it based on profits of previous years.
    • Eligible CSR Activities:
      1. Eradicating hunger and poverty
      2. Promoting education, gender equality
      3. Combating diseases (e.g., HIV/AIDS)
      4. Environmental sustainability
      5. Contributions to relief funds (e.g., PM CARES, PM Relief Fund)
      6. Welfare of disadvantaged groups
    • If CSR spend > ₹50 lakh, companies must constitute a CSR committee with at least three board members, one being independent.
    [UPSC 2024] Consider the following statements with reference to Corporate Social Responsibility (CSR) rules in India:

    1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.

    2. CSR rules do not specify minimum spending on CSR activities.

    Which of the statements given above is/are correct?

    Options: (a) 1 only* (b) 2 only (c) Both 1 and 2 (d) Neither 1 or 2

     

  • A chance for India’s creative ecosystem to make waves

    Why in the News?

    Despite global trade challenges and stock market fluctuations, India remains a strong and resilient economy. By using its young population and technological strengths, India has the potential to turn difficulties into opportunities. With its rich tradition of storytelling, India’s Media & Entertainment (M&E) sector aims to connect creators around the world through the vision of ‘Create in India, Create for the World.’

    What is the vision behind India’s Media & Entertainment (M&E) sector as outlined in the WAVES 2025 initiative?

    • Global Creative Leadership: India aims to emerge as a ‘Creative Powerhouse’, encouraging the creation of world-class content that resonates globally through the ‘Create in India, Create for the World’ vision. Eg: Namit Malhotra’s DNEG delivered Oscar-winning VFX for Dune 2, showcasing India’s global capability.
    • Fostering Innovation and Startups: The vision promotes a vibrant M&E startup ecosystem through WAVEX—offering funding, mentorship, and exposure in areas like gaming, AR/VR, animation, and AI. Eg: WAVEX supports startups like Erucanavis Technologies (AI-driven ads) and Amaze Studios (VR storytelling).
    • Cultural and Technological Synergy: It seeks to blend India’s rich cultural heritage with digital innovation, empowering young creators and expanding India’s influence in entertainment, education, and digital media. Eg: InscapeXR uses immersive media to transform learning experiences through storytelling.

    Who are some notable contributors and startups exemplifying India’s growing influence in the global creative industry?

    • DNEG (Namit Malhotra): India’s presence in high-end global cinema has grown significantly. Eg: DNEG, led by Namit Malhotra, delivered Oscar-winning VFX for Dune 2, showcasing India’s prowess in visual effects and animation.
    • Erucanavis Technologies: Innovation in ad-tech is pushing the boundaries of user interaction. Eg: Erucanavis is developing AI-driven playable ads, transforming digital advertising formats globally.
    • Lapwing Studios: Women-led creative startups are gaining recognition and scale. Eg: Lapwing Studios is supported under WAVEX, promoting inclusivity in India’s Media & Entertainment sector.
    • Amaze Studios: New-age storytelling formats are reshaping viewer experiences. Eg: Amaze Studios focuses on immersive storytelling through VR and animation, enhancing narrative depth.
    • InscapeXR: Ed-tech is merging with creative media to revolutionize learning. Eg: InscapeXR uses extended reality (XR) to create immersive educational content, blending creativity with pedagogy.

    How does WAVEX aim to support and scale startups in India’s creative economy?

    • Mentorship: WAVEX connects startups with industry leaders for strategic guidance and capacity building Eg: Startups like Vygr Media gain mentorship on scaling content for global audiences.
    • Funding Access: It facilitates financial support to overcome capital barriers for creative ventures. Eg: Women-led startups such as Lapwing Studios receive funding through WAVEX platforms.
    • Global Exposure: WAVEX offers international visibility and networking with global investors and buyers. Eg: Over 5,900 buyers at the WAVES Bazaar help startups like Amaze Studios find global partners.
    • Tech Integration: It supports innovation in tech-driven media fields like AR/VR, AI, and the metaverse. Eg: Erucanavis Technologies is leveraging WAVEX support to expand AI-based playable ads.
    • Inclusive Ecosystem: WAVEX promotes diversity by uplifting women-led and regional startups in M&E. Eg: Initiatives like Vision Impact promote inclusive ed-tech innovation through immersive storytelling.

    Why is India uniquely positioned to become a global creative powerhouse?

    • Demographic Dividend: India has a large, young population that fuels creativity and innovation across media sectors. Eg: WAVEX connects this youthful energy with global platforms to scale creative startups.
    • Technological Capability: India has strong digital infrastructure and IT expertise that power cutting-edge content creation. Eg: DNEG, led by Namit Malhotra, delivered Oscar-winning VFX in Dune 2, showcasing India’s tech strength.
    • Cultural Heritage: A rich legacy of storytelling, arts, and performance adds depth to creative expression. Eg: From classical dance to comics, Indian creators blend tradition with modern formats.
    • Government Support: Policy initiatives like WAVES 2025 foster a robust startup ecosystem for M&E. Eg: WAVEX provides funding, mentorship, and exposure to startups in AR/VR and AI-driven media.
    • Global Vision: India is aiming to create content not just for domestic audiences, but for the world. Eg: The ‘Create in India, Create for the World’ initiative positions India as a content export hub.

    What are the challenges? 

    • Access to Capital and Funding: Many startups in India’s creative sector face difficulty in securing adequate funding and investment. Despite government support through initiatives like Start-up India, access to venture capital and global investors remains a challenge for emerging companies. Eg: Small animation studios or VR companies, such as Amaze Studios, often struggle to scale due to limited financial resources.
    • Infrastructure Gaps: While the government has made significant strides in developing digital infrastructure, there are still gaps in areas like high-quality production facilities, broadband connectivity, and tech training centers. Smaller cities and rural areas, in particular, face challenges in accessing the necessary resources to contribute to the global creative industry. Eg: The lack of advanced digital infrastructure in tier-2 cities restricts the growth of tech-driven creative startups.

    Way forward: 

    • Enhanced Funding Support and Investment Channels: Strengthen access to venture capital and government-backed funding, especially for emerging creative startups, through dedicated investment platforms and incentives. Eg: Expanding initiatives like Start-up India to include sector-specific funding for M&E startups in animation, AR/VR, and AI.
    • Improved Infrastructure and Regional Connectivity: Invest in high-quality production facilities, fast-track broadband connectivity, and tech training programs across tier-2 cities and rural areas to bridge the infrastructure gap. Eg: Setting up regional M&E hubs outside major cities to create localized opportunities for tech-driven creative startups.

    Mains PYQ:

    [UPSC 2023] What is the status of digitalization in the Indian economy? Examine the problems faced in this regard and suggest improvements.

    Linkage: The “A chance for India’s creative ecosystem to make waves” text highlights the shift from traditional film-making to digital production and the role of technology like AI and VR/AR in the M&E sector. This PYQ on digitalisation is relevant as the growth of the creative ecosystem is heavily reliant on digital infrastructure and technologies.

  • [pib] Electronics Components Manufacturing Scheme

    Why in the News?

    The Ministry of Electronics and Information Technology (MeitY) has notified the Electronics Components Manufacturing Scheme to expand the manufacturing capabilities of passive electronic components in India.

    About Electronics Components Manufacturing Scheme:

    • The scheme is designed to promote the manufacturing of select electronic components in India, such as resistors, capacitors, relays, switches, sensors, and connectors.
    • It focuses particularly on passive electronic components, while active components like semiconductors fall under the India Semiconductor Mission (ISM).
    • The scheme has a tenure of 6 years, with a 1-year gestation period.
    • The scheme offers 3 types of incentives:
      1. Turnover-linked incentive: Based on revenue.
      2. Capex-linked incentive: For investments in plants and machinery.
      3. Hybrid incentive model: A combination of both turnover and capex incentives.

    Achievements and Growth in the Electronics Sector:

    • Domestic Production Growth: India’s electronics production has grown from ₹1.90 lakh crore in FY 2014-15 to ₹9.52 lakh crore in FY 2023-24, at a compound annual growth rate (CAGR) of over 17%.
    • Export Growth: Electronics exports have increased from ₹0.38 lakh crore in FY 2014-15 to ₹2.41 lakh crore in FY 2023-24, reflecting a CAGR of over 20%. India is now the second-largest mobile phone producer globally.
    • Future Projections: By 2026, India’s electronics production is projected to reach USD 300 billion.

    Government Initiatives for Electronics Growth:

    • Make in India (2014): Aimed at boosting India’s manufacturing sector and transforming it into a global hub for design and manufacturing.
    • Phased Manufacturing Programme (2017): Focused on increasing domestic value addition in mobile phones and their parts.
    • Production Linked Incentive (PLI) Scheme (2020): Aimed at boosting domestic manufacturing in mobile phones, electronic components, and semiconductor packaging, offering 3-6% incentives on incremental sales.
    • Semicon India Program (2021): With a financial outlay of ₹76,000 crore, this scheme promotes the domestic semiconductor industry.
    • Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) (2021): Provides a 25% financial incentive for capital expenditure in electronic goods manufacturing.
    • Increased Budget for 2025-26: The allocation for electronics manufacturing has been raised from ₹5,747 crore in FY 2024-25 to ₹8,885 crore in FY 2025-26.
    [UPSC 2016] Recently, India’s first ‘National Investment and Manufacturing Zone’ was proposed to be set up in:

    (a) Andhra Pradesh (b) Gujarat (c) Maharashtra (d) Uttar Pradesh

     

  • Govt proposes to abolish Equalization Levy

    Why in the News?

    The Centre is considering the withdrawal of the 6% Equalization Levy on online advertisement services provided by offshore digital economy firms to Indian businesses.

    What is Equalization Levy?

    • The Equalization Levy was introduced in 2016 under Section 165A of the Finance Act, primarily to tax digital transactions conducted by foreign e-commerce companies with Indian businesses.
    • It was designed to ensure that foreign companies, particularly in the digital economy, pay taxes for benefiting from Indian markets without a physical presence in the country.
    • It was primarily aimed at business-to-business (B2B) transactions, which is why it is often referred to as the “Google Tax”.
    • The levy mechanism involves withholding the tax at the time of payment made by the Indian service recipient to a non-resident service provider.
    • The annual payment threshold for the levy is ₹1,00,000 for a single service provider in a financial year.
    • Services covered under the levy:
      • Online advertisement services (effective from June 1, 2016).
      • Provision of digital advertising space or sale of goods to Indian residents (effective from April 1, 2020).
    • Tax Rates:
      • 6% of the gross consideration is levied on online advertisement services.
      • 2% of the gross consideration is levied on e-commerce transactions like the sale of goods or services.
    • Exclusions:
      • The levy does not apply if the non-resident has a permanent office in India related to the service.
      • The payment for the service is below ₹1 lakh.
    • Tax Withholding: The tax is withheld by the Indian service recipient at the time of payment.

    Why it is being Abolished?

    • This move is part of India’s attempt to reduce tensions with the US, which raised concerns over such taxes.
      • Similarly, the UK is considering the abolition of its digital services tax by April 2025.
    • In August 2024, the Indian government removed the 2% levy applied to offshore tech firms (e.g., cloud services, e-commerce).
      • The 6% levy on online advertisements remained, impacting companies like Google and Meta.
    • The Finance Bill 2025 proposes a sunset clause to phase out the 6% levy on online advertisements by April 1, 2025.
    [UPSC 2012] What is/are the recent policy initiative(s)of Government of India to promote the growth of manufacturing sector?  Setting up of:

    1. National Investment and Manufacturing Zones

    2. Providing the benefit of ‘single window clearance’

    3. Establishing the Technology Acquisition and Development Fund

    Select the correct answer using the codes given below:

    (a) 1 only   (b) 2 and 3 only  (c) 1 and 3 only   (d) 1, 2 and 3