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

  • [pib] Budget 2025-26 removes 7 Custom Duties for Industrial Goods

    Why in the News?

    The Budget proposes to remove 7 customs tariff rates for industrial goods, following a similar step in Budget 2023-24. This will leave only 8 tariff rates, including a zero rate, making customs duty structure more transparent and predictable.

    What is Customs Duty?

    • Customs Duty is a tax imposed on goods that cross international borders to regulate their movement.
    • It helps protect a country’s economy, jobs, environment, and residents by controlling imports and exports.
    • It prevents illegal trade, ensures fair competition, and generates government revenue.
    • The Customs Act, 1962, which defines and regulates customs duty in India.
    • The Central Board of Indirect Taxes and Customs (CBIC) under the Ministry of Finance manages customs duties.
    • Types of Customs Duties in India:
    1. Basic Customs Duty (BCD): Levied on imported goods (0-100%).
    2. Countervailing Duty (CVD): Imposed to balance foreign subsidies (0-12%).
    3. Social Welfare Surcharge (SWS): 10% surcharge to support welfare projects.
    4. Anti-Dumping Duty: Imposed on goods sold below market price to prevent unfair trade.
    5. Compensation Cess: Levied on items like tobacco and pollution-causing goods.
    6. Integrated GST (IGST): Imposed on imports at 5%, 12%, 18%, or 28% rates.
    7. Safeguard Duty: Applied when excessive imports harm domestic industries.
    8. Customs Handling Fee: 1% charge for customs processing.
    • Customs Duty Calculation: Based on product value, origin, composition, and international trade agreements.

    Key Changes Announced to Customs Tariffs:

    • Tariff rates reduced from 15 to 8, Social Welfare Surcharge was removed on 82 items.
    • 36 new life-saving medicines exempted, 5% duty on six more drugs.
    • Full BCD exemption on 35 EV battery capital goods, 28 mobile battery items, and key minerals like cobalt & lithium.
    • 10-year duty exemption for shipbuilding materials; Ethernet Switch duty cut from 20% to 10%.
    • 20% export duty on crust leather removed, handicraft export timeline extended to 1 year.
    • Frozen fish paste duty cut from 30% to 5% to boost seafood exports.
    • Customs assessments limited to 2 years, quarterly importer reporting instead of monthly.

    How India is Protecting Its Economy from Trade War Impact?

    • Rupee-based trade settlements with Russia, UAE & Sri Lanka to reduce dollar dependence.
    • Stockpiling essential imports like semiconductors, rare earth metals, and crude oil.
    • Attracting companies shifting from China with PLI incentives for manufacturing.
    • Paperless customs clearance, AI-driven trade monitoring, and blockchain documentation for smoother trade.
    • Strengthening global trade alliances like IPEF (Indo-Pacific Economic Framework) and Supply Chain Resilience Initiative (SCRI) (Japan-Australia) for supply chain stability.

    PYQ:

    [2018] Consider the following statements

    1. The quantity of imported edible oils is more than the domestic production of edible oils in the last five years.

    2. The Government does not impose any customs duty on all the imported edible oils a special case.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

  • [pib] National Manufacturing Mission (NMM)

    Why in the News?

    The Union Finance Minister, while presenting the Union Budget 2025-26, announced the launch of the National Manufacturing Mission (NMM) to boost India’s manufacturing sector under the Make in India initiative.

    What is the National Manufacturing Mission?

    • The NMM was announced in Union Budget 2025-26 to boost India’s manufacturing sector under the Make in India initiative.
    • It covers small, medium, and large industries and aims to strengthen domestic production capabilities, enhance competitiveness, and create jobs.
    • The mission provides policy support, execution roadmaps, and governance frameworks for both central ministries and state governments.
    • It promotes Clean Tech manufacturing and focuses on developing an ecosystem for critical industrial components such as solar PV cells, EV batteries, wind turbines, and high-voltage transmission equipment.
    • Aims and Objectives:
      • Boost domestic production to reduce import dependence.
      • Enhance MSME sector growth with credit expansion (₹10 crore from ₹5 crore).

    Key Features & Significance:

    • Infrastructure & Industrial Clusters to strengthen supply chains.
    • National Action Plan for Toys to make India a global toy hub.
    • New footwear & leather industry scheme to create 22 lakh jobs and boost exports.
    • National Institute of Food Technology in Bihar to increase farmer incomes through food processing.

    Back2Basics: National Manufacturing Policy (NMP)

    • Launched in 2011 to boost India’s manufacturing sector.
    • Aims to increase GDP share to 25% and create 100 million jobs in a decade.
    • Focuses on National Investment and Manufacturing Zones (NIMZs) to attract investment and enhance productivity.
    • Promotes technology advancement, skill development, and sustainable growth with fiscal & infrastructure incentives.
    • Key areas: Ease of doing business, labor law reforms, export growth, and global competitiveness.

     

    PYQ:

    [2012] What is/are the recent policy initiative(s) of Government of India to promote the growth of manufacturing sector?

    1. Setting up of 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

  • [pib] What is Geo-Economic Fragmentation?

    Why in the News?

    The Economic Survey 2024-25 highlights the shift from globalization to geo-economic fragmentation (GEF). Countries are now forming economic blocs, with concepts like “friend-shoring” gaining prominence.

    What is Geo-Economic Fragmentation (GEF)?

    • GEF refers to the breakdown of global economic integration, caused by strategic national policies.
    • It involves disruptions in trade, capital flows, foreign direct investment (FDI), and migration.
    • The shift resembles the Cold War era, with countries aligning into economic blocs.
    • Western nations’ imposition of uniform environmental, labor, and social standards has fueled economic divisions.
    • The World Trade Organization (WTO) Trade Monitoring Report (October 2024) recorded:
      • 169 new trade-restrictive measures, affecting $887.7 billion worth of trade.
      • A sharp rise from $337.1 billion in 2023, reflecting escalating protectionism.
    • The IMF notes that trade fragmentation today is costlier than during the Cold War, when global trade was just 16% of GDP.
      • Today, it is 45%, making economic isolation riskier.

    Significance and Impacts of GEF:

    • Decline of Global Trade: WTO reported 169 new trade restrictions covering $887.7 billion in 2023-24, making trade costlier.
    • FDI Relocation: Friend-shoring is concentrating FDI among geopolitically aligned nations, reducing capital for emerging economies.
    • China’s Economic Dominance: Controls 80% of solar panels, 80% of batteries, and 60% of wind energy, reshaping supply chains.
    • Supply Chain Disruptions: Firms are shifting from China to India, Vietnam, and Mexico to diversify risks.
    • Emerging Market Challenges: Increased trade barriers, inflation, and tech restrictions slow down growth.
    • Rise in Economic Nationalism: Nations are prioritizing domestic industries, energy security, and localized production over global collaboration.

    PYQ:

    [2022] Elucidate the relationship between globalization and new technology in a world of scarce resources, with special reference to India.

    [2017] Which of the following has/have occurred in India after its liberalization of economic policies in 1991?

    1. Share of agriculture in GDP increased enormously.

    2. Share of India’s exports in world trade increased.

    3. FDI inflows increased.

    4. India’s foreign exchange reserves increased enormously.

    Select the correct answer using the codes given below:

    (a) 1 and 4 only

    (b) 2, 3 and 4 only

    (c) 2 and 3 only

    (d) 1, 2, 3 and 4

  • A pragmatic picture: Economic Survey

    Why in the News?

    The Budget session of Parliament has started at a time when India’s economic situation is shifting. After four years of strong growth following the pandemic, the economy is slowing down.

    What are the key projections for India’s economic growth in FY 2024-25?

    • Projected GDP Growth: The National Statistical Office (NSO) has estimated that India’s GDP will grow by 6.4% in FY 2024-25. This figure marks a decline from the 8.2% growth recorded in FY 2023-24 and is lower than earlier forecasts which ranged from 6.5% to 7%.
    • Sectoral Performance: The slowdown is attributed to weaker performance in sectors such as manufacturing and services. The first half of FY 2024-25 is expected to see a growth rate of around 6%, necessitating a stronger performance of 6.8% in the second half to meet the annual target.
    • Comparative Estimates: While the NSO’s estimate stands at 6.4%, other organizations like the International Monetary Fund (IMF) have projected a slightly higher growth rate of 7%, reflecting differing outlooks on economic recovery and consumer demand.

    How does the Economic Survey address challenges such as inflation and global uncertainties?

    • Food Inflation Concerns: Despite the overall decline in inflation, food inflation remains a challenge, rising from 7.5% in FY24 to 8.4% in the same period due to supply chain disruptions and adverse weather conditions. 
      • The survey emphasizes the need for improved agricultural practices and climate-resilient crops to manage these risks effectively.
    • Inflation Trends: The survey reports a reduction in retail inflation from 5.4% in FY24 to 4.9% during April-December 2024, indicating a positive trend towards achieving the RBI’s target of around 4% by FY26, contingent on stable global commodity prices and favorable domestic agricultural output.
    • Global Economic Uncertainties: The survey highlights that ongoing geopolitical tensions and global trade risks pose significant challenges to inflation management, necessitating careful policy interventions to mitigate potential impacts on the domestic economy.
    • Policy Recommendations: To address these challenges, the Economic Survey advocates for strategic policy measures, including enhancing supply chain resilience, improving data collection for better price monitoring, and fostering an environment conducive to investment and growth.

    What structural reforms are recommended to enhance long-term economic stability?

    • Deregulation and Ease of Doing Business: The Economic Survey advocates for significant deregulation to foster a more conducive business environment. It stresses that the government should “get out of the way” of businesses by minimizing micro-management and enhancing accountability among regulators.
    • Empowering Small Firms: Recommendations include empowering small enterprises, enhancing economic freedom, and ensuring a level playing field across sectors to stimulate growth and investment.
    • Focus on Domestic Demand: The budget is expected to prioritize boosting domestic demand through increased government spending, particularly in infrastructure and capital projects, as a countermeasure against global uncertainties and inflationary pressures.

    Way forward: 

    • Strengthen Domestic Resilience – Focus on boosting domestic consumption and investment through targeted fiscal measures, infrastructure expansion, and support for MSMEs to counter global uncertainties.
    • Enhance Inflation Management – Implement climate-resilient agricultural policies, improve supply chain efficiency, and strengthen monetary-fiscal coordination to maintain stable inflation and ensure sustainable growth.

    Mains PYQ:

    Q Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India.(UPSC IAS/2022)

  • [pib] DGFT launches enhanced eCoO 2.0 System

    Why in the News?

    The Directorate General of Foreign Trade (DGFT) has launched the enhanced Certificate of Origin (eCoO) 2.0 system, a major upgrade aimed at simplifying export certification and improving trade efficiency.

    What is eCoO 2.0 System?

    • The eCoO 2.0 system is a digital platform launched by the Directorate General of Foreign Trade (DGFT) to simplify and streamline the issuance of Non-Preferential Certificates of Origin (CoO).
    • Effective January 1, 2025, exporters must electronically file CoO applications through this platform.
    • It aligns with India’s Ease of Doing Business initiative by improving trade facilitation, digital authentication, and document processing.

    Key Features of the eCoO 2.0 System

    • Exporters must submit Non-Preferential Certificates of Origin (CoO) online.
    • Allows exporters to authorize multiple users under a single Importer Exporter Code (IEC).
    • Aadhaar-based e-Signing provides an alternative to Digital Signature Tokens, enhancing security and ease of use.
    • Offers real-time access to eCoO services, Free Trade Agreement (FTA) details, trade events, and notifications.
    • Exporters can request In-lieu CoO for rectifications on previously issued CoOs.
    • The system handles 7,000+ eCoOs daily, integrating 125 issuing agencies, 110 chambers of commerce, and 650+ issuing officers.

    Significance of the eCoO 2.0 System

    • Reduces manual paperwork and speeds up export documentation.
    • Digitally signed CoOs prevent fraudulent certifications and ensure traceability.
    • Facilitates smoother re-exports, trans-shipments, and intermediary trade, boosting India’s position in global supply chains.
    • Faster approvals help exporters comply with international trade agreements, enhancing competitiveness.
    • Aligns with India’s push for paperless trade, reinforcing DGFT’s trade facilitation efforts.

    PYQ:

    [2011]  A “closed economy” is an economy in which:

    (a) the money supply is fully controlled

    (b) deficit financing takes place

    (c) only exports take place

    (d) neither exports or imports take place

  • SEBI proposes sachetization of mutual funds to boost financial inclusion

    Why in the News?

    SEBI is collaborating with the mutual fund industry to find ways to make monthly SIPs of just Rs 250 possible, aiming to encourage more people from lower-income groups to invest in mutual funds.

    What is Sachetisation?

    • Sachetisation refers to offering products in small, affordable units, making them accessible to a broader consumer base, especially those in price-sensitive segments.
    • The term originated from the FMCG (Fast Moving Consumer Goods) sector, where products like shampoos were made available in small sachets at low prices to cater to low-income consumers.
    • SEBI is now proposing a similar approach for mutual funds, allowing small-ticket investments through SIPs (Systematic Investment Plans) with low monthly amounts (such as Rs 250).

    What are the significances of Sachetisation?

    • Affordable Financial Products: Just as small sachets of consumer goods made them accessible to lower-income groups, small-ticket SIPs in mutual funds can make investment opportunities available to a larger section of the population, particularly those who may not have the financial capacity to invest larger amounts.
    • Promoting Financial Empowerment: By lowering the entry barrier for mutual fund investments, sachetisation can help empower underserved communities and individuals by enabling them to participate in the growing financial markets and benefit from the potential returns.
    • Expanding Reach: This approach would encourage mutual fund companies to expand their reach to remote locations, helping them penetrate rural and low-income markets, and promote a wider culture of saving and investing.
    • Financial Inclusion for the Bottom of the Pyramid: The primary target of sachetisation in mutual funds is low-income groups that have limited access to traditional investment products. By offering small, regular investments, SEBI aims to promote financial inclusion at the grassroots level.

    How does it work?

    • SEBI has proposed introducing small ticket SIPs at Rs 250 per month, which would allow new investors from low-income groups to participate in mutual funds without the burden of higher minimum investment requirements. This contrasts with existing schemes that often require a minimum SIP of Rs 500 or more.
    • Investors can commit to a small ticket SIP for a duration of five years (60 installments), although they have the flexibility to withdraw or stop their investments without restrictions if needed. This structure encourages consistent investment while providing an exit option for investors.
    • To facilitate the success of small ticket SIPs, SEBI plans to implement discounted rates for intermediaries and reimburse certain costs from the Investor Education and Awareness Fund. This will help asset management companies (AMCs) break even more quickly on their investments in these small ticket offerings.
    • The sachetised SIPs will be available under specific mutual fund schemes, excluding high-risk options like small-cap and mid-cap equity schemes, which are deemed unsuitable for new investors from lower-income backgrounds. This targeted approach aims to safeguard these investors while still encouraging their entry into the market.
    • To further promote financial inclusion, SEBI proposes incentives for distributors who successfully guide investors through 24 instalments of the small ticket SIP, thereby enhancing participation and support for new investors in mutual funds.

    Conclusion: The strategy could result in a significant increase in domestic investor participation, contributing to the resilience of India’s equity market and fostering long-term financial stability.

    Mains PYQ:

    Q Comment on the important changes introduced in respect of the Long term Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in the Union Budget for 2018-2019. (UPSC IAS/2018)

  • [23rd January 2025] The Hindu Op-ed: China’s moves must recast India’s critical minerals push

    PYQ Relevance:

    Q) Discuss the multi-dimensional implications of uneven distribution of mineral oil in the world. (UPSC CSE 2021)

    Mentor’s Comment: UPSC mains have always focused on Chinese dominance in Geopolitics (2024) and Mines and Minerals in Indian Economy (2021 & 2022).

     

    Despite having the fifth-largest reserves of rare earths globally, India currently lags in all stages of rare earth development. India heavily relies on China for critical minerals, with significant import percentages for essential resources such as lithium (82%), bismuth (85.6%), and silicon (76%). This dependency poses risks to India’s economic security. The International Energy Agency predicts that demand could double by 2030 and quadruple by 2040.

     

    Today’s editorial emphasizes the challenges posed by the Critical Mineral industry at national and Global level. This content can be used for presenting the challenges in the Indian Economy with respect to Critical Mines and Minerals and Trade issues.

    _

    Let’s learn!

    Why in the News?

    China’s recent actions (expanded its export control list by including 28 entities), including potential export restrictions, have heightened fears about India’s reliance on Chinese supplies of critical minerals like lithium, cobalt, and rare earth elements.

    • China controls a substantial portion of the global supply of critical minerals, producing about 60% of rare earth elements, 50% of lithium, and 70% of cobalt.
    • This dominance extends to processing, where China handles approximately 80% of the world’s critical mineral processing, allowing it to influence global prices and availability significantly.

    What are the implications of China’s dominance in the critical minerals supply chain for India’s Economic Security?

    • Supply Chain Vulnerability: India’s heavy reliance on Chinese imports for critical minerals like lithium and cobalt creates significant risks, as China’s control over a large share of global production and processing capacity could lead to supply disruptions or price increases.
    • Geopolitical Leverage: China’s ability to restrict access to critical minerals during geopolitical tensions poses a direct threat to India’s energy transition and economic stability, potentially hindering its renewable energy goals.
    • Need for Strategic Diversification: In response to these challenges, India must pursue strategic partnerships with resource-rich countries and invest in domestic mineral exploration and processing capabilities to reduce dependence on China.
    • Global Competition and Sustainability: As global competition for critical minerals intensifies, India must balance its pursuit of resource independence with sustainable mining practices, ensuring long-term availability while addressing environmental concerns.

     

    What are the key challenges in developing India’s domestic critical mineral production?

    • Limited Exploration and Development: Complex geology, lack of advanced exploration technologies, and regulatory hurdles slow down the discovery and commercial extraction of resources like lithium and cobalt.
    • Processing Capacity Gaps: India lacks sufficient domestic processing and refining facilities for critical minerals. This gap forces the country to depend on foreign processing.
    • Regulatory and Policy Constraints: Existing regulations reserve certain critical minerals for public sector undertakings, limiting private sector participation in exploration and mining.
      • Additionally, the need for an updated list of critical minerals in the Mines and Minerals (Development and Regulation) Act hampers timely exploration efforts.
      • Establishing new exploration and processing activities involves long gestation periods, which can delay India’s efforts to become self-reliant in critical minerals.
    • Skilled Workforce Shortage: There is a shortage of skilled manpower in the materials, minerals, and metals sectors due to gaps in specialized training and advanced skills development.
    • Environmental Concerns: Mining activities can lead to significant environmental degradation, including biodiversity loss, water depletion, and pollution. Addressing these concerns while developing mineral resources poses a challenge for sustainable practices.

    How can India effectively reduce its dependency on Chinese imports for critical minerals?

    • Domestic Exploration and Production: India is focusing on enhancing its domestic mining capabilities by identifying and exploring critical mineral reserves within its territory.
      • For Example, the recent discoveries of lithium deposits in states like Jammu and Kashmir, Rajasthan, and Karnataka highlight the potential for self-reliance in critical minerals essential for renewable energy technologies.
    • Critical Minerals Mission: Government has launched a Critical Mineral Mission aimed at securing domestic production, recycling, and overseas acquisition of critical minerals.
      • This mission includes incentives for private companies to establish processing facilities and aims to reduce import duties on key minerals, thereby promoting local processing and refining.
    • International Partnerships: India is actively seeking to forge strategic partnerships with resource-rich countries, particularly in Africa and Latin America, to secure mineral blocks through government-to-government agreements.
      • This includes investments in countries like Australia, Chile, Ghana, and South Africa to diversify supply sources and mitigate risks associated with over-reliance on China.
    • Regulatory Reforms and Investment: The Indian government is implementing regulatory reforms to attract private investment in the critical minerals sector.
      • This includes auctioning critical mineral blocks to both state-owned and private companies, establishing entities like Khanij Bidesh India Ltd. (KABIL) for overseas acquisitions, and enhancing the National Mineral Exploration Trust (NMET) to support exploration efforts.

    Key Significant Features of the Mines and Minerals (Development and Regulation) Amendment Act, 2023 

    • Private Sector Involvement: The amendment allows the private sector to explore and mine six critical minerals previously restricted to state agencies, including lithium, beryllium, niobium, titanium, tantalum, and zirconium. This shift encourages private investment and expertise in the mining sector.
    • Exploration Licenses (EL): The introduction of Exploration Licenses enables private companies to conduct reconnaissance and prospecting for critical minerals. This is expected to attract foreign direct investment (FDI) and engage junior mining companies, thereby boosting exploration efforts for deep-seated minerals.
    • Exclusive Auctions for Critical Minerals: The central government is empowered to auction mineral concessions for critical minerals such as rare earth elements, cobalt, and nickel. This streamlined auction process is designed to accelerate production and generate revenue for state governments.
    • Revenue-Sharing Mechanism: If resources are proven after exploration, the state government must conduct an auction for mining leases within six months. The exploration licensee will receive a share in the auction value of the subsequent mining lease, incentivizing exploration activities.

    What role do global market dynamics play in shaping India’s critical mineral policies?

    • Geopolitical Influences: The competitive landscape of critical minerals is heavily influenced by geopolitical tensions, particularly with China, which dominates the supply chain.
      • India’s policies need to be increasingly designed to mitigate reliance on Chinese imports by fostering partnerships with countries like the U.S., Australia, and members of the Quad, aiming for a more diversified and secure supply chain.
    • Investment in Domestic Capabilities: To counteract dependency on imports, India should  implement regulatory reforms to attract private investment in the mining sector.
      • This includes auctioning mineral blocks and promoting initiatives like the National Critical Minerals Mission, which aims to strengthen the entire value chain from exploration to processing.
    • Need for Strategic Sourcing: Global market fluctuations can lead to price volatility for critical minerals, prompting India to develop a carefully crafted import strategy.
      • This strategy focuses on establishing stable relationships with resource-rich nations and diversifying sourcing options to mitigate risks associated with supply disruptions.
    • Fiscal Incentives: A possible remedy is to offer larger upfront fiscal incentives during the exploration phase. In other words, pledging direct capital support early in the construction phase might be to approach critical minerals extraction as a semiconductor fabrication project.

  • What is U.S.’s new rule for exporting AI chips?

    Why in the News?

    The U.S. Bureau of Industry and Security (BIS) created a system with different levels to control the sale and export of AI chips and technology more effectively.

    What is the main objective behind one of the last orders of the Biden administration? 

    • National Security and Foreign Policy: The primary goal of the BIS regulations is to enhance control over the circulation of advanced AI technology and chips to align with U.S. national security and foreign policy interests.
      • The regulations aim to prevent sensitive technologies from reaching adversarial nations, thereby mitigating risks associated with military advancements and cyber operations.
    • Secure Technology Ecosystem: The regulations are designed to cultivate a secure and trusted technology ecosystem that promotes the responsible use and diffusion of AI technologies, ensuring that advanced AI capabilities do not fall into the hands of U.S. adversaries.

    How will the tiered framework for licensing and exporting Artificial Intelligence chips work? 

    • Three-Tier System: The new regulations categorize countries into three tiers based on their relationship with the U.S.:
      • Tier 1: No restrictions for exports to 18 U.S. allies, including Australia, Canada, and Japan.
      • Tier 2: Countries like China and India face caps on volumes and require Validated End User (VEU) authorization for transactions contributing to advanced AI development.
      • Tier 3: Arms-embargoed countries such as North Korea and Iran have no access to advanced AI technology.

    How has the tech industry responded to the move? 

    • Concerns Over Competitiveness: Major tech companies, including NVIDIA and Oracle, have expressed apprehension that these regulations could undermine U.S. competitiveness in the global tech landscape.
      • They argue that restricting access to widely available technologies may not enhance security but instead hinder innovation.
    • Call for Revisions: Industry leaders hope that the incoming administration will reconsider or withdraw these regulations, citing potential disruptions to business operations and global supply chains.

    Will it affect the Indian Economy?

    • Impact on AI Growth: As India invests heavily in its National AI Mission, which aims to develop infrastructure with over 10,000 GPUs through a ₹10,000 crore investment, the restrictions could pose substantial challenges in scaling up AI capabilities post-2027.
      • The limits on GPU imports may deter innovation and slow down the growth of India’s tech sector.
    • Potential Delays in Infrastructure Development: Major data center providers in India, such as Tata Communications and CtrlS, may face delays or downsizing of their plans due to restricted access to GPUs. This could place Indian companies at a competitive disadvantage compared to their U.S. counterparts.
    • India’s Exclusion from Trusted Allies: India is not included in the list of trusted U.S. allies due to concerns over the leakage of chips to countries like Russia.

    Way forward: 

    • Strengthen Domestic AI Capabilities: India should accelerate the development of indigenous AI technologies and chips to reduce reliance on foreign imports, invest in local R&D and foster partnerships with global tech firms for technology transfer.
    • Diversify Global Alliances: India could strengthen its technological partnerships with countries outside the U.S. and explore alternative markets to source AI chips, ensuring the diversification of its supply chains to mitigate the impact of export restrictions.

    Mains PYQ:

    Q “The emergence of the Fourth Industrial Revolution (Digital Revolution) has initiated e-Governance as an integral part of government”. Discuss. (UPSC IAS/2020)

  • [pib] Diamond Imprest Authorization (DIA) Scheme

    Why in the News?

    The Department of Commerce under the Ministry of Commerce and Industry has launched the Diamond Imprest Authorization (DIA) Scheme to bolster the global competitiveness of India’s diamond sector.

    About the Diamond Imprest Authorization (DIA) Scheme

    • The DIA Scheme permits duty-free import of natural cut and polished diamonds for export purposes.
    • It mandates an export obligation with a value addition of 10%.
    • Objective: To retain India’s leadership in the global diamond industry value chain by facilitating ease of doing business.
    • It will be implemented starting April 1, 2025.
    • Features of the Scheme:
      • Duty-Free Import: Allows duty-free import of natural cut and polished diamonds of less than ¼ Carat (25 Cents).
      • Export Obligation: Requires a minimum 10% value addition to ensure beneficiation.
      • Eligibility: Open to Two Star Export Houses and above; Exporters with annual exports of at least USD 15 million are eligible.
      • Support for MSMEs: Provides a level playing field for smaller exporters, enabling them to compete with larger players.
      • Global Beneficiation Practices: Inspired by beneficiation policies in diamond-mining countries like Botswana, Namibia, and Angola, where manufacturers must establish cutting and polishing facilities.

    India’s Diamond Industry: Current Status

    • India processes over 90% of the world’s diamonds and provides jobs to approximately 5 million people.
    • India contributes 19% of total global diamond exports.

    Challenges:

    • Exports Decline:
      • 2022: Exports valued at $23 billion.
      • 2023: Declined to $16 billion, with further declines anticipated.
    • Rough Diamond Imports: Fell by 24.5%, from $18.5 billion (FY 2021-22) to $14 billion (FY 2023-24).
    • Exports of Cut and Polished Diamonds: Dropped by 34.6%, from $24.4 billion (FY 2022) to $13.1 billion (FY 2024).
    • Inventory Challenges: The gap between net imports of rough diamonds and net exports of cut and polished diamonds widened from $1.6 billion (FY 2022) to $4.4 billion (FY 2024).
    • Returns of Unsold Diamonds: The percentage of unsold diamonds returned to India rose from 35% to 45.6% between FY 2022 and FY 2024.

     

    PYQ:

    [2018] Which one of the following foreign travellers elaborately discussed about diamonds and diamond mines of India?

    (a) Francois Bernier

    (b) Jean-Baptiste Tavernier

    (c) Jean de Thevenot

    (d) Abbe Barthelemy Carre

  • [pib] 9 Years of Startup India

    Why in the News?

    On January 16 (National Startup Day), 2025, India marks 9 successful years of Startup India, a flagship initiative that has revolutionized the entrepreneurial ecosystem in the country.

    About the Startup India Initiative

    • Startup India is a flagship initiative launched by the Government of India on January 16, 2016, to create a robust ecosystem for nurturing startups and innovation.
    • It aims to drive economic growth and generate large-scale employment opportunities, with a focus on empowering entrepreneurs through innovation and regulatory support.
    • The PM first announced the initiative on August 15, 2015, during his Independence Day address at Red Fort, New Delhi.
    • The program aims to establish 75+ startup hubs across India and encourages entrepreneurship in Tier-2 and Tier-3 cities.
      • A related scheme, Stand-Up India, was launched on April 5, 2016, to facilitate loans between ₹10 lakh to ₹1 crore for SCs, STs and women entrepreneurs to establish Greenfield enterprises.
    • The program emphasizes the 3 Cs—Capital, Courage, and Connections, which Prime Minister Modi identifies as essential for entrepreneurial success.
    • It seeks to eliminate restrictive policies, including those related to License Raj, foreign investment proposals, and land permissions, ensuring ease of doing business.

    Definition of a Startup (as per DPIIT)

    • A startup must be registered as a private limited company, partnership firm, or limited liability partnership (LLP) in India.
    • The entity must not have completed 10 years since its incorporation.
    • Annual turnover should not exceed ₹100 crore in any financial year since incorporation.
    • The startup should focus on innovative products or services and demonstrate scalability, potential for wealth creation, or employment generation.
    • Entities formed through splitting or restructuring of existing businesses are not classified as startups.
    • Startup related terminologies analogously used in India:
      • Unicorn: A startup valued at over $1 billion.
      • Decacorn: A startup valued at over $10 billion.
      • Hectocorn: A startup valued at over $100 billion.
      • Soonicorn: A rapidly growing startup expected to become a unicorn soon.
      • Mincorn: A startup valued at less than $1 billion.

    Key Achievements of Startup India

    • India is the third-largest startup hub globally, following the United States and China.
    • DPIIT-recognized startups grew from 500 in 2016 to 1,59,157 by January 2025.
    • Women-led startups accounted for 73,151 entities as of October 2024, with 48% of startups having at least one woman director by December 2023.
    • Startups have generated 16.6 lakh direct jobs from 2016 to October 2024.
    • Over 50% of startups originated from Tier-2 and Tier-3 cities, including emerging hubs like Indore, Jaipur, and Ahmedabad.

    Key Government Initiatives for Startups:

    • Startup India Seed Fund Scheme (SISFS), 2021: Provides financial assistance to early-stage startups for proof of concept, prototype development, product trials, market entry, and commercialization.
      • Total allocated amount: ₹945 crore for startups over a four-year period.
    • Credit Guarantee Scheme for Startups (CGSS), 2022: Offers collateral-free loans to startups through Scheduled Commercial Banks, NBFCs, and SEBI-registered AIFs.
      • Covers loans up to ₹10 crore for eligible startups.
    • Fund of Funds for Startups (FFS), 2016: Established with a ₹10,000 crore corpus to provide funding support to startups through SEBI-registered Venture Capital Funds.
      • By 2024, ₹7,980 crore was committed to 99 Alternative Investment Funds (AIFs), benefiting over 800 startups.
    • BHASKAR (Bharat Startup Knowledge Access Registry), 2024: A centralized platform aimed at streamlining interactions within India’s entrepreneurial ecosystem.
      • Fosters innovation, collaboration, and startup growth through knowledge-sharing and networking.
    • Startup Village Entrepreneurship Program (SVEP): A sub-component of the National Rural Livelihood Mission (NRLM), implemented by the Ministry of Rural Development.
      • Supported 3,02,825 enterprises as of 2024, creating 6,26,848 jobs.
    • TIDE 2.0 (Technology Incubation and Development of Entrepreneurs): Focuses on supporting startups in emerging technologies like AI, IoT, and Blockchain.
      • Established 51 incubators and supported 1,235 startups.
    • GENESIS (Gen-Next Support for Innovative Startups), 2024: Aims to boost startups in Tier-II and Tier-III cities.
      • Total outlay: ₹490 crore over five years, targeting over 1,500 startups.
    • Atal Innovation Mission (AIM): Operates under NITI Aayog to foster innovation and entrepreneurship through the establishment of Atal Incubation Centers (AICs).
      • Provides physical infrastructure and mentorship for startups to scale effectively.
    • Startup Mahakumbh: A flagship event organized to bring together startups, unicorns, investors, and industry leaders.
      • First edition in 2019 saw over 500 participants; the fifth edition is scheduled for March 7-8, 2025, in New Delhi.

    PYQ:

    [2014] What does venture capital mean?

    (a) A short-term capital provided to industries

    (b) A long-term start-up capital provided to new entrepreneurs

    (c) Funds provided to industries at times of incurring losses

    (d) Funds provided for replacement and renovation of industries