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

  • Semicon 2.0

    Why in News?

    The Union Cabinet approved Semicon 2.0 with an outlay of ₹1,27,500 crore to strengthen India’s semiconductor design and manufacturing ecosystem after the success of Semicon 1.0.

    Key Highlights

    • Outlay: ₹1,27,500 crore.
    • Objective: Develop a complete semiconductor ecosystem and strengthen India’s position in the global semiconductor value chain.

    Six Pillars

    • Design: Promote indigenous chip design, Intellectual Property (IP) creation and System-on-Chip (SoC) development.
    • Machines & Materials: Support manufacturing of semiconductor equipment, chemicals and materials.
    • Semiconductor Fabs: Encourage Silicon, Compound Semiconductor, Display and Discrete Component fabrication units.
    • ATMP/OSAT: Expand Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) facilities.
    • R&D: Strengthen Research and Development (R&D) for advanced semiconductor technologies.
    • Talent Development: Expand semiconductor education and industry training.

    Progress under Semicon 1.0

    • 12 manufacturing units approved with investment of ₹1.64 lakh crore.
    • Includes 1 Silicon Fab, 1 Silicon Carbide Fab, 1 Gallium Nitride (GaN) Micro LED Fab and 9 packaging units.
    • Micron, Kaynes and CG Semi have started commercial production.
    • 24 design projects supported and 105 startups/MSMEs provided access to Electronic Design Automation (EDA) tools.

    Significance

    • Reduces import dependence on semiconductors.
    • Strengthens supply chain resilience and national security.
    • Promotes innovation, high-value manufacturing and technological self-reliance.

    Prelims Pointer

    • Nodal Ministry: Ministry of Electronics & Information Technology (MeitY)
    • Mission: India Semiconductor Mission (ISM)
    • Key Focus: Chip design, fabrication (Fabs), ATMP, OSAT, R&D and skill development.

  • Reform Express: Eight New Railway Reforms

    Why in News?

    The Ministry of Railways announced 8 new structural reforms under the Reform Express initiative, taking the total to 17 reforms as part of the target of52 reforms in 52 weeks.

    Key Highlights

    • Aim: Reduce logistics costs, improve freight efficiency, encourage private investment, and promote green transport.
    • Fly Ash Transport: Introduction of containerised transport using ISO containers for pollution-free movement.
    • Container Sector: Unified Pan-India Container Train Operator (CTO) licence replacing multiple categories.
    • Fertiliser Transport: Simplified freight tariff and permission for containerised movement.
    • Skilling Policy: QR code-enabled certification for railway artisans in critical trades.
    • Construction Reforms: Better contractor selection, mandatory insurance, and Rail Bhoomi digital platform for land acquisition.
    • Wagon Design: Industries can now design specialised freight wagons with RDSO (Research Designs and Standards Organisation) approval.
    • Petroleum Transport: Oil companies can own or lease specialised POL (Petroleum, Oil and Lubricants) tank wagons.
    • Foodgrain Transport: Simplified freight rates and containerised transport for foodgrains, flour, and pulses.

    Significance

    • Promotes ease of doing business and multimodal logistics.
    • Shifts freight from road to rail, reducing costs and carbon emissions.
    • Supports PM Gati Shakti and sustainable freight transportation.

    [2025] Consider the following statements:
    I. Indian Railways have prepared a National Rail Plan (NRP) to create a future ready railway system by 2028.
    II. Kavach’ is an Automatic Train Protection system, development in collaboration with Germany.
    III. ‘Kavach’ system consists of RFID tags fitted on track in station section.
    Which of the statements given above are not correct?

    [A] I and II only

    [B] II and III only

    [C] I and III only

    [D] I, II and III

  • Bharat Tex 2026

    Why in News?

    Bharat Tex 2026, India’s largest global textile exhibition, will be held at Bharat Mandapam, New Delhi, from 14 to 17 July 2026

    Key Highlights

    • Organised by the Bharat Tex Trade Federation (BTTF) with support from the Ministry of Textiles.
    • Based on the 5F Vision: Farm → Fibre → Factory → Fashion → Foreign.
    • Participation of 1,600+ exhibitors, 7,000+ buyers, and delegates from 20+ countries.
    • Over 4,000 Business-to-Business (B2B) meetings, 100+ Business-to-Government (B2G) meetings, and 30+ Memoranda of Understanding (MoUs) expected.
    • Covers the complete textile value chain including fibre, yarn, fabric, apparel, home textiles, and technical textiles.
    • Features 100+ knowledge sessions on sustainability, technical textiles, Industry 5.0, innovation, and exports.
    • Includes Confederation of Indian Textile Industry (CITI) Textile Sustainability Awards 2026 and AI-enabled digital business matchmaking.

    About Bharat Tex

    • India’s flagship global textile and apparel exhibition.
    • Promotes exports, investment, innovation, sustainability, and international partnerships.
    • Showcases India’s textile manufacturing capabilities and strengthens its position in global value chains.

    Government Initiatives

    • PM MITRA: Prime Minister Mega Integrated Textile Region and Apparel Parks
    • PLI Scheme: Production Linked Incentive Scheme for Textiles
    • NTTM: National Technical Textiles Mission
    • SAMARTH: Scheme for Capacity Building in Textile Sector

    [2022] Which of the following activities constitute real sector in the economy?
    1. Farmers harvesting their crops
    2. Textile mills converting raw cotton into fabrics
    3. A commercial bank lending money to a trading company
    4. A corporate body issuing Rupee Denominated Bonds overseas.
    Select the correct answer using the code given below:

    [A] 1 and 2 only

    [B] 2, 3 and 4 only

    [C] 1, 3 and 4 only

    [D] 1, 2, 3 and 4

  • India’s Steel Sector Records Growth in Q1 FY 2026

    Why in News?

    India’s steel sector recorded steady growth in Q1 FY 2026-27 with higher production, strong demand, and continued policy support.

    Key Highlights

    • Crude steel production: 42.1 Mt (+3.0% YoY)
    • Finished steel production: 41.0 Mt (+5.9% YoY)
    • Finished steel consumption: 41.6 Mt (+8.3% YoY)
    • Installed steel capacity: 221.9 MTPA (Target: 300 MTPA by 2030 under National Steel Policy 2017)
    • India remained a net importer of finished steel despite export growth.

    Major Developments

    • DGTR launched an anti-dumping probe into hot-rolled steel imports from China, Japan, and Russia.
    • Ministry of Steel promoted AI, automation, predictive maintenance, digital mining, and smart manufacturing.
    • SAIL supplied 5,700 tonnes of special steel for three Indian Navy ships.
    • JSW Group began construction of a 2 MTPA integrated steel plant in Kadapa, Andhra Pradesh.

    Green Steel

    • SAIL Rourkela launched India’s first CO₂ Dashboard for digital carbon monitoring.
    • Plantation drives and decarbonisation initiatives continued under Van Mahotsav 2026.

    [2023]Consider the following heavy industries:
    1. Fertilizer plants
    2. Oil refineries
    3. Steel plants
    Green hydrogen is expected to play a significant role in decarbonizing how many of the above industries?

    [A] Only one

    [B] Only two

    [C] All three

    [D] None

  • MSMEs and Viksit Bharat 2047: formalisation, credit access, and the inclusion gap

    Why in the news

    The Ministry of MSME released its 2025–26 sector review highlighting landmark milestones: 8.7 crore Udyam registrations, CGTMSE completing 25 years, and MSME contributions reaching 31.1% of GDP and 48.58% of exports. The review exposes the central challenge — formalisation and credit access have expanded rapidly, but equity capital, market linkages, and structural inclusion for marginalised entrepreneurs remain uneven.

    What is the scale and economic significance of India’s MSME sector, and what structural gaps persist despite aggregate growth?

    • Economic footprint (January 2026 data): MSMEs contribute 31.1% of GDP, 35.4% of manufacturing output, and 48.58% of exports. With 38.9 crore employed, the sector is the second-largest employment source after agriculture.
    • Definition revision (April 2025): The government revised MSME classification thresholds based on investment and turnover, giving enterprises greater room to scale without losing policy support — addressing a longstanding cliff-edge disincentive to growth.
    • Formalisation reach: Udyam and Udyam Assist registrations crossed 8.7 crore as of June 2026, expanding access to institutional finance and government schemes for previously informal enterprises.
    • Persistent equity gap: Debt-based credit schemes have scaled, but equity capital essential for MSMEs seeking to move beyond micro-scale remains structurally limited. The SRI Fund (Fund of Funds) has reached only 761 enterprises with ₹2,851 crore as of May 2026, a narrow footprint relative to sector size.

    How has credit access for MSMEs been restructured, and what constraints remain in reaching the smallest enterprises?

    • CGTMSE expansion: The Credit Guarantee Fund Trust for Micro and Small Enterprises approved 29.03 lakh guarantees worth ₹3.77 lakh crore (January–November 2025). The guarantee ceiling was raised from ₹5 crore to ₹10 crore, enabling larger collateral-free support.
    • Digital Credit Assessment Model: A new model reduces dependence on traditional collateral and balance-sheet assessment, improving access for first-generation and informal-origin entrepreneurs who lack formal credit histories.
    • PMEGP reach: The Prime Minister’s Employment Generation Programme has supported 10.84 lakh micro-enterprises with ₹29,623 crore in margin money subsidies, generating employment for over 97 lakh people since inception. Applications are now available in 19 regional languages (since June 2025).
    • Remaining constraint: Guarantee schemes address debt access but not enterprise viability. MSMEs without bankable cash flows common among artisan and rural enterprises — remain outside the formal credit architecture despite formalisation.

    How are technology adoption and quality certification being embedded into the MSME ecosystem?

    • ZED Certification (Zero Defect Zero Effect): Over 93.61 lakh MSMEs registered and 6.68 lakh certified as of May 2026. The framework promotes quality manufacturing with minimal environmental impact — aligning MSME output with global supply chain standards.
    • LEAN Manufacturing: Over 65,647 enterprises registered and 18,961 certified under the Lean Manufacturing scheme. Adoption of globally recognised lean practices reduces waste and raises operational efficiency.
    • Technology Centre network: 18 existing Technology Centres, 25 operational Extension Centres (trained 53,963 youth), and 9 World Bank-supported centres (trained 59,357 individuals, assisted 1,520 MSMEs as of November 2025). An additional 20 Technology Centres and 100 Extension Centres are under development.
    • IPR facilitation: Intellectual Property Facilitation Centres have approved 191 patents, 807 trademarks, 99 designs, and 6 GI registrations building a thin but growing innovation asset base within the sector.

    How effectively is MSME policy reaching marginalised groups artisans, SC/ST entrepreneurs, women, and the North East?

    • PM Vishwakarma: The scheme covers 18 traditional trades and reached its four-year registration target of 30 lakh beneficiaries in two years. Over 24 lakh completed basic skill training; ₹5,133 crore in collateral-free loans sanctioned to 5.98 lakh beneficiaries.
    • National SC/ST Hub: Public procurement from SC/ST-owned enterprises rose from ₹99 crore (2015–16) to ₹3,731 crore (2024–25). SC/ST-owned MSEs accounted for 1.93% of total public procurement as of December 2025, progress visible but far below proportional representation.
    • Women entrepreneurship: At the 44th IITF 2025, over 67% of MSME stalls were allotted to women entrepreneurs a market access intervention, though stall allocation does not translate directly into sustained commercial scale.
    • North East promotion: 73 projects approved under the NER & Sikkim scheme (total cost ₹114.37 crore, government assistance ₹89.60 crore), targeting manufacturing, testing, packaging, skilling, and tourism infrastructure. Eight new projects were approved in Assam and Meghalaya in 2025.
    • SFURTI (traditional industry clusters): 513 clusters approved, 376 functional as of June 2026, benefiting 3.03 lakh artisans. Cluster-based organisation addresses market linkage and tool access — the structural gaps that individual artisan support cannot solve.

    Do the governance and grievance redressal mechanisms match the scale of the MSME sector’s delayed payment and dispute burden?

    • MSME Samadhaan Portal: 2,56,892 applications received involving ₹55,244 crore in claims as of June 2026. Only 58,148 cases disposed — a 22.6% resolution rate, revealing a large unresolved claims backlog despite the portal’s existence.
    • CHAMPIONS Portal: 39,494 grievances received in 2025–26; 39,387 resolved a 99.72% disposal rate. High throughput here contrasts sharply with Samadhaan’s backlog, suggesting delayed payments are the deeper structural problem, not general grievance handling.
    • Online Dispute Resolution (ODR) Portal: Newly launched to reduce delayed payments through technology-enabled dispute resolution. Effectiveness is yet to be demonstrated at scale.
    • Public procurement monitoring: The MSME Sambandh Portal tracked ₹31,443 crore in CPSE procurement during FY 2026–27 (as of June 2026), with 54.51% sourced from MSEs across 29,769 enterprises. Mandatory procurement targets create market access but do not resolve the downstream payment delay problem.

    Conclusion

    India’s MSME sector has achieved significant formalisation and credit access milestones — but the policy architecture still addresses inputs (registrations, guarantees, skilling) more effectively than outcomes (enterprise viability, market competitiveness, equitable inclusion). The delayed payment backlog on Samadhaan, the narrow reach of equity capital under the SRI Fund, and the 1.93% SC/ST share in public procurement collectively indicate that expansion of the formal enterprise base has not yet translated into structural economic empowerment. For Viksit Bharat 2047, the MSME agenda must shift from formalisation as an end to commercialisation and sustained enterprise growth as the measure of success.

  • Government Introduces Improvement Notice Mechanism under the Legal Metrology Act

    Why in the news?

    The Department of Consumer Affairs has introduced the Improvement Notice mechanism under the Legal Metrology Act, 2009 through the Jan Vishwas (Amendment of Provisions) Act, 2026. The reform aims to reduce the compliance burden, promote Ease of Doing Business (EoDB), and encourage voluntary compliance while ensuring consumer protection.

    What is the Improvement Notice Mechanism?

    • It allows first-time procedural or regulatory non-compliance to be corrected before penal proceedings begin.
    • A Legal Metrology Officer issues an Improvement Notice, identifying the deficiency and providing reasonable time for rectification.
    • If the entity complies within the prescribed period:
      • No penal action or unnecessary litigation.
    • If the entity Fails to comply, or Repeats the violation, Penal provisions under the Legal Metrology Act continue to apply.

    Objectives

    • Promote Ease of Doing Business (EoDB).
    • Encourage voluntary compliance.
    • Reduce compliance costs and litigation.
    • Foster trust-based governance.
    • Allow regulators to focus on serious and deliberate violations.

    Significance for UPSC

    • Example of Minimum Government, Maximum Governance.
    • Reflects the philosophy of the Jan Vishwas Act.
    • Balances Consumer protection, Regulatory efficiency, and Ease of Doing Business
    • Shifts regulation from a punitive approach to a facilitative approach.

    Jan Vishwas (Amendment of Provisions) Act, 2026

    • The Jan Vishwas (Amendment of Provisions) Act, 2026 is a reform aimed at promoting Ease of Doing Business (EoDB) by shifting from a punitive compliance regime to a trust-based governance framework.
    • It amends several Central laws to reduce unnecessary penalties for minor procedural violations while retaining strict action for serious offences.

    Legal Metrology Act, 2009

    • Legal Metrology is the application of laws and regulations to weights, measures, measuring instruments, and packaged commodities to ensure accuracy, fairness in trade, and consumer protection.
    • Enacted: 2009 (came into force in 2011)
    • Nodal Ministry: Ministry of Consumer Affairs, Food and Public Distribution
    • Department: Department of Consumer Affairs

    [2022] In India which one of the following is responsible for maintaining for prices stability by controlling inflation?

    [A] Department of Consumer Affairs

    [B] Expenditure Management Commission

    [C] Financial Stability and Development Council

    [D] Reserve Bank of India

  • Transition Facilitation (Quality Control) Order, 2026

    Why in News?

    The Department for Promotion of Industry and Internal Trade (DPIIT) has notified the Transition Facilitation (Quality Control) Order, 2026 to ease industry compliance while maintaining product quality and strengthening domestic supply chains.

    What are Quality Control Orders (QCOs)?

    • Quality Control Orders (QCOs) are mandatory regulations issued by the Central Government under the Bureau of Indian Standards (BIS) Act, 2016.
    • They require specified products to conform to Indian Standards (IS) and obtain BIS certification before manufacture, import, sale, or distribution.
    • Objectives:
      • Ensure consumer safety and product quality.
      • Prevent substandard imports.
      • Promote standardisation and manufacturing excellence.
      • Improve global competitiveness of Indian products.

    What is the Transition Facilitation (Quality Control) Order, 2026?

    The Order introduces a risk-based alternative compliance mechanism to facilitate a smooth transition to QCO compliance without compromising quality standards.

    Key Features

    • Allows manufacturers to procure inputs from suppliers licensed under:
      • Scheme II of the BIS (Conformity Assessment) Regulations, 2018 (Product Certification Scheme),
      • instead of only relying on Scheme I (ISI Mark Scheme).
    • Permissions will be granted based on:
      • Technical capability.
      • Compliance history.
      • Technology adoption and innovation.
      • Research and design capabilities.
      • Contribution to domestic supply chains.
    • Manufacturers with three consecutive years of default-free QCO compliance are also eligible for the benefits.
    • Maintains consumer protection while reducing compliance bottlenecks.

    BIS Certification Schemes

    • Scheme I (ISI Mark Scheme): Product testing and factory inspection. Mandatory use of the ISI Mark. Applicable to products covered under QCOs.
    • Scheme II: Simplified product certification framework. Intended for specific categories where alternative conformity assessment is permitted. Facilitates flexible sourcing while ensuring quality.

    Significance

    • Strengthens domestic value chains.
    • Encourages technology upgradation and innovation.
    • Reduces regulatory burden on industry.
    • Enhances Ease of Doing Business.
    • Improves integration with global supply chains.
    • Ensures continued consumer confidence in product quality.

    Prelims Pointers

    • DPIIT: Department under the Ministry of Commerce and Industry responsible for industrial policy, startup promotion, and quality ecosystem.
    • Bureau of Indian Standards (BIS):
      • National Standards Body of India.
      • Established under the BIS Act, 2016.
      • Functions under the Ministry of Consumer Affairs, Food and Public Distribution.
      • Formulates Indian Standards and operates certification schemes, including the ISI Mark.

  • Index of Services Production (ISP)

    Why in the news?

    The Ministry of Statistics and Programme Implementation (MoSPI) will launch the Index of Services Production (ISP) in July 2026 as India’s first monthly indicator to measure short term growth in the services sector.

    What is ISP?

    • Index of Services Production (ISP) is a monthly high frequency indicator that measures changes in the real output (volume) of the formal services sector relative to a base year.
    • It is the services sector counterpart of the Index of Industrial Production (IIP).

    Key Highlights

    • Nodal Ministry: Ministry of Statistics and Programme Implementation (MoSPI).
    • Base Year: 2024-25.
    • First Trial Release: 14 July 2026 (for 2025-26 and April 2026).
    • Release Frequency: Monthly, with a 60 day time lag.
    • Compiled using a fixed weight Laspeyres Volume Index.
    • Weights are based on Gross Value Added (GVA) of service sectors.

    Objectives

    • Complement the Index of Industrial Production (IIP).
    • Provide high frequency data on the services sector.
    • Improve economic forecasting and business cycle analysis.
    • Strengthen evidence based policymaking.

    Coverage

    • Included Sectors: Wholesale and retail trade, Transport, Banking and insurance, Telecommunications, Hotels and restaurants, Real estate, Professional, scientific and technical services, Arts, entertainment and recreation
    • To be Included Later: Health services and Education services (after availability of ASISSE data).

    Data Sources

    • Administrative data: Air Transport, Railways, Banking and Insurance.
    • GST (GSTR-1 outward supplies): Most service industries.
    • Annual Survey of Incorporated Services Sector Enterprises (ASISSE): Health and Education.

    Why is ISP Important?

    • Services contribute over 50% of India’s Gross Value Added (GVA) since 2013-14.
    • Provides timely tracking of service sector performance.
    • Enables faster policy response and economic monitoring.
    • Aligns India with international statistical practices.

    Limitations

    • Covers only the formal services sector.
    • Excludes: Public administration and defence, Government health and education, Social work without accommodation, Household services, Activities of extraterritorial organisations, Gambling and betting, Other predominantly non market and informal services.

    What is the proposed compilation formula?

    • ISP is proposed to be compiled using a fixed-weight Laspeyres Volume Index
      • Measures changes in output using fixed base year weights.
      • Widely used for indices such as IIP due to ease of comparison over time.

    [2020] Consider the following statements:
    1.The weightage of food in the Consumer Price Index (CPI) is higher than that in the Wholesale Price Index (WPI).
    2.The WPI does not capture changes in the prices of services, which the CPI does.
    3.The Reserve Bank of India uses WPI as its key measure of inflation to decide changes in policy rates.
    Which of the statements given above is/are correct?

    [A] 1 and 2 only

    [B] 2 and 3 only

    [C] 1 and 3 only

    [D] 1, 2 and 3

  • Examine the impact of liberalization on companies owned by Indians. Are they competing with the MNCs satisfactorily? Discuss.

  • Normally countries shift from agriculture to industry and then later to services, but India shifted directly from agriculture to services. What are the reasons for the huge growth-services vis-a-visindustry in the country? Can India become a developed country without a strong industrial base?