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GS Paper: GS3-01.Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

  • MoSPI Secy: Nominal GDP revised down as informal sector data has improved

    Why in the News

    The Ministry of Statistics and Programme Implementation (MoSPI) has stated that the downward revision of nominal Gross Domestic Product (GDP) under the new base year series follows a change in how the informal sector is measured, not a correction of an earlier overstatement. The revision runs across every overlapping year of the two series and was driven by the replacement of proxy based estimates with direct annual surveys. The new series moves the base year to 2022-23 from 2011-12 and was released in February. Two separate criticisms have been put to the Ministry, one that the informal economy is still being read off the performance of listed companies, and the other that the price data used for deflation is the wrong kind. The contest is therefore not about the growth rate but about whether the measurement itself can be trusted.

    What changed in the new base year GDP series?

    1. The base moved: The series shifts its base year from 2011-12 to 2022-23, and was released in February.
    2. The estimation method changed with it: The informal sector is now estimated from direct, empirical annual surveys rather than from proxies carried forward from a base year.
    3. The revision is systematic, not a one year correction: Nominal GDP has been revised lower across all overlapping years, meaning 2022-23 to 2024-25 and the subsequent quarters.

    Why did nominal GDP fall in the revised series?

    1. The old series had no regular unorganised sector survey: MoSPI calculated Gross Value Added (GVA), meaning output net of the cost of inputs used up in producing it, for the unorganised sector by multiplying estimated workforce counts by the Value Added per Worker derived from decadal surveys.
    2. Forward projection of the base year figure: The projection used proxies such as formal corporate growth rates, inter survey growth rates and historical tax collections, because no regular data was available.
    3. Survey evidence changed the picture: Annual survey evidence made it possible to capture the distinct growth patterns of the informal sector, which had been running on the formal sector’s growth rate by assumption.
    4. Informal services, the largest single driver: The single largest driver of the revision is the improved measurement of India’s informal services sector.

    How do the new surveys change the measurement?

    1. Two surveys replaced the proxies: The Annual Survey of Unincorporated Sector Enterprises (ASUSE), which enumerates unincorporated non agricultural businesses, and the Periodic Labour Force Survey (PLFS), which measures employment and workforce size, now supply the inputs directly.
    2. Survey frequency: ASUSE is now available on a quarterly basis and PLFS on a monthly basis, so quarterly GDP no longer waits on a survey that ran once every five years.
    3. What is now measured directly: Unorganised sector productivity and workforce size are measured rather than inferred from corporate results.

    What is the Annual Survey of Unincorporated Sector Enterprises?

    1. What an unincorporated enterprise is: A business run as a proprietorship or a partnership rather than as a registered company. Its accounts are never filed with a corporate registry, so its output cannot be read off company results and has to be counted directly.
    2. What ASUSE enumerates: Non agricultural businesses in manufacturing, trade and other services. It covers both establishments that hire workers and own account enterprises run by the proprietor without hired labour.
    3. How the units are reached: The survey draws a sample against an area based frame rather than against a registration list, which is what allows it to reach units that appear on no register.
    4. Why the frequency changes the estimate: Its predecessor ran roughly once in five years, so every intervening year was filled in by projection. A survey running annually and now quarterly supplies measured values for the same periods the national accounts are compiled for.

    Where does the contest over the new series lie?

    1. The listed company charge: A former Chief Economic Adviser has argued that the GDP data does not capture the informal economy properly and extrapolates the performance of listed companies. The Ministry’s stated position is that ASUSE is being used for quarterly GDP and proxies are not.
    2. The proxies were always bounded: Even in the earlier series proxies were used only between the quinquennial surveys, carried forward from previous base years, which is how the overhang continued.
    3. Overestimation is rejected as a framing: The Ministry holds that GDP is an estimation built on the best data available at the time, and that calling the old series an overestimate implies a systematic bias that was not there.
    4. The price data objection: A separate criticism concerns the use of producer price data. The Ministry’s answer is that the method of calculation was shifted to producers in the 2011-12 series of the Wholesale Price Index (WPI) itself, and that data for the past 10 years has been collected from industry.
    5. What separates the two indices: The WPI excludes exports and imports and includes taxes and trade margins to some extent, while a Producer Price Index (PPI) does not, and the Ministry states those corrections have since been made.
    6. The growth is not felt on the ground: The Ministry treats this as a larger question shaped by other factors, uncertainties and the global situation, comparable to how an individual’s experience of prices differs from an inflation rate aggregated across the country.

    What is a Producer Price Index?

    1. Prices received at the factory gate: A Producer Price Index tracks the change in prices received by domestic producers for their own output at the factory gate. It reads the price at the point of production rather than the price at any later point in the chain.
    2. Why the deflator has to match the output: Real output is nominal output divided by a price index, so the index must track the prices of the goods and services being deflated. A mismatch between the output being measured and the prices used to deflate it moves the real growth rate without anything happening in the economy.
    3. The services gap: A wholesale price index is built on goods traded in bulk and carries no services. An economy whose output is majority services therefore has no matching price series for its largest component, which is why the deflator is the contested instrument.

    Challenges to a base year revision of the national accounts

    1. A long gap between base years builds in drift: Holding a base year for more than a decade lets the structure of the economy move away from the weights the series is built on. Eg. The 2011-12 base was carried forward for over a decade on proxies before the present revision replaced it.
      The Fix: Fix a statutory base year revision cycle with a published date, so the revision is a scheduled operation rather than an event that invites suspicion.
    2. A revision breaks the comparable series users rely on: Analysts, ratings and fiscal ratios are all computed on a level that has now moved, and back series construction is where most disputes about Indian GDP have historically landed. Eg. The dispute over the back series of the 2011-12 base ran for years after that series was introduced.
      The Fix: Release a fully documented back series alongside the new base, with the method for each sector stated, rather than issuing the levels first and the method later.
    3. Deflation remains the weakest link: Converting nominal values to real ones requires price indices that match the output being deflated, and India has no full producer price index for services. Eg. Services form the largest share of output and are deflated using indices built for goods.
      The Fix: Complete and publish a services producer price index so that the largest part of output is deflated on prices collected from services producers.
    4. Survey coverage of the informal sector is thin at the edges: An enterprise survey reaches businesses with a recognisable place of operation more easily than it reaches itinerant and home based work. Eg. Home based and own account work is concentrated among women, which is also where labour force measurement is weakest.
      The Fix: Link the enterprise survey to the labour force survey at the household level, so an activity missed as an enterprise is still captured through the worker reporting it.

    Conclusion

    The disagreement now on record is about method rather than about the growth rate, and the Ministry has taken the position that the new series is the best available and that no obvious correction has been put to it for the next one. That claim is testable, since a statistical system is judged on whether its next revision moves the numbers again in the same direction. The marker to watch is the deflator, because the informal sector question has now been answered with direct surveys while the price side has not been given an equivalent instrument.

    Matching Previous Year Question

    “[2021, GS3, 10 marks] Explain the difference between computing methodology of India’s Gross Domestic Product(GDP) before the year 2015 and after the year 2015.”

  • India climbs to 4th spot as forex reserves post record weekly gain

    Why in the News

    India’s foreign exchange reserves have reached a record $785.71 billion, and the country has moved past Russia into fourth place globally. The stock rose by $44.9 billion in the week to 4 September, the largest weekly gain the Reserve Bank of India (RBI) has recorded. The gain came from a special forex drive the RBI opened in June. That drive offered banks a concessional currency swap on foreign currency deposits raised from non residents. It filled fast enough for the RBI to shut its main window a month ahead of the announced closing date. The rank and the record therefore rest on borrowed money, since a non resident deposit is a liability that falls due.

    What is the RBI’s concessional swap scheme?

    1. The deposit it targets: An FCNR(B) account, meaning Foreign Currency Non Resident (Bank), holds a non resident’s money in foreign currency and repays it in that same currency, so the depositor carries no rupee risk.
    2. What the swap does: The bank hands the foreign currency to the RBI in exchange for rupees. It receives a commitment to reverse that exchange at a fixed rate on maturity, so it does not carry the exchange risk on the principal.
    3. Why it is concessional: The swap was priced below the market cost of buying that cover, which is what made this route cheaper for banks than raising the same money abroad on their own credit.

    How big is the jump, and where does it place India?

    1. A record stock: Reserves stood at $785.71 billion on 4 September, up $44.9 billion from 28 August.
    2. A record weekly gain: The previous largest weekly rise was $16.7 billion, in the week ended 27 August 2021, so this gain is over two and a half times that mark.
    3. Fourth place came partly from a Russian decline: Russia’s international reserves fell $20.7 billion in the same week, from $774.2 billion to $753.5 billion, which put India ahead of it.
    4. The three still above India: China holds $3.85 trillion, Japan $1.21 trillion and Switzerland $1.09 trillion.

    What drove the gain?

    1. One instrument accounts for it: FCNR(B) deposits under the concessional swap brought in $127.23 billion up to 31 August, an inflow the RBI had not anticipated at that scale.
    2. The window shut early because of it: The scheme was set to close on 30 September. The pace of deposits led the RBI to close it a month sooner.
    3. A deposit drive registers directly as reserves: Foreign currency handed to the RBI under the swap enters the reserve stock in the week it lands, which is why a mobilisation shows up as a single large weekly jump rather than a gradual build.

    What did the full forex drive raise across its three windows?

    1. When it ran: The RBI announced the drive on 5 June and it became operational on 8 June.
    2. The Overseas Foreign Currency Borrowings window: The swap facility for Overseas Foreign Currency Borrowings (OFCBs), meaning foreign currency loans Indian banks raise abroad, drew $5.26 billion.
    3. The External Commercial Borrowings window: The facility for External Commercial Borrowings (ECBs), meaning foreign currency debt raised abroad by Indian companies, drew $3.89 billion.
    4. The combined total: All three windows together brought in $136.38 billion up to 31 August.
    5. Two windows are still running: The OFCB and ECB swap windows stay open until 31 December, so the drive has not finished.

    What does a larger reserve stock let the RBI do?

    1. A sustained run of increases: Reserves have now risen for ten weeks in a row.
    2. Ammunition for the rupee: A larger stock lets the RBI sell dollars to slow a fall in the rupee without drawing the cover down to an uncomfortable level.
    3. Import cover is the standard test: Reserve adequacy is judged by the number of months of imports the stock can pay for, and a higher stock lengthens that cover.
    4. It prices external borrowing: Lenders and rating agencies read reserve adequacy as a measure of a country’s capacity to meet external obligations, so the stock affects the terms on which Indian borrowers raise money abroad.

    Challenges to building reserves through a concessional swap window

    1. The addition is debt creating: A non resident deposit counts within India’s external debt, so the reserve stock and the liability against it rise together. Eg. Non resident deposits are among the largest single components reported in the Finance Ministry’s quarterly external debt statement.
      The Fix: Report the debt creating share of any reserve addition alongside the headline reserve number, so the two are read together.
    2. Maturities bunch at one point: A window filled inside three months falls due inside three months, which turns a one off inflow into a one off outflow at redemption. Eg. The concessional FCNR(B) swap of 2013 raised about $34 billion and came up for redemption together in late 2016.
      The Fix: Vary the swap rate by tenor, so deposits spread across maturities instead of bunching at the cheapest one.
    3. The subsidy sits on the central bank’s books: Pricing the swap below the market cost of cover means the RBI absorbs the difference on the exchange risk it has taken on. Eg. Cover on a three to five year rupee dollar exposure runs to roughly 3% a year, which is the order of the spread a concessional rate gives away.
      The Fix: Publish the cost of the swap subsidy as a stated line item, so the price of the reserve build is visible alongside the reserve total.
    4. A ranking is not a buffer: The reserve table compares stock sizes across economies with very different import bills and external liabilities, so a place in it says nothing about adequacy. Eg. Switzerland holds reserves above a trillion dollars on an economy a fraction of India’s size.
      The Fix: Judge the stock against import cover and short term external debt rather than against other countries’ totals.
    5. Reserve building substitutes for adjustment: Drawing in deposits to steady the currency postpones the correction a persistent current account gap eventually forces. Eg. The rupee continued to depreciate through the years after the 2013 deposit drive ended.
      The Fix: Tie each window to a stated reserve adequacy target, so it closes as a one time step rather than becoming a standing instrument.

    Conclusion

    India’s place in the reserve table now rests on money that has to be repaid rather than on export earnings or durable capital inflow. That distinction decides whether the buffer holds once the deposits mature. The two borrowing windows still open will show whether banks keep taking the concessional rate after the deposit window has closed. The number to watch is not the reserve total but the share of it carrying a matching external liability.

    Back2Basics: What foreign exchange reserves are made of

    1. Foreign currency assets: The largest component, held as deposits and securities denominated in currencies other than the rupee, and the part that moves most with valuation changes and market intervention.
    2. Gold: Bullion held by the RBI and valued at market prices, which is why the reserve total moves when the gold price moves.
    3. Special Drawing Rights: An international reserve asset created by the International Monetary Fund (IMF) and allocated to members in proportion to quota, exchangeable with other members for usable currency.
    4. Reserve tranche position: India’s own paid in quota holding at the IMF, which it can draw on without policy conditions attached.

    Matching Previous Year Question

    “[2013] Which one of the following groups of items is included in India’s foreign-exchange reserves? (a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries (b) Foreign-currency assets, gold holdings of the RBI and SDRs (c) Foreign-currency assets, loans from the World Bank and SDRs (d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank ANSWER: (b)”

  • National Statistical Office releases first ever district level output for the unincorporated non farm sector

    PIB class: Press Release. Ministry: Ministry of Statistics and Programme Implementation.

    Why in News

    The National Statistical Office (NSO) released, for the first time, output estimates for the unincorporated non farm sector at the district level.

    Core facts

    1. What it covers: The unincorporated sector means enterprises that are not registered as companies. It spans manufacturing, trade and other services run as household or proprietary units outside agriculture.
    2. Institution: The National Statistical Office (NSO) sits under the Ministry of Statistics and Programme Implementation (MoSPI). It compiles national accounts and conducts the large sample surveys.
    3. Significance stated in the headline: District level granularity is a new level of disaggregation. Earlier estimates for this sector stopped at the state and national level.
    4. Figures: Release specific counts and values were not verifiable this run and are therefore omitted.

    Static Context

    1. The unincorporated non farm segment is the statistical face of the informal economy. It employs the bulk of the non farm workforce and contributes a large share of jobs outside agriculture.
    2. The survey vehicle is the Annual Survey of Unincorporated Sector Enterprises (ASUSE). It records employment, output and value added for these units. It replaced the earlier periodic enterprise surveys of the erstwhile National Sample Survey Office.
    3. National accounts use these estimates. Value added from the unincorporated sector feeds the Gross Value Added computation for services and unregistered manufacturing.

    Prelims angle

    The parent body NSO and its ministry MoSPI. The distinction between incorporated and unincorporated enterprises. The survey name ASUSE. The place of unincorporated output inside Gross Value Added and Gross Domestic Product.

    Mains angle

    GS3, Indian economy, mobilization of resources, growth and employment. Better informal sector data supports district level planning and targeted formalisation. Frame around measurement gaps in the informal economy and the policy value of disaggregated data.

    Matching Previous Year Question

    No direct PYQ on unincorporated sector statistics was traced in the provided files. Closest tracked Microtheme is the manufacturing and micro, small and medium enterprise economy.

    “[2023, GS3, 10 marks] 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.”

  • Why India must rethink the way it values skills, jobs and productive work

    Why in the News

    India has become the world’s fourth largest economy and is treated as the next engine of global growth. The assessment now placed against that record is that the country is drifting toward the middle income trap, where an economy exhausts its gains from cheap labour and rapid catch up and fails to move to productivity led growth. Weak job creation, stagnant wages, sluggish private investment and low productivity are named as reinforcing one another. Youth protests across the country are read as the visible sign of that distress. The two standard explanations, another round of market reform and a larger public spending push, both treat this as a supply or a demand problem. The argument placed against both is that the binding constraint is institutional, meaning social norms that decide how the market prices skills and how the State allocates resources.

    Why do the standard explanations of the slowdown fall short?

    1. The pro market reading: Economists trained in market orthodoxy call for a second round of reform on the scale of 1991, covering labour flexibility, agricultural reform, deregulation and infrastructure investment.
    2. The Keynesian reading: Economists in the Keynesian tradition locate the problem in weak aggregate demand and prescribe higher public spending, redistribution and social protection.
    3. What both miss: Each treats the constraint as one of supply or of demand. Institutions shaped by social norms decide both how markets set incentives and prices and how the State allocates resources and supplies public goods.

    What does the present pattern of growth look like?

    1. Jobless growth: Productivity gains stay concentrated in narrow capital intensive and skill intensive enclaves that generate little employment.
    2. Weak domestic demand: Private investment remains sluggish, wage growth is stagnant and household consumption is weak.
    3. Manufacturing has not absorbed labour: The sector has failed to generate enough jobs for the workforce moving out of agriculture.
    4. An uneven recovery: Growth after the pandemic favoured large corporations and the digital economy and left the informal sector barely touched.
    5. Inequality and low productivity together: Rising inequality alongside low productivity is the specific combination that makes the trap dangerous, since neither corrects the other.

    How do social norms distort what the market and the State each do?

    1. Competitiveness through cost cutting: Private capital, freer from regulation than at any earlier point, competes by cutting costs rather than by innovating.
    2. Knowledge does not travel: Firms have failed to absorb the knowledge that arrives with foreign direct investment (FDI). Productivity has risen neither through movement between sectors nor through innovation inside them.
    3. Capital is priced below labour: Heavy subsidy to capital lowers its price relative to labour in an economy with surplus labour, which pushes firms toward machines over workers.
    4. Innovation is thin: Research and development spending stands at 0.65% of GDP, and technology adoption remains weak rather than spontaneous.
    5. State capacity is low despite size: Government has grown in size, and the ability to deliver basic services such as health centres and schooling remains among the lowest anywhere.
    6. Spending is tilted toward the privileged: Mass education has been historically underfunded. Higher education for elites was subsidised.
    7. The elite bias carried into the growth pattern: That same bias produced service sector heavy growth after the reforms, letting upper castes monopolise better occupations and relegating low productivity work to others.

    What does India’s vocational training record show?

    1. Almost no formal skilling: Fewer than 3% of the workforce has any formal vocational education.
    2. Seats go unfilled: Roughly 14,000 Industrial Training Institutes (ITI) offer about 25 lakh seats, and actual intake is only about 48%.
    3. Placement is weak even for those who finish: The employment rate among graduates is 63%, against over 90% in many other countries.
    4. The system is badly run: Vocational training remains poorly managed and chronically underfunded, which follows from the long neglect of mass education.

    Why does the social valuation of skills decide productivity?

    1. Useful knowledge drives modern growth: Sustained growth rests on the coevolution of science, technology and the spread of “useful knowledge”, meaning the practical skills that let a society innovate, adapt and raise productivity. Eg. The economic historian Joel Mokyr, a Nobel laureate in economics, treats the diffusion of such knowledge as the taproot of entrepreneurial success.
    2. India privileged the abstract: University degrees command prestige. Courses training electricians, welders, machinists and carpenters do not.
    3. The hierarchy has a source: That ranking reflects centuries of caste based occupational stratification in which manual and artisanal work was systematically undervalued despite its role in industrial development.
    4. The visible result: Skilled manufacturing workers are chronically short even as millions of educated young people fail to find decent work.
    5. Valuation shapes choices before markets do: Social premiums attached to some occupations, visible in the marriage market, shape educational choices and occupational aspirations and therefore the allocation of labour.
    6. Official advice runs against the norm: The Chief Economic Adviser has urged young people to take up trades such as welding and plumbing rather than software jobs or management degrees.
    7. Labour intensity is falling: Data show a persistent decline in the labour intensity of production technology across sectors, including traditionally labour intensive ones, and artificial intelligence is expected to accelerate the trend.

    What separates the countries that escaped the trap from those that did not?

    1. South Korea: Escape came from building institutions capable of creating and diffusing useful knowledge across domains, not from building factories alone.
    2. China: Early state led industrialisation was paired with large investment in technical education, local manufacturing capability and technological learning, and earlier interventions in education and health laid the productive base.
    3. Brazil, Argentina, Thailand and the Philippines: All four failed to build or sustain such institutions and remain stuck in the middle income trap.
    4. The shared symptom of failure: In those four, as in India, large sections of the population depend on public transfers and handouts for the basic requirements of a decent living.

    What does productivism propose instead?

    1. The core shift: Productivism, proposed by the economist Dani Rodrik, moves policy attention from redistribution after the fact to the creation of productive employment.
    2. Where it parts from market orthodoxy: It gives government a leading role over markets in shaping economic opportunity rather than leaving that to prices alone.
    3. Its stated priorities: It places the real economy above finance, jobs above redistribution and production above consumption.
    4. Dignity as an economic output: An inclusive economy on this reading gives people social recognition as productive members of society, which requires changing the norms underpinning institutions rather than only the policy framework.

    Challenges to escaping the middle income trap

    1. Industrial policy without skilled labour stalls: Incentives for manufacturing cannot be used if the plants receiving them cannot staff skilled lines. Eg. Electronics units in India remain concentrated in final assembly rather than component fabrication.
      The Fix: Tie incentive disbursement to verified apprenticeship and skilling numbers at the receiving plant.
    2. Training is disconnected from employers: Curricula and equipment in public training institutes lag the technology used on the shop floor, so a certificate does not signal usable skill. Eg. Many public institutes still train on machine tools several generations behind those in contract manufacturing plants.
      The Fix: Give industry associations a decisive voice in course content and equipment upgrades at each institute, with annual revision.
    3. Skilling is measured as enrolment, not as employment: Targets reward seats filled and certificates issued rather than wages earned afterwards. Eg. Short duration certification under national skilling programmes has repeatedly recorded low conversion into formal jobs.
      The Fix: Shift reporting to wage outcomes after training, tracked through provident fund records.
    4. Cheap capital keeps displacing labour: Accelerated depreciation, concessional credit and duty exemptions lower the effective price of machinery against workers, so firms automate ahead of demand. Eg. Garment units have moved to automated cutting and spreading, with employment in the sector staying flat.
      The Fix: Rebalance the incentive structure toward employment linked support rather than capital linked support.
    5. State capacity limits the very services the strategy needs: Schooling and primary health are the inputs into a productive workforce and are delivered most thinly where they are needed most. Eg. Teacher and doctor vacancies persist across the districts with the youngest populations.
      The Fix: Fill sanctioned posts in the lowest performing districts first rather than distributing recruitment evenly.

    Conclusion

    The diagnosis places the binding constraint outside the familiar argument about how much the State should spend and how far markets should be freed. What follows from it is that a skilling target or a manufacturing incentive will not move productivity for as long as the social ranking of occupations stays where it is. The difficulty is that a norm of that kind is not amenable to a budget line or a notification. Whether policy can change the standing of skilled manual work, and not only its supply, is what decides where the economy settles.

    Back2Basics: Industrial Training Institutes

    1. What they are: Post school vocational institutions that train candidates in designated trades such as fitter, electrician, welder and machinist.
    2. Who runs them: They function under the Directorate General of Training in the Ministry of Skill Development and Entrepreneurship, and are set up by State governments and by private promoters.
    3. The qualification awarded: Trainees who clear the All India Trade Test receive the National Trade Certificate.
    4. Statutory anchor: Trade training and apprenticeship in these institutes operate within the framework of the Apprentices Act, 1961.

    Matching Previous Year Question

    “[2022, GS3, 15 marks] “Economic growth in the recent past has been led by increase in labour productivity.”Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.”

  • At 78%, Telangana district Nirmal on top in women’s share in informal workers

    Why in the News

    The Ministry of Statistics and Programme Implementation (MoSPI) has released the first district level estimates of India’s informal sector drawn from a large scale national survey. They come from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) of 2025, which covers enterprises outside the corporate sector and outside agriculture. Women are 78% of all informal workers in Nirmal district of northern Telangana, the highest share recorded for any district. Female participation in informal work turns out to vary far more between districts than any national figure suggests. The districts where women dominate this workforce are also among the lowest paying, which is the tension the new granularity exposes.

    What does the Annual Survey of Unincorporated Sector Enterprises cover?

    1. The universe surveyed: It covers unincorporated establishments in manufacturing, trade and other services, which is the part of the economy usually described as the informal sector.
    2. What it leaves out: Agriculture is outside its scope, as are enterprises incorporated as companies.
    3. Coverage of this round: The report carries estimates for 757 districts.
    4. A caveat on district identity: MoSPI notes that the districts covered may not match the present administrative map, because boundaries, names and new districts have changed since.

    How wide is the spread between districts?

    1. The national benchmark: Across India women are 29% of informal workers.
    2. The bottom of the list: In Rudraprayag in Uttarakhand women are 6.7% of informal workers.
    3. A state boundary makes the difference: Nanded in Maharashtra, immediately across the border from the top ranked district, sits 288th with women at 31%.

    What regional pattern do the district numbers reveal?

    1. The top ten are regionally clustered: All ten districts with the highest female share lie in south India or the north east, in Telangana, Manipur, Meghalaya and Mizoram.
    2. Parity is rare: Women are at least half the informal workforce in only 25 districts, 22 of them in the south or the north east, with three in the east including Pakur in Jharkhand and Deogarh in Odisha.
    3. A third is a wider club: Women account for at least 33% of the informal workforce in 237 districts.

    Does a high female share come with better pay?

    1. The best payer among high share districts is modest: South West Khasi Hills in Meghalaya pays Rs 1.7 lakh per hired worker, about 35% above the national average of around Rs 1.3 lakh.
    2. The top paying district has few women: Dehradun pays Rs 4.6 lakh per hired worker, and women are 19% of its informal workforce.
    3. The pattern that follows: High female participation coincides with low earnings per worker rather than with better paid work.

    What do the ownership and concentration numbers add?

    1. Participation tracks ownership: Districts with the greatest female participation also carry the highest share of female owned proprietary establishments, and the leading district reaches almost 80% on that measure.
    2. Scale sits elsewhere: North 24 Parganas in West Bengal has the most informal workers, at 21.3 lakh, and the most establishments, at 16.6 lakh.
    3. Output is concentrated: The ten districts with the most establishments account for around 11% of total Gross Value Added (the value of output less the cost of inputs bought in, which is how a sector’s contribution is measured), and the top fifty for almost a third of it.
    4. The stated purpose of the release: MoSPI’s position is that the diversity of activity and local conditions makes granular statistics necessary for evidence based policymaking.

    Challenges to district level informal sector measurement

    1. Boundary churn breaks comparability: A district measured once cannot be tracked over time once it is split, merged or renamed before the next round. Eg. Telangana raised its district count from 10 to 33 in 2016.
      The Fix: Publish every round against a frozen reference map alongside the current one, so a district series survives reorganisation.
    2. Excluding agriculture removes most rural informal work: The survey frame leaves out the sector that still employs the largest number of informal workers. Eg. Agriculture remains the single largest employer in the Periodic Labour Force Survey’s distribution of workers.
      The Fix: Release the unincorporated estimates together with the labour force survey’s agricultural numbers as one district profile.
    3. A high female share can record distress rather than progress: Unpaid family labour and home based piece work enter the count as participation with no wage attached to it. Eg. Beedi rolling and garment stitching in home units are recorded as enterprise work paid at piece rates.
      The Fix: Report unpaid family helpers separately from hired workers for every district.
    4. Enterprise surveys miss the smallest and most mobile units: Vendors and units without fixed premises are hard to list, so they are undercounted at source. Eg. The survey and registration of street vendors required by the Street Vendors Act, 2014 remains incomplete in many towns.
      The Fix: Use municipal vending registers and welfare board rolls as a supplementary listing frame for mobile units.

    Conclusion

    The release turns a state level statistic into a district one, and that changes what an administrator can act on. The pattern it exposes is that where women work most in the informal economy, that work pays least, which is a question about the kind of enterprise available locally rather than about willingness to work. The milestone to watch is whether these estimates are repeated on the same frame, because a single snapshot cannot show whether participation and earnings are moving together or apart.

    Back2Basics: MoSPI and the National Sample Survey

    1. The ministry: MoSPI is the nodal body for India’s official statistical system and releases the national income and price statistics.
    2. The survey arm: The National Statistical Office conducts large sample surveys through the National Sample Survey, which began in 1950.
    3. The companion employment survey: The Periodic Labour Force Survey supplies employment and unemployment estimates, and it counts workers rather than enterprises.
    4. The advisory body: The National Statistical Commission, set up in 2005 on the Rangarajan Commission’s recommendation, advises on statistical priorities and standards.

    Matching Previous Year Question

    “[2023, GS3, 15 marks] Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements.”

  • FCNR(B) deposits: Understanding who finally bears the foreign exchange risk

    Why in the News

    The Reserve Bank of India (RBI) opened a special swap facility in June to draw money from non resident Indians into FCNR(B) deposits. The full name is Foreign Currency Non Resident (Bank), and such a deposit is held and repaid in foreign currency rather than in rupees. The step answered pressure on the rupee from high oil prices and an aim of building up foreign exchange reserves. The facility protects banks against exchange rate loss on the principal. It does not cover the interest, which is owed in dollars and has to be arranged by the banks themselves. That split is what decides who finally carries the currency risk.

    What is an FCNR(B) deposit and what did the special swap facility offer?

    1. A deposit denominated in foreign currency: A non resident places dollars or another permitted currency with an Indian bank, and the bank repays in that same currency, so the depositor carries no rupee risk.
    2. The term of the money: These deposits typically run for three to five years, which is when the principal and the accumulated interest fall due.
    3. What the swap added: The bank passes the foreign currency to the central bank for rupees and receives a commitment to reverse the exchange at an agreed rate on maturity.
    4. The window is shut: Fresh deposits under the facility stopped on 31 August 2026.

    Why was the window opened, and what did it actually raise?

    1. The response overshot the target: Banks mobilised more than $127 billion through these deposits against an initial target of about $50 billion.
    2. Funding turned cheap: The scheme gave banks foreign currency at a lower cost than borrowing abroad on their own credit would have carried.
    3. Reserves rose with it: The foreign currency handed to the central bank added substantially to India’s reserve stock.

    What does protecting the principal cost the central bank?

    1. The hedging bill sits with the central bank: It bears the cost of covering the currency exposure on the principal, put at up to 3% a year by BofA Securities Research and taken at about 3% a year by SBI Research.
    2. The annual and cumulative numbers: On an assumed mobilisation of $65 billion to $70 billion at that rate, SBI Research calculated a notional cost of about $2.1 billion a year and about $10.5 billion over five years.
    3. Measured against the reserve stock: Against reserves of around $700 billion, the five year cost works out to 1.45% of the stock.

    What offsets that cost?

    1. The reserves themselves earn a return: BofA Securities Research estimated a yield of around 4.5% to 5% on the reserves generated, enough to more than cover the hedging cost across a five year holding.
    2. Placement is chosen for yield: Part of the money may be invested in United States government securities because those yields are higher.
    3. Part of the outgo is already recovered: SBI Research said the central bank had rebuilt $31.2 billion of its foreign currency assets by 7 August 2026, equal to 55% of the amount mobilised to that point.

    Why have most banks left the interest leg unhedged?

    1. The swap stops at the principal: Banks have to source the dollars for interest payments and manage that exposure on their own books.
    2. The split runs by ownership type: Foreign banks are largely hedging this exposure. Most state run banks and several private sector Indian lenders have left it open.
    3. Cost is the stated reason: Bankers cite the price of cover on a three to five year exposure, which is of the same order as the cost the central bank carries on the principal.
    4. The payment timing invites the gamble: Interest on these deposits is paid only at maturity, so some banks plan to buy dollars in the spot market when the payment actually falls due.

    What happens to an unhedged bank if the rupee weakens?

    1. The arithmetic of one payment: Interest of $1 million costs Rs 9.5 crore at Rs 95 to the dollar, and Rs 10 crore if the dollar reaches Rs 100 at maturity.
    2. Cover decides who absorbs it: A hedged bank is protected against that movement, and a lender that left the exposure open bears the higher rupee cost.
    3. The risk is correlated across lenders: A sharp fall in the rupee would push many banks to buy dollars at the same time, adding to dollar demand and to pressure on the currency.
    4. The exposure has not gone away: The scheme moved currency risk between parties rather than removing it from the system.

    Challenges to the FCNR(B) swap route to reserve building

    1. Reserves built this way are borrowed reserves: Non resident deposits count within India’s external debt, so the reserve stock rises with a matching liability against it. Eg. Non resident deposits are among the largest components in the Finance Ministry’s quarterly external debt statement.
      The Fix: Publish the debt creating share of any reserve addition alongside the headline reserve figure.
    2. Maturities bunch at one point in time: A window opened over a single quarter falls due over a single quarter, which concentrates the outflow. Eg. The concessional swap window of 2013 raised about $34 billion and came up for redemption together in late 2016.
      The Fix: Stagger the maturities permitted under a window across quarters rather than letting the market settle on one tenor.
    3. The open exposure sits with the thinnest buffers: Public sector lenders hold less capital against a valuation loss than the foreign banks that are covering the same risk. Eg. Several public sector banks required recapitalisation from the Union Budget through the second half of the 2010s.
      The Fix: Set a supervisory ceiling on the share of foreign currency interest liability a bank may leave uncovered.
    4. The facility substitutes for adjustment: Attracting deposits to steady the currency postpones the correction that a persistent current account gap eventually forces. Eg. The rupee continued to depreciate through the years after the 2013 defence of the currency ended.
      The Fix: Tie any such window to a stated reserve adequacy target, so it closes as a one time step instead of becoming a standing instrument.

    Conclusion

    The swap changed the address of the currency risk without retiring it. The central bank now holds an exposure that depositors were unwilling to take, and lenders hold the portion the central bank declined. Whether that is prudent rests on a rupee path nobody can commit to. The supervisory question to watch is whether banks will be required to cover the foreign currency leg they have chosen to leave open.

    Back2Basics: Non resident deposit accounts

    1. NRE account: A Non Resident External account is held in rupees, and both principal and interest are freely repatriable.
    2. NRO account: A Non Resident Ordinary account is held in rupees for income earned in India, and repatriation out of it is capped.
    3. Where the currency risk sits: In a rupee denominated non resident account the depositor bears the exchange risk, which is the reverse of a foreign currency denominated account.

    Matching Previous Year Question

    “[2019] Consider the following statements: 1. Most of India’s external debt is owed by governmental entities. 2. All of India’s external debt is denominated in US dollars. 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 ANSWER: (d)”

  • SEBI, RBI launch Demat 2.0 pilot for corporate bond tokenisation

    Why in the News

    The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have jointly launched a pilot named Demat 2.0. It tokenises corporate bonds and settles them in central bank digital currency (CBDC), which is sovereign money issued by the central bank in digital form. The stated purpose is to test whether distributed ledger technology can bring the security leg and the settlement leg of a bond trade closer together. The same test covers faster settlement and the automation of parts of asset servicing. Ownership records and cash movement sit on two separate systems today, and the gap between them is what carries settlement risk. The pilot puts both on one ledger.

    How does the Demat 2.0 tokenisation pilot work?

    1. Tokenised security: A corporate bond is issued as a token on a shared electronic ledger instead of as an entry in a single depository’s own database.
    2. Digital settlement asset: The cash leg moves as CBDC on that same ledger, so payment and the transfer of ownership complete in one step.
    3. Smart contracts: Coded instructions carry out servicing steps automatically once their conditions are met, for example a coupon payment on its due date.
    4. Legal certainty of ownership: The design keeps the legal title of the holder intact during the experiment with new infrastructure.

    Why does moving the security leg and the cash leg onto one ledger matter?

    1. The 1996 reform only removed paper: Demat 1.0 converted shares held in paper form into electronic entries and left the payment leg on a separate banking rail.
    2. The gap is where the risk lives: A delay between delivery of the security and receipt of the money leaves one counterparty exposed until both are done.
    3. Part of the debt market already runs this way: Commercial papers and certificates of deposit trade in tokenised form on the unified markets interface and settle in CBDC.

    Who is running the pilot, and what has it put through so far?

    1. Depositories hold the tokenised paper: Central Depository Services Ltd (CDSL) and National Securities Depositories Ltd (NSDL) are leading the depository side of the exercise.
    2. Exchanges and banks complete the chain: The BSE and the National Stock Exchange (NSE) are participants, alongside HDFC Bank and ICICI Bank.
    3. The payments layer is inside the pilot: The National Payments Corporation of India is part of the participating group.
    4. Three issuances have gone through: One is a Rs 500 crore issue by Larsen and Toubro, taken up by investors including the State Bank of India, Axis Bank and SBI Mutual Fund.

    How far can tokenisation travel beyond corporate bonds?

    1. Equity, mutual funds and gold are named next: The exercise can be extended to those asset classes once the bond leg is proven.
    2. Collateral is the larger prize: A holding that settles within the day can be pledged and released the same day, which shortens the funding cycle for a bond holder.
    3. The debt market was a deliberate choice: Secondary trading in corporate bonds is thin, so a failed experiment there does not disturb the settlement system the equity market depends on.

    Challenges to Demat 2.0

    1. Thin secondary trading limits what speed can deliver: Most corporate bonds in India are bought and held to maturity, so settlement time is not the binding constraint on liquidity. Eg. The bulk of corporate bond issuance is by private placement to a small group of institutional investors.
      The Fix: Pair the tokenised segment with market making obligations, so there is continuous two way quoting for faster settlement to act on.
    2. Two depositories must interoperate or the market splits: A token created in one depository has to be recognised and transferable in the other, or holders end up in two separate pools. Eg. Moving securities between the existing depositories already requires an inter depository transfer instruction.
      The Fix: Fix a common token standard and a single transfer protocol before the pilot widens beyond its present cohort.
    3. Settlement in central bank money reaches few investors: Only participants holding CBDC balances can settle this way, which leaves out most holders of corporate debt. Eg. The wholesale CBDC pilot started in 2022 with a narrow set of banks in the government securities segment.
      The Fix: Extend CBDC access to mutual funds and insurers, which together hold the largest share of outstanding corporate debt.
    4. Coded instructions fail silently: A defect in a smart contract executes as written rather than as intended, and an automated coupon or redemption error propagates instantly. Eg. Automated liquidation logic on decentralised lending platforms has repeatedly triggered cascading sales on a single faulty price feed.
      The Fix: Require an independent code audit and a manual override for every servicing action before a token series goes live.

    Conclusion

    The pilot is a controlled test, confined to one instrument and a named set of participants, and it does not yet change how the wider bond market settles. Its value lies in whether the legal position of a holder on the ledger proves as secure as that of a holder in the present system. The marker to watch is the regulatory decision on whether the token becomes the record of ownership or remains a mirror of it. That choice, rather than the technology, decides how far the exercise can be extended.

    Back2Basics: Depositories in India

    1. Legal basis: The Depositories Act, 1996 gives statutory backing to holding and transferring securities in electronic form.
    2. What a depository does: It maintains the ownership record for securities and effects a transfer by book entry rather than by physical delivery.
    3. Access is intermediated: An investor does not deal with a depository directly and operates through a registered depository participant, usually a bank or a broker.
    4. Supervision: Both the depository and its participants are registered with and regulated by SEBI.

    Matching Previous Year Question

    “[2026, GS3, 10 marks] What do you mean by Digital Rupee? In this context, explain the working and progress of India’s Central Bank Digital Currency (CBDC).”

  • Double deflation debate over GDP methodology is no ‘great battle’

    Why in the News

    The Vice Chairman of NITI Aayog, the government’s economic think tank, has said there is no winner in the ongoing dispute over the use of double deflation in India’s new gross domestic product (GDP) series, and that the methodology is neither impractical nor particularly difficult to implement. The statement answers concerns raised a week earlier by a former Finance Secretary and a former Chief Statistician over the method used to double deflate GDP under the new series. The tension is that the methodology being questioned is the same one that produces growth rates lower than the series it replaced, which is why the Vice Chairman asked why the scrutiny is arriving only now.

    What is double deflation?

    1. The method: Double deflation removes the effects of inflation at both the producer and the consumer expenditure stages when arriving at the real GDP of an economy.
    2. What it requires in practice: The inputs a producer buys have to be separated from the outputs the producer sells, and each set is deflated by its own price index.
    3. Where it stands internationally: The method is widely used across national statistical systems.

    What has changed in India’s GDP series?

    1. The new base year carries the new method: The Ministry of Statistics and Programme Implementation (MoSPI), the nodal ministry for official statistics, introduced double deflation in the GDP series with 2023-24 as the base year.
    2. The earlier series did not use it: Double deflation was not part of India’s 2011-12 GDP series.
    3. The output looks different: GDP growth rates in the new series, based on 2023-24 prices, are lower than those under the earlier series with 2011-12 as the base year.

    How is the dispute framed?

    1. The government think tank’s position: Deflating the price effects at the producer and the consumer expenditure stages of GDP is not a great battle, and double deflation is not a methodological impossibility.
    2. The practical claim: All that is required is to separate the inputs from the outputs, the method can of course be improved like anything else, and it is a good time to start.
    3. The timing objection: The Vice Chairman asked why the methodology had not come under similar scrutiny when the earlier series was in use, and why the concerns are being raised only now.
    4. What the critics raised: A former Finance Secretary and a former Chief Statistician had, a week earlier, questioned the methodology used to double deflate GDP under the new series.

    Challenges to measuring real GDP under double deflation

    1. India lacks a full producer side price index: Deflating inputs correctly requires a producer price index, and the wholesale price index that stands in for it covers goods alone. Eg. Services account for over half of gross value added but have no wholesale price index representation.
      The Fix: Complete and release a producer price index covering services, as recommended by the working group set up to design one.
    2. Informal output is estimated rather than measured: A large share of value added comes from unincorporated enterprises whose input costs are inferred from survey benchmarks rather than observed. Eg. The unincorporated sector enterprise survey is conducted at multi year intervals, so intervening years are interpolated.
      The Fix: Move the unincorporated enterprise survey to an annual cycle so input cost ratios are updated each year rather than carried forward.
    3. The method amplifies error in volatile quarters: Subtracting one deflated series from another magnifies any mismatch between the two price indices used. Eg. A sharp swing in crude prices moves input costs long before it moves output prices in refining and petrochemicals.
      The Fix: Publish the input and output deflators alongside the headline estimate so the source of any swing is visible to users.
    4. A base year change breaks comparability: Growth rates computed on a new base and a new method cannot be read directly against the old series. Eg. The shift to the 2011-12 series produced a comparable dispute over back series estimates.
      The Fix: Release a full back series on the new base and method, so the change in level is separated from the change in growth.

    Conclusion

    The dispute is about measurement, not about performance, and both sides accept that removing inflation twice is the internationally accepted way to compute real output. What is unresolved is whether the price data India collects can support the method at the level of detail it demands. That is a question about the statistical system’s inputs rather than about the arithmetic applied to them. The marker to watch is whether the producer price index that the method depends on is released alongside the new series.

    Matching Previous Year Question

    “[2021, GS3, 10.0 marks] Explain the difference between computing methodology of India’s Gross Domestic Product(GDP) before the year 2015 and after the year 2015.”

  • India’s listing bonanza: IPO window opens wide as OFS turns exit route

    Why in the News

    The initial public offering (IPO) process in India has become an exit mechanism for existing shareholders rather than a route for companies to raise growth capital. The offer for sale (OFS) component was nearly 1.5 times the fresh capital raised in FY26, according to National Stock Exchange data. Forthcoming issues, including the National Stock Exchange’s own estimated Rs 30,000 crore offering, are entirely OFS. The tension is that a window designed to widen public ownership and fund new investment is now converting private holdings into public ones without adding capital to the companies being listed.

    What is an offer for sale?

    1. The instrument: An OFS is a sale of shares already held by promoters or early investors, conducted through the stock exchange rather than by the company issuing new shares.
    2. Where the money goes: The proceeds reach the selling shareholder, so the listed company’s own capital base does not change.
    3. The Indian variation: When an unlisted firm lists, an OFS can be included in the IPO prospectus, also called a Red Herring Prospectus (the offer document filed before the issue price is fixed), so it enters through the primary market window while behaving like a secondary market transaction.

    How large has the OFS share of India’s primary market become?

    1. It now exceeds fresh capital: OFS was nearly 1.5 times the fresh capital raised in FY26, according to National Stock Exchange data.
    2. It dominates issue proceeds: OFS accounted for about 59 per cent of IPO proceeds in FY26, according to KPMG India data. Listings backed by private equity rose sharply.
    3. The pattern is five years old: Indian companies mopped up Rs 5.4 lakh crore through public issues during 2021-25, of which Rs 3.37 lakh crore came entirely from OFS, according to Prime Database.
    4. The pipeline is large: As many as 245 companies have filed their draft Red Herring Prospectus with the Securities and Exchange Board of India (SEBI), according to an Equirus Capital report.

    Why was the OFS route created, and what was it originally meant to do?

    1. A compliance mechanism, not an exit route: SEBI formally introduced OFS in 2012 as a dedicated exchange based mechanism for promoters of listed companies to sell shares transparently.
    2. The stated purpose: It was meant to help promoters reduce their holdings and comply with minimum public shareholding norms, which require a listed company to keep a fixed proportion of its equity with public shareholders.
    3. The government adopted it for disinvestment: The Centre used OFS to dilute its holding in central public sector enterprises to reach the shareholding threshold and beyond it, in ONGC, Hindustan Copper, NMDC, Oil India, NTPC, Rashtriya Chemicals and Fertilisers, NALCO and the Steel Authority of India.
    4. Large public issues carried it too: Life Insurance Corporation of India, General Insurance Corporation, Coal India, Indian Railway Finance Corporation and New India Assurance each saw a sizeable OFS share in their public offer.

    Which of the forthcoming issues are entirely exits?

    1. The exchange’s own listing: The National Stock Exchange, cleared by SEBI for its estimated Rs 30,000 crore IPO, will go entirely through OFS.
    2. An asset manager followed the same route: SBI Funds Management’s public offering of more than Rs 9,800 crore was entirely through OFS.
    3. Three more public sector issues are proposed on the same basis: Indian Gas Exchange, Mahanadi Coalfields and Asset Reconstruction Company India are taking a proposed 100 per cent OFS route.
    4. The private sector uses it to unlock value: In the Hyundai India listing the parent company did not dilute to fund the subsidiary’s expansion, and sold shares to Indian investors instead, in one of India’s largest IPOs.

    Why is the window open now?

    1. Subscription demand has more than doubled: Average IPO subscriptions rose to 59.1 times in July and August from 24.5 times in April to June, according to NovaaOne Investment Banking.
    2. Listing gains have widened: Average listing gains climbed to 19.5 per cent from 5.7 per cent over the same comparison.
    3. Deferred issues have returned: Companies that stayed on the fringes during volatile markets are now seeking to capitalise on improving sentiment.
    4. The pipeline spans consumer facing sectors: The private sector queue covers quick commerce, logistics, housing finance, dairy, financial services and education infrastructure, with a sizeable proportion of OFS embedded in the issues.

    What does the contrast with other large markets show about the Indian structure?

    1. The comparison is structural rather than detailed: The United States, China, the United Kingdom, Japan and parts of Europe have historically had large secondary equity markets, but their structures differ from India’s IPO plus OFS model.
    2. Sequence is the difference: In the United States and Europe, secondary sales usually happen after a company is already public, so the market has already achieved price discovery before existing holders sell.

    Challenges to the offer for sale route

    1. Pricing is set by the party leaving: A selling shareholder fixes the price of its own exit and carries no continuing obligation to the company’s performance after listing. Eg. Paytm listed in November 2021 and traded far below its issue price within a year.
      The Fix: Extend a lock in on significant selling shareholders beyond the existing anchor investor period, so a portion of the exit is priced after the market has tested the company.
    2. Disclosure is built around the issuer, not the seller: An offer document centres on the company’s stated use of proceeds, which carries little information where the fresh issue is small. Eg. An issue that is entirely OFS has no use of proceeds section of substance at all.
      The Fix: Require a separate disclosure of each large selling shareholder’s holding period and acquisition cost on the cover of the offer document.
    3. Retail investors absorb the price discovery risk: Listing gains draw first time investors into issues priced off valuations set in private funding rounds. Eg. SEBI studies have found that a majority of retail allottees sell within a week of listing.
      The Fix: Publish an issue level dashboard showing the fresh issue share and the pre-issue acquisition cost, so a subscriber can see what is being funded.
    4. Public sector divestment becomes procyclical: Stake sales are timed to buoyant markets rather than to a stated ownership policy, so the exchequer sells most when sentiment is strongest. Eg. Coal India’s stake sales have clustered in periods of strong index performance.
      The Fix: Publish a rolling multi year divestment calendar with target holdings per company, so the sale schedule is not set by market mood.

    Conclusion

    India’s primary market is functioning as a liquidity platform, and capital formation has become only one part of what it does. That is not a defect in itself, since an exit route is what persuades early investors to fund unlisted firms in the first place. The unresolved question is whether a subscriber can tell which of the two an issue is doing, because the offer document is built to describe a company raising money and most issues are no longer doing that. The marker to watch is whether SEBI requires the fresh issue share to be disclosed on the face of the prospectus.

    Matching Previous Year Question

    “[2023] Consider the following markets : 1. Government Bond Market 2. Call Money Market 3. Treasury Bill Market 4. Stock Market How many of the above are included in capital markets? (a) Only one (b) Only two (c) Only three (d) All four ANSWER: (b)”

  • ‘Surprised by furore over GDP; methods, data already public’

    Why in the News

    The Ministry of Statistics and Programme Implementation (MoSPI) has defended the new Gross Domestic Product (GDP) series against charges of overestimation and of undisclosed methodology. Its stated position is that the downward revision of earlier years reflects better data rather than a systematic bias. The defence answers criticism that followed the release of first quarter 2026-27 GDP data, which put growth at 7.8 per cent, well above what most economists had anticipated. A former Finance Secretary argued that this print was possible only because the year-ago GDP data had been reduced, and that real growth was close to zero. The contest is over what a base revision is allowed to imply: whether lowering past output is better measurement or an admission that the old series had flattered growth.

    What is the new GDP series?

    1. A base revision of the national accounts: The series replaces the earlier 2011-12 based estimates, which had themselves replaced the 2004-05 series. It was released in February 2026.
    2. Built on a wider evidence base: The new series rests on a wider set of indicators and surveys than its predecessors, which is the ministry’s ground for calling it the best so far.
    3. Direct measurement of the informal sector: The old series estimated informal sector output through proxies. The new series uses direct, empirical annual surveys instead.

    Where did the dispute begin?

    1. An unexpected growth print: GDP data for the first quarter of 2026-27 showed growth of 7.8 per cent, and the ministry’s own reading is that this higher-than-expected number is what provoked the criticism.
    2. A challenge to the nominal numbers: A former Finance Secretary held that nominal GDP growth in April-June should have been 2.6 per cent and not 10.3 per cent, with real growth close to zero. Those figures were arrived at by comparing data from the old and the new GDP series.
    3. A data adequacy charge: A former Chief Economic Adviser held that the ministry lacks good and timely data on the informal economy.
    4. The timing is itself contested: The series has been in the public domain since February 2026, and the ministry’s position is that a controversy arriving six months later is surprising.

    What is the ministry’s defence?

    1. Estimation is not overestimation: The stated position is that calling the old numbers overestimates implies a systematic bias. GDP is an estimation made on the best data available at the time, and each successive series improves on the indicators the previous one used.
    2. Cross-series comparison is unwarranted: The ministry holds that any comparison between the old series and the new series is unwarranted, since the two rest on different indicator sets.
    3. The revision traces to one change: The primary reason for the downward revision in nominal GDP of previous years is the shift from proxy-based estimates for the informal sector to direct annual surveys.
    4. Survey figures, not proxies: Figures from the Annual Survey of Unincorporated Sector Enterprises (ASUSE, an annual enterprise survey covering informal, non-corporate businesses) and the Periodic Labour Force Survey (PLFS) are used even for quarterly GDP estimates.

    Which new data sources underpin the series?

    1. Sources that did not exist at the last revision: The Goods and Services Tax (GST) network, PLFS, ASUSE and the Public Financial Management System (PFMS) were unavailable when the earlier series was framed.
    2. Administrative digital data: Digital records such as e-Vahan, the national vehicle registration database, are now part of the input set.
    3. The gain is unlikely to repeat: The last ten years produced numerous new data sources, and the ministry’s assessment is that the next base revision, roughly five years away, will not see a comparable expansion.

    Has the methodology already been published?

    1. Three technical reports in February: Sub-committees of the Advisory Committee on National Accounts Statistics released reports on ‘Methodological Improvement for the Base Revision of GDP’, ‘Constant Price Estimates’, and ‘Incorporation of New Data Sources, Rates and Ratios’.
    2. Supporting series through the year: The new Index of Industrial Production (IIP) series was released in May, and output Producer Price Index (PPI) data starting 2022-23 was made public in June.
    3. The awaited document adds nothing new: The ministry’s position is that the ‘Sources and Methods’ document will only be a compilation of material already disclosed.

    Why is rapid growth said not to be felt on the ground?

    1. GDP is one indicator among several: Other factors, uncertainties and the global situation shape how an individual experiences the economy, so a single aggregate cannot settle the question.
    2. Aggregation hides dispersion: How a household sees prices differs from prices aggregated across the country and across regions, in the same way that felt inflation diverges from the measured rate.
    3. High-frequency indicators are offered as corroboration: Monthly consumption and production indicators for steel, cement, electricity and automobiles are cited as independent evidence of the pace of activity.

    Conclusion

    The argument is not really about arithmetic; it is about what a statistical revision is permitted to signal. A revision that lowers past output can be read as sharper measurement or as evidence that the earlier picture was inflated, and no amount of technical documentation adjudicates between those two readings. What would adjudicate is a published back-series placing old and new estimates on a consistent basis, so users can compare periods without splicing two incompatible sets themselves. Until that exists, every quarterly print will be argued twice, once on the number and once on the series it came from.

    Matching Previous Year Question

    “[2021, GS3, 10.0 marks] Explain the difference between computing methodology of India’s Gross Domestic Product(GDP) before the year 2015 and after the year 2015.”