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GS Paper: GS3

  • 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).”

  • Financial Fraud Risk Indicator crosses ₹5,000 crore in prevented fraud

    Why in News

    1. Milestone crossed: The Financial Fraud Risk Indicator (FRI) has prevented suspected cyber fraud transactions of over ₹5,000 crore.

    Core facts

    1. What FRI is: The Financial Fraud Risk Indicator is a real time risk assessment framework. It flags whether a mobile number may be linked to cyber crime or fraud.
    2. Administering body: The Department of Telecommunications (DoT) developed and operates it. It launched on 22 May 2025.
    3. Risk classes: FRI classifies mobile numbers into three categories. These are Medium, High and Very High risk.
    4. Data sources: It draws on citizen reports through Sanchar Saathi, the National Cybercrime Reporting Portal, telecom operators and financial institutions.
    5. Use by institutions: Banks, payment providers, insurers and pension entities use the risk signal for transaction monitoring.
    6. Amount protected: FRI prevented ₹5,043.73 crore in suspected fraud as of August 2026.
    7. Recent record: Over ₹2,000 crore was prevented between April and August 2026. More than 1,600 organisations are on the platform.

    Static Context

    1. The Digital Intelligence Platform was launched by the Department of Telecommunications in 2024. FRI operates within it.
    2. Sanchar Saathi is a citizen portal to report suspected fraud communication and to block lost or stolen mobile handsets.
    3. The National Cybercrime Reporting Portal is run by the Indian Cyber Crime Coordination Centre (I4C) under the Ministry of Home Affairs.

    Prelims angle

    1. FRI custodian: Department of Telecommunications, within the Digital Intelligence Platform.
    2. Related platforms: Sanchar Saathi, National Cybercrime Reporting Portal and I4C are frequently tested.

    Mains angle

    1. GS3, internal security: A question can assess how real time data sharing between telecom and banking systems strengthens India’s response to cyber financial fraud.

    Matching Previous Year Question

    “No direct Prelims PYQ on financial fraud prevention was traced in the provided files. Closest Microtheme: Cyber Security (Internal Security).”

    “[2022, GS3, 10 marks] What are the different elements of cyber security? Keeping in view the challenges in cyber security, examine the extent to which India has successfully developed a comprehensive National Cyber Security Strategy.”

  • First sector wide Corporate Social Responsibility framework for coal companies

    Why in News

    1. New framework launched: The Ministry of Coal launched the first sector wide Corporate Social Responsibility (CSR) framework for Indian coal companies on 8 September 2026.

    Core facts

    1. First of its kind: This is the first sector specific CSR framework since statutory CSR began under the Companies Act, 2013.
    2. Design agency: The Indian Institute of Corporate Affairs developed the framework. It targets communities in coal mining areas.
    3. Thalassemia Bal Sewa Yojana (TBSY): This scheme funds treatment for thalassaemia and aplastic anaemia. Empanelled hospitals expanded from 4 to 21 nationally.
    4. TBSY support: It provides up to ₹10 lakh per patient for a bone marrow transplant. The total budgeted outlay is ₹130 crore across four phases.
    5. TBSY record: Over 1,050 bone marrow transplants have been completed. Coal India Limited (CIL) delivers this programme.
    6. Nanha Sa Dil: This programme addresses congenital heart defects in newborns. It began in March 2024 in four districts of Jharkhand.
    7. Nanha Sa Dil record: Over 200,000 children were screened. More than 1,500 corrective cardiac surgeries were performed free of cost. Subsidiaries SECL, CCL, NCL and WCL scaled the programme.

    Static Context

    1. Statutory CSR was introduced through Section 135 of the Companies Act, 2013.
    2. CSR rule: Qualifying companies must spend 2 percent of average net profits of the preceding three years on CSR.
    3. Applicability: The rule applies to companies meeting thresholds on net worth, turnover or net profit.
    4. Coal India Limited is a Maharatna central public sector enterprise under the Ministry of Coal.

    Prelims angle

    1. CSR statutory basis: Section 135, Companies Act, 2013, and the 2 percent spending norm.
    2. Scheme mapping: Thalassemia Bal Sewa Yojana and Nanha Sa Dil are run by coal sector enterprises, a testable pairing.

    Mains angle

    1. GS3 and GS4: A question can examine whether mandatory CSR produces genuine social value or compliance driven spending, using coal sector health schemes as evidence.

    Matching Previous Year Question

    “[2024] With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements:
    1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.
    2. CSR rules do not specify minimum spending on CSR activities.
    Which of the statements given above is/are correct?
    (a) 1 only
    (b) 2 only
    (c) Both 1 and 2
    (d) Neither 1 nor 2
    Final answer: (a)”

    “[2013, GS3, 10 marks] With a consideration towards the strategy of inclusive growth, the new Companies Bill, 2013 has indirectly made CSR a mandatory obligation. Discuss the challenges expected in its implementation in right earnest. Also discuss other provisions in the Bill and their implications”

  • Surface Coal and Lignite Gasification Scheme: Round 1 concludes with seven applications

    Why in News

    1. Round 1 closed: The Scheme for Promotion of Surface Coal and Lignite Gasification Projects received seven applications from public and private companies. Round 2 opened on 8 September 2026.

    Core facts

    1. Administering body: The Ministry of Coal runs the scheme.
    2. Approval and outlay: The Union Cabinet approved the scheme on 13 May 2026. The financial outlay is ₹37,500 crore.
    3. Objective: The scheme converts domestic coal and lignite into higher value products. These include syngas, methanol, ammonia, urea and hydrogen.
    4. Import substitution: India imported liquefied natural gas (LNG), urea, ammonia and methanol worth ₹2.77 lakh crore in the financial year 2024 to 2025.
    5. Capacity target: The scheme targets 100 million tonnes of coal gasification capacity by 2030. It contributes 75 million tonnes of that target.
    6. Round 1 applicants: NTPC Limited applied for one synthetic natural gas project. Adani Enterprises Limited applied for three urea projects. Gallantt Ispat Limited, Shyam Sel and Power Limited and Talcher Fertilisers Limited applied for one project each.
    7. Process: The Request for Proposal was issued on 7 July 2026. Further Round 2 windows open every two months.

    Static Context

    1. Coal gasification is a thermochemical process. It reacts coal with controlled oxygen and steam to produce syngas, a mixture of carbon monoxide and hydrogen.
    2. Syngas is a feedstock for fertilisers, chemicals and fuels. It reduces reliance on imported natural gas.
    3. Earlier scheme: A ₹8,500 crore gasification incentive scheme was notified in January 2024. Eight projects are under implementation under it.
    4. India’s coal has high ash content and low sulphur content. High ash lowers gasification efficiency and needs specific technology choices.

    Prelims angle

    1. Products from coal gasification: urea, methanol, ammonia, hydrogen and synthetic natural gas are testable factual hooks.
    2. Composition of syngas: carbon monoxide and hydrogen.
    3. Nodal ministry: Ministry of Coal. Cabinet approval year: 2026.

    Mains angle

    1. GS3, energy and infrastructure: A question can ask how coal gasification advances energy security and import substitution while raising environmental concerns from continued coal use.

    Matching Previous Year Question

    “[2025] Consider the following substances:
    I. Ethanol
    II. Nitroglycerine
    III. Urea
    Coal gasification technology can be used in the production of how many of them?
    (a) Only one
    (b) Only two
    (c) All three
    (d) None
    Final answer: (b)”

    “[2026, GS3, 15 marks] Explain the key challenges for India’s energy security. What measures do you suggest for ensuring energy security along with economic growth and sustainability?”

  • GRSE launches indigenous vessel for deep-sea research

    Why in the News

    Garden Reach Shipbuilders and Engineers (GRSE) has launched Sagar Manthan, an indigenously built ocean research vessel for the National Centre for Polar and Ocean Research (NCPOR). The Rs 840 crore vessel is being built for the Ministry of Earth Sciences and is expected to be ready for use by early 2028. India’s existing ocean research ships were built abroad, and its polar voyages have run on chartered vessels. The capability being added is therefore the domestic construction of the platform itself, not a new branch of ocean science.

    What has actually been launched?

    1. The vessel and the builder: Sagar Manthan is an ocean research vessel built at GRSE, the Kolkata based defence shipyard under the Ministry of Defence.
    2. The cost and the date: The vessel costs Rs 840 crore and is expected to be ready for use by early 2028.
    3. What a launch is: Launch is the stage at which the completed hull enters the water, and outfitting, sea trials and delivery to the user follow it.

    Why does an indigenously built research vessel matter?

    1. The existing fleet came from abroad: The oceanographic research vessel Sagar Kanya was built in Germany and delivered in 1983, and Sagar Nidhi was built in Italy and delivered in 2008.
    2. Polar voyages run on hired ships: Indian Antarctic expeditions have been carried on chartered ice class vessels rather than on an Indian owned polar research ship.
    3. The capability stays onshore: Building a scientific platform domestically keeps design, repair and refit capacity inside the country, which shortens the turnaround between expeditions.

    Where does the vessel fit in India’s ocean programme?

    1. The Deep Ocean Mission: Approved in 2021, the mission is developing the crewed submersible Matsya-6000 under the Samudrayaan project to carry three people to a depth of 6,000 metres.
    2. India’s seabed exploration rights: India holds an exploration contract with the International Seabed Authority for polymetallic nodules in the Central Indian Ocean Basin, and a second contract for polymetallic sulphides on the Indian Ocean Ridge, both of which require sustained survey and sampling at sea.

    Challenges to India’s deep-sea research capability

    1. Programme timelines slip: Deep sea hardware moves from design to sea trials over years, and the science schedule is rebuilt each time a date moves. Eg. The crewed dive under the Samudrayaan project has slipped repeatedly from its original 2022 target.
      The Fix: Publish dated milestones for each mission element and release funding tranches against those milestones rather than against annual budget cycles.
    2. Exploration rights do not convert into extraction: A seabed contract permits survey and testing, and commercial recovery waits on an international mining code that has not been adopted. Eg. Negotiations on the seabed mining code at the International Seabed Authority have run for over a decade without a final text.
      The Fix: Use the contract period to build a domestic metallurgical route for processing nodule metals, so capability exists before the code opens extraction.
    3. The polar operating window is narrow: A hull without ice strengthening cannot work in polar waters for most of the year, so polar science is compressed into a short season. Eg. Resupply of India’s Antarctic research stations is confined to the austral summer.
      The Fix: Commission a dedicated ice class polar research vessel alongside this platform, rather than treating one research hull as cover for both tropical and polar work.

    Conclusion

    The hull is in the water and the science is still two years away, since launch is the start of outfitting rather than the end of construction. What the milestone settles is that India can build this class of ship for itself. What it does not settle is the shortage of sea time against a mandate that runs from the Arctic to the Antarctic and across the Indian Ocean seabed. The marker to watch is whether a dedicated ice class polar vessel is sanctioned to sit alongside it, or whether polar expeditions continue on chartered ships after this one is delivered.

    Back2Basics

    1. What NCPOR is: Set up in 1998 as the National Centre for Antarctic and Ocean Research, and renamed the National Centre for Polar and Ocean Research in 2018.
    2. Status and location: An autonomous institute of the Ministry of Earth Sciences, based at Vasco da Gama in Goa.
    3. Mandate: The nodal agency for India’s polar and Southern Ocean research, which plans and executes the annual Antarctic and Arctic expeditions.
    4. Stations it runs: Maitri and Bharati in Antarctica, and Himadri at Ny-Alesund in Svalbard in the Arctic.

    Matching Previous Year Question

    “[2026] Which of the following statements with regard to India’s Deep Ocean Mission is/are correct? 1. It was launched by the Ministry of Ports, Shipping and Waterways, Government of India. 2. Matsya-6000 has been designed to carry 3 people for deep sea exploration. 3. Samudrayaan is a project under this mission. (a) 1 only (b) 2 and 3 only (c) 1 and 2 only (d) 1, 2 and 3 ANSWER: (b)”

  • Egg, chicken, milk prices: Why they remain high

    Why in the News

    Gross value added from India’s livestock sector was about 34% of that from crops in 2013-14, and the ratio touched 57% in 2023-24, the last year for which official data is available. The value of milk, eggs, meat and other animal products from Indian farms is steadily approaching that of foodgrains, oilseeds, sugarcane, cotton, vegetables, fruits and spices. That progress is being undermined by spiralling feed ingredient costs. The tension is that the same grain the animal economy runs on is also the feedstock the fuel blending programme is turning to, and the government cannot protect both at once.

    Components of livestock feed

    1. Energy comes from maize: Broiler chicken feed is 55-65% maize by weight, egg laying bird feed is 50-60% maize, and cattle feed 15-20%.
    2. Protein comes from oilseed cakes and meals: Broiler formulations carry 25-30% soyabean meal and layer feed 18-20%. Oilseed cakes and meals make up 40-50% by weight of compound cattle feed.
    3. The balance is micro ingredients: Animals also need minerals such as calcium and phosphorus, vitamins, dietary fibre, fat and synthetic amino acids such as methionine and lysine.

    How far have feed ingredient prices risen?

    1. Maize at Erode: The average price at the Alangeyam market in Tamil Nadu’s Erode district rose from Rs 2,537 per quintal in August 2025 to Rs 2,759 in August 2026, and stands at Rs 2,810 now.
    2. Soyabean meal at Indore: Prices of 50% protein soyabean meal on the National Commodity and Derivatives Exchange rose from Rs 38,186 per tonne in August 2025 to Rs 58,156 in August 2026. They have fallen to Rs 50,000 this month, against a September 2025 average of Rs 35,327.
    3. The peak and the switch: Soyabean meal has come off a peak of Rs 63,000 to Rs 64,000 per tonne, and maize began hardening just as it eased.
    4. The other protein meals: Groundnut and rapeseed oilcakes trade at Rs 38,000 and Rs 33,100 per tonne against September 2025 averages of Rs 24,188 and Rs 24,479, with cottonseed extraction at Rs 35,500 against Rs 30,500 and rice bran extraction at Rs 20,500 against Rs 13,669, on Solvent Extractors’ Association of India data.

    Why did egg prices climb this year?

    1. The current level: Egg prices in Delhi are at Rs 600 per 100 pieces on the indicative poultry farm-gate rates set by the National Egg Co-ordination Committee (NECC), and retail prices rule at Rs 7-9 per egg depending on whether the purchase is a 30 piece crate, a dozen or a smaller lot.
    2. The July spike: NECC suggested prices scaled Rs 725-730 per 100 eggs in July, and the month’s average of Rs 670.5 was 38.7% higher than a year earlier.
    3. Weather cut supply: The NECC’s stated explanation is that an extended summer and delayed monsoon rains linked to El Nino caused water shortages, heat stress and rising bird mortality, alongside a July spike in maize and soyabean meal prices.
    4. Demand is seasonal: Egg demand and prices generally rise after Diwali through winter and the spring season, and fall with rising temperature and humidity. The real dip runs through Shravan, Pitru Paksha, Navratri, Diwali and Chhath Puja, when many Hindu households avoid eggs.

    Why does feed cost decide the producer’s margin?

    1. Feed dominates the egg cost: Layer feed prices have climbed from Rs 24-26 to Rs 30-32 per kg over the last four months, and feed constitutes 65-70% of a farmer’s egg production cost.
    2. Broiler margins have narrowed: Broiler feed prices have surged from Rs 40 to Rs 46 per kg over the same four months, and total broiler production cost is now roughly Rs 110 per kg.
    3. The price has fallen back towards cost: Farmgate broiler prices crossed Rs 150 per kg of live weight across north India in late June and early July, and have settled at Rs 115-120 per kg after Shravan.
    4. The bird takes time to pay back: Farmers raise day old chicks of 35-45 gm to slaughter ready weight of 2-2.5 kg over 35-42 days. Layer hens begin laying at 18-20 weeks, continue until 70-72 weeks, and lay 250-300 eggs a year.

    Why is the supply outlook uneven between maize and soyabean?

    1. Soyabean looks comfortable: Farmers sowed almost the same area under soyabean this kharif season as last year, and the crop due for harvest in October and November is reported normal to good with no major insect pest or disease incidence.
    2. Imports have padded the stocks: Some large poultry companies with captive feed manufacturing facilities have contracted soyabean imports estimated at 0.9 million tonnes in 2025-26, improving carryover stocks for the new marketing year.
    3. Maize is the worry: Kharif maize acreage is down 4.1% on government data and the yield outlook is weak, on the assessment of CLFMA of India, the compound livestock feed manufacturers’ body. El Nino could also hurt the rabi maize crop.
    4. The output projection has turned: The US Department of Agriculture projects India’s maize production in 2026-27 at 50 million tonnes, a sharp decline from the record 55.1 million tonnes of 2025-26, which was itself a substantial jump over 43.4 million tonnes the year before.

    How does ethanol policy tighten the feed squeeze?

    1. Sugar feedstock is being closed off: With sugar prices rising, the Centre is expected to bar mills from using cane juice or B-heavy molasses, the intermediate molasses stream that still carries high sucrose, for manufacturing ethanol in the crushing year beginning October.
    2. The load shifts to grain: Grain based distilleries carry the blending programme when cane feedstock is restricted, and maize is the grain they draw on.
    3. Diversion itself may be reviewed: If maize prices keep rising into livestock feed costs and consumer prices for milk, eggs and meat, the diversion of the feed grain to ethanol production could itself come up for review.
    4. The blending target is the casualty: Meeting the existing 20% ethanol blending in petrol (E20) would become difficult in 2026-27.

    Challenges to India’s livestock feed supply

    1. Maize productivity is low: India’s average maize yield sits well below the world average, so additional demand has to be met by planting more area rather than by raising output per hectare. Eg. Single cross hybrid seed coverage remains limited across the rainfed kharif maize belts of Rajasthan and Madhya Pradesh.
      The Fix: Drive seed replacement with single cross hybrids in the rainfed kharif districts and expand irrigated rabi maize, which yields far more per hectare.
    2. Protein meal supply carries no import ceiling: India does not permit routine imports of genetically modified soyabean meal, so domestic meal prices have no external cap when they run up. Eg. The Centre allowed a one time import of 1.2 million tonnes of de-oiled genetically modified soyameal in 2021 after poultry feed costs spiked.
      The Fix: Notify a standing tariff rate quota for de-oiled soyameal that opens automatically once domestic prices cross a declared trigger.
    3. Dairy runs on a fodder deficit: Cattle and buffalo rations depend on crop residue and grazing land that is shrinking, which pushes more of the ration onto purchased compound feed. Eg. Fodder crops occupy roughly 4% of India’s gross cropped area and that share has not expanded in decades.
      The Fix: Bring fodder crops into seed subsidy and assured procurement in the major milk shed districts, so a farmer growing fodder is not worse off than one growing grain.
    4. Poultry carries weather risk without cover: Commercial layer and broiler units sit outside the livestock insurance cover that large ruminants receive, so mortality in a heat wave is borne entirely by the farmer. Eg. The livestock insurance component of central animal husbandry schemes covers cattle, buffalo, sheep, goat and pig, and not commercial poultry.
      The Fix: Extend livestock insurance to commercial poultry units with a temperature triggered payout, so relief does not wait on a mortality survey.

    Conclusion

    Feed, not disease and not demand, is what now sets the price of an egg, a kilogram of chicken and a litre of milk. The animal economy has grown faster than the grain and oilmeal base that feeds it, so a single bad grain year passes straight through to the consumer. The decision point is the feedstock order for the coming crushing year, which settles how much grain the fuel programme takes before the feed industry gets to it. The marker to watch is whether the government caps grain diversion to protect feed supply, or holds the blending target and lets feed prices clear the market.

    Back2Basics

    1. What the NECC is: A body of poultry farmers formed in 1982 to co-ordinate egg marketing and stabilise prices for producers.
    2. What it does: It declares daily suggested farm-gate egg prices for each of its producing and consuming centres, which the trade uses as the reference rate.
    3. Its standing: The prices are indicative and carry no statutory force, and the body is a producers’ association rather than a regulator.

    Matching Previous Year Question

    “[2015, GS3, 12.5 marks] Livestock rearing has a big potential for providing non-farm employment and income in rural areas. Discuss suggesting suitable measures to promote this sector in India.”

  • 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)”

  • Withdraw stand on Gram Sabha consent, rights group urges Ministry

    Why in the News

    The Tribal Affairs Ministry has held in an office memorandum that there is “no provision” under the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 to seek the consent of Gram Sabhas for diverting forest land to non-forest purposes. The Campaign for Survival and Dignity (CSD), a national platform of Adivasi and forest dweller organisations, has demanded immediate withdrawal of the memorandum. The position was arrived at during the Ministry’s discussion with the Power Ministry on the requirement of 100% Gram Sabha consent, which has been described as a “critical bottleneck” delaying large government projects. The contest is over what the consent requirement actually is. Treated as a statutory right it cannot be set aside by an executive communication, and treated as an administrative practice it can.

    What does the Forest Rights Act, 2006 give the Gram Sabha?

    1. It recognises rights: Section 3 recognises individual rights over forest land under occupation and community rights over minor forest produce, grazing, water bodies and traditional use.
    2. The Gram Sabha starts the process: Section 6 makes the Gram Sabha the authority that initiates determination of the nature and extent of individual and community forest rights.
    3. It carries powers over the forest itself: Section 5 empowers the Gram Sabha to protect wildlife, forest and biodiversity and to stop any activity that harms the community forest resource.
    4. Consent attaches to diversion: An Environment Ministry circular of 3 August 2009 requires written Gram Sabha consent, together with a certificate that rights recognition is complete, before forest land is diverted under the Forest (Conservation) Act, 1980.

    What did the Ministry hold, and what produced it?

    1. The memorandum’s claim: The office memorandum of 31 August states there is no provision in the Act requiring Gram Sabha consent for diversion of forest land to non-forest use.
    2. It came out of an inter-ministerial discussion: The Tribal Affairs Ministry is in discussions with the Power Ministry on the 100% consent requirement, which the discussions treat as a critical bottleneck holding up large government projects.

    On what grounds is the memorandum contested?

    1. Called factually and legally untenable: The CSD said the position “smacks of dereliction of duty” and that the error could have been avoided by reading the text of the law.
    2. It cuts against the Ministry’s own record: A former Union Environment Minister said the stance runs contrary to the Ministry’s own directives, communications, guidelines and the set procedure under law as it stands.
    3. It sits against the Niyamgiri ruling: In Orissa Mining Corporation v. Ministry of Environment and Forests (2013), the Supreme Court referred the question of community and religious claims to the Gram Sabhas of Rayagada and Kalahandi districts. All twelve Gram Sabhas consulted rejected bauxite mining in the Niyamgiri hills.
    4. A motive is alleged: The CSD alleged the Ministry took the position to appease the interests of project developers, contractors and large corporations.

    Challenges to Gram Sabha consent under the Forest Rights Act

    1. Consent presumes recognition is finished: Where community forest resource rights have not been recognised, there is no recorded rights holder whose consent can be sought, and the diversion proceeds on that silence. Eg. Gadchiroli district in Maharashtra carries widespread community forest resource titles, and recognition remains thin across most other States.
      The Fix: Complete community forest resource mapping and titling for a block before any diversion proposal for that block is admitted for processing.
    2. Consent can be manufactured: Resolutions are recorded without quorum, or with an agenda drafted by the project proponent and read out at the meeting. Eg. Gram Sabha consent resolutions for the Parsa coal block in Chhattisgarh’s Hasdeo Arand were alleged to be forged and were placed under official inquiry.
      The Fix: Video record every consent Gram Sabha and publish the attendance roll and the resolution in the local language before the clearance file moves.
    3. Clearance stages have been decoupled from consent: The Forest (Conservation) Rules, 2022 allow the Centre to grant in principle approval before the State certifies that forest rights settlement is complete. Eg. The Rules were challenged before the Supreme Court by retired civil servants and forest rights groups on precisely this ground.
      The Fix: Restore the consent certificate as a condition precedent to the first stage approval rather than an obligation the State discharges afterwards.

    Conclusion

    The memorandum stands, and only the Ministry that issued it can withdraw it. What is in dispute is not a policy preference but a reading of a statute, which means the answer is available to any court asked the question. The immediate marker is whether the Tribal Affairs Ministry withdraws or reissues its communication to the Power Ministry. The larger one is whether consent survives as a condition of forest diversion or is converted into a clearance stage that the executive can waive when a project is large enough.

    Matching Previous Year Question

    “[2013] Under the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, who shall be the authority to initiate the process for determining the nature and extent of individual or community forest rights or both? (a) State Forest Department (b) Distrit Collector/Deputy Commissioner (c) Tahsildar/Block Develoment Officer/Mandal Revenue Officer (d) Gram Sabha ANSWER: (d)”

  • Pollution from open waste burning triples in cities during winter: study

    Why in the News

    Open waste burning across Indian cities rises sharply in winter, with the average incidence, the quantity of waste burned and the associated emissions as much as three times higher than in summer. The finding comes from a working paper by the World Resources Institute (WRI) India, built on field surveys carried out between 2019 and 2026 in 11 polluted Indian cities whose names have not been disclosed. The burning is not a major source of citywide particulate pollution, contributing under 1% of total PM2.5 and PM10 emissions in the cities assessed. The contest is over what the finding measures. Read as an air quality number the share is small, and read as a service delivery number it is evidence that municipal waste collection is failing in the poorest wards of the smallest cities.

    Why does the burning rise in winter?

    1. The seasonal multiple: Incidence, quantity burned and emissions run up to three times higher in winter than in summer across every category of city examined.
    2. The weather compounds it: The post monsoon period brings falling temperatures and stagnant atmospheric conditions, which make it harder for pollutants to disperse.

    How does the burden differ across city tiers?

    1. Tier 3 cities burn most often: They recorded the highest winter incidence, at an average of 49.6 incidents per square kilometre per day.
    2. Tier 2 cities burn the most waste: Cities with populations between 500,000 and five million recorded the highest quantities of waste burned, at 46 incidents per square kilometre per day.
    3. Tier 1 cities trail: The largest cities recorded 39.4 incidents per square kilometre per day.

    Why does a share under 1% still matter?

    1. The citywide share is small: Open burning contributed less than 1% of total citywide PM2.5 and PM10 emissions in the cities assessed.
    2. The exposure is close range: Burning happens near homes, streets and waste dumps, so it raises short term exposure to toxic smoke for the people living beside it.

    What does the income gradient reveal?

    1. Poorer areas burn more: Lower income neighbourhoods recorded substantially more burning than higher income areas within the same cities.
    2. The single highest reading: Nearly 84 incidents per square kilometre per day were recorded in the poorer areas of Tier 2 cities during winter, the highest figure in the study.
    3. What the researchers read into it: The pattern points to disparities in waste collection and other municipal services between neighbourhoods, rather than to differences in household behaviour alone.

    Challenges to municipal solid waste collection

    1. Segregation at source stays low: The Solid Waste Management Rules, 2016 require households to hand over segregated wet, dry and domestic hazardous waste, and mixed waste continues to reach collection points. Eg. Indore’s ward level segregated door to door collection is cited as an exception rather than the norm across Indian cities.
      The Fix: Tie Swachh Bharat Mission grant releases to third party audited segregation rates at ward level rather than to citywide self reported figures.
    2. Collection routes stop at the settlement edge: Informal settlements and peri urban wards often sit outside the contracted collection route, so waste there has no lawful disposal path. Eg. Peri urban wards added to municipal limits after boundary expansion frequently retain no collection contract for years.
      The Fix: Use burning incidence mapped per square kilometre to identify uncollected pockets and extend contracted routes to them.
    3. Processing capacity lags behind collection: Waste that is collected still lands on legacy dumpsites because sorting and processing plants are missing or underused. Eg. Delhi’s Ghazipur, Bhalswa and Okhla legacy dumps continue to receive fresh waste, with bio-mining running alongside.
      The Fix: Release bio-mining funds against verified reduction in dump height and volume rather than against tonnage cleared on paper.
    4. Enforcement against burning is nominal: Open burning of waste is prohibited and carries a spot fine under the 2016 Rules, and prosecution is rare because the offence is momentary and unwitnessed. Eg. The Graded Response Action Plan bars open burning across Delhi and the National Capital Region every winter, and incidents persist through the season.
      The Fix: Make the ward sanitation officer accountable for a measured incidence figure in the ward, so enforcement is judged on the count rather than on fines issued.

    Conclusion

    The paper converts open waste burning from an air quality footnote into a measurable test of municipal performance. The unit it uses is a count of incidents in a defined area, which a city can track ward by ward and compare across seasons. That makes the finding usable in a way a citywide emission share is not. The marker to watch is whether city clean air action plans adopt burning incidence as a service delivery indicator before the coming winter, or continue to treat it as a source with a negligible share.

    Back2Basics

    1. World Resources Institute: A global research organisation founded in 1982 and headquartered in Washington DC, working on climate, energy, food, forests, water and cities.
    2. WRI India: An independent research charity registered in India, which works with State governments and urban local bodies on air quality, mobility, energy and urban development.
    3. What a working paper is: A pre-publication research document circulated for comment, which has not been through peer review.

    Matching Previous Year Question

    “[2026, GS3, 15.0 marks] What are the challenges to solid waste management in India? Discuss the governmental policy framework on solid waste management. Discuss the success/failure cases of Delhi and Indore cities highlighting the salient feature of their solid waste management initiatives.”