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GS Paper: GS3

  • IMF releases World Economic Outlook (WEO)

    Why in the News?

    The International Monetary Fund (IMF) has released the July 2025 update to its World Economic Outlook (WEO).

    IMF releases World Economic Outlook (WEO)

    About World Economic Outlook (WEO):

    • Published By: International Monetary Fund (IMF)
    • Frequency: Biannual (April, October) + updates in January and July
    • Purpose: Provides global forecasts on GDP, inflation, trade, and policy trends
    • Data Sources: IMF consultations with member nations and internal models
    • Audience: Governments, institutions, investors, researchers
    • July 2025 Update Title: “Global Economy: Tenuous Resilience amid Persistent Uncertainty”

    Key Highlights – July 2025 Update:

    • Global Growth Projections:
      • 2025: 3.0% (↑ from 2.8% in April)
      • 2026: 3.1% (↑ from 3.0%)
    • Despite multiple shocks—COVID-19, the Ukraine war, tariff increases—global growth continues.
      However, resilience remains fragile due to:

      • US–China tariff tensions and rising protectionism
      • Conflicts in Ukraine and the Middle East
      • High public debt in advanced economies is raising interest rates
    • Country Forecasts for 2025:  United States: 1.9%,  China: 4.8% (↑ from 4.0%),  Euro Area: 1.0%,  Germany: 0.1%,  United Kingdom: 1.2%,  Japan: 0.7%,  Russia: 0.9%,  Pakistan: 2.7%.

    India – The Bright Spot:

    • Growth Rate: 2023: 9.2%;  2024: 6.5%;  2025: 6.4% (strongest among major economies).
    • Drivers of Growth:
      • Robust domestic demand
      • Strong services and manufacturing output
      • Effective inflation and monetary policy management
    • Strategic Position:
      • Set to overtake several advanced economies in GDP size
      • Viewed globally as a “bright spot” amid persistent uncertainties
    [UPSC 2014] Which of the following organisations brings out the publication known as ‘World Economic Outlook?

    Options: (a) The International Monetary Fund * (b)The United Nations Development Programme (c) The World Economic Forum (d) The World Bank

     

  • What are Skill Impact Bonds (SIB)?

    Why in the News?

    Skill Impact Bonds (SIB) were recently highlighted by the Skill Development Ministry.

    About the Skill Impact Bond:

    • Launched: November 2021
    • Nature: India’s first Development Impact Bond (DIB) focused on employment-linked skill development
    • Lead Agency: National Skill Development Corporation (NSDC), under the Ministry of Skill Development and Entrepreneurship
    • Collaborators: British Asian Trust, HSBC India, Michael & Susan Dell Foundation
    • Target: Train and place 50,000 youth over 4 years, with 62% women participation
    • How it Works:
      • Risk Investors: Provide upfront capital to training providers
      • Training Providers: Deliver skill training and ensure job placements
      • Outcome Funders: Repay investors only if job outcomes are achieved
      • Evaluators: Independently assess outcomes via CATI surveys and document verification

    Key Features:

    • Outcome-Focused Approach: Measures success by certification, placement, and 3-month retention, not just enrolment
    • Eligibility Criteria:
      • Age: 18–40 years; Education: Undergraduate or below
      • Status: Unemployed or earning below ₹15,000/month, or household income below ₹25,000/month
    • Sectoral Coverage: Retail, Healthcare, Apparel, Logistics, Information Technology & IT-enabled Services, Banking, Financial Services & Insurance.
    • Women-Focused Design: Ensures 62% female participation to bridge the gender employment gap
    [UPSC 2018] With reference to Pradhan Mantri Kaushal Vikas Yojana, consider the following statements:

    1. It is the flagship scheme of the Ministry of Labour and Employment.

    2. It, among other things, will also impart training in soft skills, entrepreneurship, financial and digital literacy.

    3. It aims to align the competencies of the unregulated workforce of the country to the National Skill Qualification Framework.

    Which of the statements given above is/are correct?

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

     

  • [pib] Digital Payments Index (DPI)

    Why in the News?

    According to the Reserve Bank of India (RBI), digital payments registered a 12.6% year-on-year rise as of March 31, 2024, as measured by the RBI’s Digital Payments Index (DPI).

    About RBI’s Digital Payments Index (DPI):

    • Launched by: Reserve Bank of India (RBI) in January 2021
    • Purpose: Measures the extent of digital payment adoption across India
    • Base Period: March 2018 (Index value = 100)
    • Release Frequency: Semi-annually (with a 4-month lag)
    • Objective: Track usage, infrastructure, and growth in digital payments
    • Key Parameters (with Weightage): These evaluate infrastructure readiness, transaction volume, user adoption, and innovation.
      1. Payment Enablers – 25%
      2. Payment Infrastructure – Demand Side – 10%
      3. Payment Infrastructure – Supply Side – 15%
      4. Payment Performance – 45%
      5. Consumer Centricity – 5%

    Growth Highlight:

    • Growth Trends in RBI-DPI: DPI grew nearly 5 times from 100 in March 2018 to 493.22 in March 2025, reflecting India’s rapid digital payment adoption.
    • Nearly 5× increase from the base value in 7 years
    • Driven by rapid expansion of Unified Payments Interface (UPI), mobile wallets, and QR code infrastructure
    [UPSC 2024] Consider the following countries:

    I. United Arab Emirates II. France III. Germany IV. Singapore V. Bangladesh

    How many countries amongst the above are there other than India where international merchant payments are accepted under UPI?”

    Options: (a) Only two (b) Only three* (c) Only four (d) All the five

    Answer: (b) Only three (UAE, France, Singapore)

     

  • [31st July 2025] The Hindu Op-ed: Restoring mangroves can turn the tide on India’s coastal security 

    PYQ Relevance:

    [UPSC 2019] Discuss the causes of depletion of mangroves and explain their importance in maintaining coastal ecology.

    Linkage: The article explicitly details the importance of mangroves, stating they are “critical in India’s pursuit of climate resilience, biodiversity conservation, and the empowerment of coastal communities”. It explains their role as “natural barriers, protecting coastal communities from cyclones, tidal surges, and erosion”, and their significance in “biodiversity conservation”. The article also discusses the threats leading to their “depletion,” such as “urban expansion, aquaculture, pollution, and changing climate patterns”.

     

    Mentor’s Comment:  India’s mangrove forests have come into focus due to growing efforts to restore and protect them amid increasing threats from urban expansion, climate change, and pollution. Recent successful restoration projects in Tamil Nadu, Gujarat, and Mumbai, along with support from government missions and private partners, highlight India’s growing role in mangrove conservation. These forests are vital for climate resilience, coastal protection, and biodiversity, making their preservation a national priority.

    Today’s editorial analyses India’s growing efforts to restore mangrove forests. This topic is important for GS Paper III (Environment) in the UPSC mains exam.

    _

    Let’s learn!

    Why in the News?

    Recently, mangrove restoration efforts in Tamil Nadu, Gujarat, and Mumbai have been successful.

    What is the extent of Mangroves in India?

    • India’s total mangrove cover is 4,992 sq km, accounting for 0.15% of the country’s geographical area (as per ISFR 2021).
    • West Bengal, Gujarat, and the Andaman & Nicobar Islands hold the largest mangrove areas, with West Bengal (Sundarbans) alone covering over 42% of the total.

    Why are mangroves vital for climate and coastal resilience in India?

    • Natural Coastal Shield: Mangroves act as buffers against cyclones, storm surges, and coastal erosion. Eg: During the 2004 tsunami, villages protected by mangroves in Tamil Nadu suffered less damage compared to those without them.
    • Climate Change Mitigation: They store “blue carbon” in biomass and deep soil, helping to absorb excess CO₂. Eg: India’s mangroves contribute significantly to carbon sequestration, aiding in climate targets under the Paris Agreement.
    • Biodiversity Hotspots: Provide breeding grounds for fish, crabs, birds, and other marine life. Eg: Thane Creek Flamingo Sanctuary in Mumbai supports over 180 bird species due to nearby mangroves.
    • Livelihood Support for Communities: Sustain traditional occupations like fishing, honey gathering, and crab farming. Eg: Sunderbans communities rely on mangroves for fishing and honey collection.
    • Disaster Risk Reduction: Reduce the impact of natural disasters by slowing floodwaters and stabilising shorelines. Eg: In Odisha, mangroves helped minimise damage during Cyclone Phailin (2013).

    What threatens India’s mangroves?

    • Urbanisation and Industrial Expansion: Mangrove areas are cleared for ports, housing, and industrial zones. Eg: Mangrove loss in Mumbai due to Navi Mumbai airport construction.
    • Aquaculture and Agriculture Encroachment: Conversion of mangrove land into shrimp farms or paddy fields disrupts ecosystems. Eg: Andhra Pradesh lost mangroves to extensive aquaculture projects.
    • Pollution: Discharge of industrial effluents, plastic, and sewage harms mangrove health. Eg: Thane Creek, Mumbai, faces heavy pollution impacting biodiversity.
    • Climate Change and Sea Level Rise: Changes in salinity, temperature, and rising sea levels affect mangrove regeneration. Eg: Sundarbans face submergence and loss due to rising sea levels.
    • Overexploitation of Resources: Excessive collection of wood, honey, and fodder leads to degradation. Eg: In West Bengal, unsustainable practices by local communities reduce forest cover.

    How has community involvement aided mangrove restoration in Tamil Nadu?

    • Collaborative Restoration Projects: Community members partnered with institutions like the M.S. Swaminathan Research Foundation and the Tamil Nadu Forest Department for restoring degraded mangroves. Eg: In Muthupettai’s Pattuvanachi estuary, locals helped implement a 115-hectare restoration plan.
    • Tidal Canal Digging for Hydrology Restoration: Villagers participated in digging 19 major canals to restore natural tidal flow, crucial for mangrove survival. Eg: This intervention successfully revived water movement in Muthupettai, enabling mangrove regrowth.
    • Seed Collection and Plantation: Locals actively collected and planted seeds of native mangrove species like Avicennia and Rhizophora. Eg: Over 4.3 lakh Avicennia seeds and 6,000 Rhizophora propagules were planted by community members.
    • Removal of Invasive Species: Community groups helped clear invasive weeds like Prosopis juliflora, which compete with mangroves for space and nutrients. Eg: In Kazhipattur near Buckingham Canal, Chennai, invasive plants were removed before mangrove restoration began.
    • Support for Green Missions and Monitoring: Local residents supported and maintained mangrove cover under the Green Tamil Nadu Mission, ensuring long-term success. Eg: Community participation helped double Tamil Nadu’s mangrove area from 4,500 ha to 9,000 ha (2021–2024).

    What is the role of corporate partnerships in mangrove revival in Mumbai?

    • Financial and Technical Support: Amazon’s Right Now Climate Fund invested $1.2 million (₹10.3 crore) in a restoration project along Thane Creek, enabling large-scale ecological rehabilitation.
    • Pollution Control and Ecosystem Restoration: Partnered with Hasten Regeneration and Brihanmumbai Municipal Corporation to install trash booms that intercept plastic waste, aiming to collect 150 tonnes over 3 years while planting 3.75 lakh mangrove saplings.
    • Community Empowerment and Livelihood Generation: Created paid employment opportunities for local women in planting and maintenance, linking ecological recovery with socio-economic upliftment.

    Why is Gujarat leading in mangrove restoration?

    • Ambitious Scale under MISHTI Scheme: Under the Mangrove Initiative for Shoreline Habitats and Tangible Incomes (MISHTI), launched in 2023, Gujarat planted over 19,000 hectares of mangroves within two years—far exceeding the national five-year target of 54,000 hectares.
    • Strategic Coastal Coverage & Biodiversity Focus: Gujarat holds about 23.6% of India’s total mangrove cover, with major plantations in Kutch, Bhavnagar, Surat, and Dumas-Ubhrat. These areas support critical ecological balance, biodiversity, and local livelihoods.
    • Strong Governance, Planning & Local Institutional Support: Efficient coordination between the Gujarat Forest Department, state environment agencies, and local communities has ensured success. Structured coastal mapping, restoration planning, and promotion of ecotourism-linked livelihoods have further strengthened outcomes.

    What are the steps taken by the Indian government? 

    • Green India Mission & State Missions: Through the National Green India Mission and state-level initiatives like the Green Tamil Nadu Mission, the government supports afforestation, ecosystem restoration, and community-based conservation efforts.
    • Inclusion in Coastal Regulation Zone (CRZ) Rules: Mangrove areas are designated as Ecologically Sensitive Zones (ESZ) under the CRZ Notification, restricting construction and promoting their protection through legal safeguards and regulatory oversight.

    Way forward: 

    • Strengthen Community-Based Conservation: Empower local communities through training, incentives, and formal roles in monitoring and maintaining mangroves to ensure sustainable, long-term protection.
    • Integrate Mangroves into Climate and Development Planning: Recognise mangroves as vital climate infrastructure by integrating them into coastal zone management, disaster resilience strategies, and carbon credit frameworks.

  • New Guidelines for Management of Contaminated Sites

    Why in the News?

    The Union Environment Ministry has notified the Environment Protection (Management of Contaminated Sites) Rules, 2025 under the Environment (Protection) Act, 1986.

    About the Environment Protection (Management of Contaminated Sites) Rules, 2025:

    • Nodal Agency: Ministry of Environment, Forest and Climate Change (MoEFCC).
    • Legal Basis: Framed under the Environment (Protection) Act, 1986.
    • Purpose: India’s first dedicated legal framework to identify, clean up, and monitor contaminated sites.
    • Goal: Prevent environmental degradation, enforce clean-up, and ensure polluter accountability.
    • Funding Pattern:
      • Himalayan & Northeast states: 90% Centre – 10% State
      • Other states: 60% Centre – 40% State
      • Union Territories: 100% Centre

    Key Features:

    • Site Classification: Sites categorized as suspected, potentially contaminated, or confirmed, based on scientific evidence.
    • Exclusions: Sites involving radioactive waste, mining, marine oil spills, or municipal solid waste (regulated separately).
    • Transparency & Tracking: Central Pollution Control Board (CPCB) to maintain a real-time online portal with public access.
    • Public Participation:
      • 60-day window for stakeholder feedback post-listing.
      • Final site lists must be published in regional newspapers.
    • Polluter Pays Principle:
      • Identified polluters must bear full remediation cost and repay within 3 months.
      • Land use changes or ownership transfers restricted during/post clean-up.
    • Orphan Sites (No Known Polluter): Clean-up funded through:
      • Environment Relief Fund
      • Environmental violation penalties
      • Government budgetary support
    • Voluntary Remediation: Private entities with technical capacity may remediate sites with landowner consent.
    • Monitoring Committees: State and Central-level bodies to oversee implementation and submit annual compliance reports.

    Back2Basics: Environment (Protection) Act, 1986

    • Enactment: In response to the Bhopal Gas Tragedy; derives authority from Article 253 of the Constitution.
    • Objective: To protect and improve the environment and prevent hazards to life and property.
    • Significance: Acts as India’s umbrella environmental legislation, coordinating with the Water Act (1974) and Air Act (1981).
    • Key Provisions:
      • Pollution standards via Environment (Protection) Rules.
      • Hazardous Waste Rules, 1989 – manage toxic waste.
      • Chemical Safety Rules – control handling of hazardous chemicals.
      • Cells Rules, 1989 – govern gene tech and genetically modified organisms.
    • Power: Empowers the Central Government to act directly for environmental protection.

     

    [UPSC 2019] Consider the following statements:

    The Environment Protection Act, 1986 empowers the Government of India to:

    1. State the requirement of public participation in the process of environmental protection, and the procedure and manner in which it is sought.

    2. Lay down the standards for emission or discharge of environmental pollutants from various sources.

    Which of the statements given above is/are correct?

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

     

  • Grassland Bird Census in Kaziranga

    Why in the News?

    The Prime Minister recently highlighted a first-of-its-kind grassland bird census in Kaziranga National Park, Assam.

    About the Bird Census:

    • Significance: India’s first-ever dedicated census of grassland birds
    • Led by: Chiranjib Bora (PhD scholar), supported by INSPIRE Fellowship from the Department of Science & Technology
    • Organised by: Park authorities, scientists, and conservationists
    • Objective:
      • Document rare, endemic, and threatened grassland bird species
      • Focused on 10 priority species endemic to the Brahmaputra floodplains

    Methodology Used:

    • Passive Acoustic Monitoring (PAM):
      • Recording devices placed in tall trees during breeding season
      • Recordings captured across 29 locations over 3 days
      • Ideal for detecting small, shy, camouflaged birds not easily visible
    • Sound Identification Tools:
      • BirdNet: Machine learning tool used to identify bird calls
      • Spectrograms: Visual analysis of sound patterns; Final identifications verified by ornithologists

    Key Findings:

    • Total Species Recorded: 43 grassland bird species
    • Priority Species Identified: Bengal Florican, Swamp Francolin, Finn’s Weaver, Jerdon’s Babbler, Black-breasted Parrotbill, among others
    • Major Discovery: A breeding colony of over 85 Finn’s Weaver nests—first-ever documentation
    [UPSC 2014] If you walk through countryside, you are likely to see some birds stalking alongside the cattle to seize the insects disturbed by their movement through grasses. Which of the following is/are such bird/birds?

    1. Painted Stork  2. Common Myna  3. Black-necked Crane

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

     

  • CERT-In makes Annual Cybersecurity Audit Mandatory for Companies

    Why in the News?

    The Indian Computer Emergency Response Team (CERT-In) has mandated annual third-party cybersecurity audits for both private and public-sector organisations operating digital infrastructure.

    Cybersecurity Directive: Key Highlights:

    • Annual third-party cyber audits are mandatory for all digital infrastructure.
    • Sectoral regulators may require more frequent checks based on risk.
    • Audits must be risk-based, domain-specific, and aligned with business context.

    About the Indian Computer Emergency Response Team (CERT-In):

    • Parent Ministry: Ministry of Electronics and Information Technology
    • Established: January 2004
    • Constituency: All entities operating in Indian cyberspace
    • Core Responsibilities:
      • Collect, analyse, and disseminate cybersecurity incident data
      • Forecast and alert about emerging cyber threats
      • Provide emergency response support to affected entities
      • Issue security guidelines, advisories, and best practices
    • International Role: Signs MoUs with other countries to:
      • Share real-time cyber threat intelligence
      • Collaborate on incident response and recovery
      • Exchange knowledge on global cybersecurity practices

    India’s Cybersecurity Ecosystem:

    • Institutional Framework:
      • National Critical Information Infrastructure Protection Centre (NCIIPC): Protects key sectors like telecom, banking, and power
      • National Cyber Coordination Centre (NCCC): Monitors real-time cyber threats across public and private domains
      • National Cyber Security Coordinator (NCSC): Ensures coordination across ministries and departments
      • Sector-Specific Response Teams (CSIRTs): For domains like finance (CSIRT-Fin), power (CSIRT-Power)
    • Legal and Policy Measures:
      • Information Technology Act, 2000: Core law for cybercrime and electronic governance
      • National Cyber Security Policy, 2013: Strategic vision for securing cyberspace
      • Digital Personal Data Protection Act, 2023: Ensures privacy, mandates breach reporting
      • Cyber Crisis Management Plan: Framework for cyber incident response in government agencies
    • Capacity Building Programs:
      • Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA): Promotes digital literacy in rural areas
      • Cyber Surakshit Bharat Initiative: Trains Chief Information Security Officers of public sector organisations
      • Indian Cyber Crime Coordination Centre (I4C): Multi-agency platform to handle cybercrimes
    [UPSC 2017] In India, it is legally mandatory for which of the following to report on cyber security incidents? 1. Service providers 2. Data Centres 3. Body corporate Select the correct answer using the code given below:

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

     

  • Interrupted growth Industrial growth is still tied to government spends on infrastructure 

    Why in the News?

    India’s Index of Industrial Production (IIP) recorded a 10-month low growth of 1.5% in June, primarily due to a sharp decline in mining (–8.7%) and electricity output (–2.6%).

    What caused the IIP slowdown in June?

    • Sharp contraction in mining and electricity output: Mining activity declined by –8.7%, and electricity generation fell by –2.6%, significantly dragging overall growth. These two sectors jointly account for 22.3% of the IIP weightage.
    • Erratic monsoon and waterlogging in key mining belts: Early and uneven southwest monsoon caused flooding in mining areas of Odisha, Jharkhand, and West Bengal, disrupting production and logistics.
    • Damage to infrastructure and supply chain disruptions: Waterlogging led to damage in power distribution infrastructure and interrupted supply chains, resulting in subdued industrial activity and power demand.

    How did climate events contribute?

    • Disruption of mining activities: Heavy rainfall and waterlogging in mineral-rich regions like Jharkhand, Odisha, and West Bengal hindered extraction and transportation of key minerals. Eg: Jharkhand received 504.8 mm rainfall (against a normal of 307 mm), affecting coal and iron ore production.
    • Damage to power infrastructure: Flooding led to breakdowns in electricity distribution systems, especially in rural and semi-industrial belts. Eg: Widespread inundation disrupted power supply, lowering electricity output by –2.6% in June.
    • Supply chain interruptions: Climate irregularities caused logistical delays and increased input costs, hampering industrial flow.

    Why is India reluctant to link climate events with economic data like IIP or GDP?

    • Institutional hesitation and narrative control: Key agencies like the Ministry of Statistics and RBI prefer attributing economic fluctuations to factors like high base effects, global demand shifts, or input cost variations, avoiding politically sensitive climate linkages.
    • Complexity of climate attribution: Linking specific events (like heavy rain or drought) to climate change requires scientific modelling and probabilistic data, which are resource-intensive and not yet integrated into mainstream reporting.
    • Fear of politicisation and accountability: Acknowledging climate-linked economic slowdowns could invite policy criticism and demand for corrective action, making policymakers cautious.

    How do climate disruptions in mining and power affect industrial output?

    • Halted Mining Operations: Extreme rainfall leads to waterlogging and flooding in mining belts, making extraction unsafe and unviable. Eg: In June, mining activity contracted by –8.7% due to excessive rainfall in Odisha, Jharkhand, and West Bengal.
    • Damage to Power Infrastructure: Climate events like floods and storms disrupt power transmission lines and generation facilities, leading to reduced electricity output. Eg: Electricity production shrank by –2.6% in June, which lowered industrial productivity across sectors.
    • Supply Chain Disruptions: Delays in the supply of raw materials (like coal) due to climate-induced transport and logistical breakdowns affect the manufacturing cycle. Eg: Sluggish industrial output growth of 3.9% in June, despite some sectoral growth, was partly due to such disruptions.

    What can India learn from global practices in integrating climate risk into economic reporting?

    • Mainstream Climate Risk in Macroeconomic Analysis: Institutions like the European Central Bank (ECB) and Bank of England incorporate climate risk assessments into their economic forecasts and financial stability reports. Eg: The ECB uses climate stress tests to estimate the impact of extreme weather on GDP and inflation projections, helping shape responsive monetary and fiscal policies.
    • Develop Probabilistic Climate Attribution Models: Global agencies invest in scientific and data-driven models to link specific climate events to broader economic outcomes. Eg: The UK Met Office partners with economic bodies to assess how floods or heatwaves influence sectoral output and employment, ensuring better policy alignment and risk preparedness.

    Why is climate attribution important for informed economic policymaking?

    • Enables Targeted Risk Mitigation and Resource Allocation: Understanding the economic impact of specific climate events helps policymakers design sector-specific interventions, such as improved infrastructure in flood-prone mining regions or energy grid resilience plans.
    • Strengthens Long-term Economic Planning and Resilience: Integrating climate attribution allows for accurate forecasting and budgeting, ensuring that climate-linked disruptions (e.g., to power or mining) are factored into growth strategies, insurance frameworks, and industrial policies.

    Way forward: 

    • Integrate Climate Risk Frameworks into Economic Reporting: Agencies like the Ministry of Statistics and RBI should formally include climate-related variables in metrics like IIP and GDP, using probabilistic models and event attribution tools to capture the economic impact of extreme weather events.
    • Build Institutional Capacity for Climate-Economic Analysis: Establish a dedicated national climate-economic observatory or task force to monitor, assess, and publish regular reports on how climate disruptions affect different sectors, drawing inspiration from institutions like the European Central Bank.

    Mains PYQ:

    [UPSC 2021] Investment in infrastructure is essential for more rapid and inclusive economic growth.”Discuss in the light of India’s experience.

    Linkage: This question is highly relevant as it directly addresses the crucial role of “investment in infrastructure” for “economic growth.” The article explicitly states that “the robust growth in capital (3.5%), intermediate (5.5%) and infrastructure (7.2%) goods output, indicates that much of industrial growth continues to hinge on the government’s infrastructure spends”.

  • Adopt formalisation to power productivity growth 

    Why in the News?

    India’s manufacturing sector is facing renewed scrutiny due to the rising contractualisation of labour, which has grown from 20% in 1999-2000 to 40.7% in 2022-23, according to the Annual Survey of Industries. 

    What drives the rise of contract labour in formal manufacturing?

    • Cost Minimization: Employers hire contract workers to reduce wage bills and avoid social security contributions. Eg: In large firms, contract workers often earn up to 31% less than regular employees.
    • Bypassing Labour Laws: Contracting allows firms to circumvent regulations under the Industrial Disputes Act, 1947, such as rules on retrenchment and notice period.  
    • Operational Flexibility: Firms use contract labour to scale up or down quickly with demand without long-term obligations. Eg: Seasonal industries like textiles use short-term contract workers during peak export periods.
    • Third-Party Shielding: Outsourcing through contractors protects the principal employer from legal accountability for employment terms. Eg: Automobile assembly lines often outsource non-core work to manpower agencies.
    • Sector-Wide Trend Across Sizes: The rise in contract labour is not limited to small firms; it extends to large and capital-intensive industries. Eg: Between 2000 and 2022, contract labour share doubled from 20% to 40.7% across all industries.

    Why does contract labour hurt long-term productivity?

    • Low Skill Development: Contract workers are rarely given training or upskilling opportunities, limiting their efficiency and innovation. Eg: In India’s electronics manufacturing sector, companies like Dixon Technologies rely heavily on contract labour, leading to a shortage of skilled technicians for precision assembly.
    • High Attrition and Turnover: Contract workers frequently change jobs due to lack of job security, resulting in loss of institutional knowledge. Eg: In food processing units in Punjab, annual turnover among contract workers exceeds 70%, disrupting workflow continuity.
    • Reduced Worker Motivation: Absence of benefits like promotion, pension, or medical cover leads to low morale and reduced effort. Eg: In government-run power plants, studies have shown that contract workers contribute less to maintenance efficiency than permanent staff, affecting overall plant performance.
    • Weak Industrial Relations: Contract workers are often excluded from grievance redressal mechanisms or unions, increasing workplace tensions and risking disruptions. Eg: Maruti Suzuki’s Manesar plant witnessed violent unrest in 2012, partly attributed to discontent between permanent and contract workers.
    • Quality Compromise and Rework: Contract workers may lack the ownership mindset, resulting in errors and product rework, which lowers productivity. Eg: In garment export hubs like Tiruppur, repeated quality rejections from overseas buyers have been traced to inconsistent output from untrained contract labour.
    • Wage and cost gaps act as a disincentive
      • Unequal pay for equal work: Contract workers often earn much less than permanent workers for doing the same job, violating fairness.
         Eg: In PSUs like ONGC, contract workers earn up to 50% less than permanent employees for the same technical work.
      • Avoidance of social security: Employers save costs by not contributing to Provident Fund, gratuity, or health benefits, increasing worker insecurity.
         Eg: A CAG audit of private thermal power plants found 30–40% labour cost savings due to evasion of statutory benefits.

    What are the existing policy?

    • Contract Labour (Regulation and Abolition) Act, 1970: This law aims to regulate the employment of contract labour in certain establishments and abolish it in specific cases where work is perennial in nature. However, enforcement is weak, and many employers bypass provisions through sub-contracting.
    • Code on Occupational Safety, Health and Working Conditions (OSH Code), 2020: Consolidates 13 labour laws, including those related to health, safety, and working conditions of workers (including contract labour). It mandates registration of establishments and welfare facilities, but monitoring and implementation remain inconsistent.
    • Fixed Term Employment (FTE) provision under the Industrial Relations Code, 2020: Legalises short-term employment contracts with a provision for equal pay for equal work. But in practice, social security benefits and job security are often denied to such workers.

    Way forward: 

    • Ensure Universal Social Protection: Extend mandatory social security coverage (e.g., ESIC, EPF) to all contract and gig workers, with portable benefits and employer accountability, regardless of tenure or contract type.
    • Improve Legal Enforcement and Transparency: Strengthen labour law enforcement through digital compliance portals, randomised inspections, and public disclosure of contract employment data to prevent misuse and promote accountability.

    Mains PYQ:

    [UPSC 2024] Discuss the merits and demerits of the four ‘Labour Codes’ in the context of labour market reforms in India. What has been the progress so far in this regard?

    Linkage: The article talks about the “labour code on industrial relations” introduced in 2020 which is related to the demand of the question. This code, awaiting implementation, aims to provide greater flexibility in hiring and firing by allowing firms to directly hire non-regular workers on fixed-term contracts without third-party contractors. However, it also seeks to curb exploitation by mandating basic statutory employment benefits.

  • In news: Kyoto Protocol

    Why in the News?

    Vijai Sharma, a 1974-batch IAS officer and architect of India’s climate diplomacy, who helped shape the Kyoto Protocol for safeguarding the interests of developing countries like India, has passed away.

    About Kyoto Protocol:

    • Adopted: 11 December 1997 (UNFCCC COP-3, Kyoto, Japan); Came into Force: 16 February 2005
    • Legal Status: Legally binding on developed (Annex I) countries
    • Parent Treaty: United Nations Framework Convention on Climate Change (1992)
    • Objective: Reduce greenhouse gas emissions and address climate change
    • Principle: Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC)
    • Parties: 192 ratified; key non-parties include United States and Canada

    Key Features:

    • Emission Targets:
      • Annex B nations to cut emissions by 5% below 1990 levels (2008–2012)
      • Doha Amendment (2012): 18% cut for 2013–2020
    • Greenhouse Gases Covered:
      • Carbon dioxide, Methane, Nitrous oxide, Hydrofluorocarbons, Perfluorocarbons, Sulfur hexafluoride
    • Market Mechanisms:
      • Clean Development Mechanism (CDM): Carbon credits via projects in developing nations
      • Joint Implementation (JI): Emission reduction between Annex I countries
      • International Emissions Trading: Trade surplus emission units
    • Monitoring and Enforcement:
      • Mandatory reporting and independent verification
      • Compliance Committee oversight
      • Land Use, Land-Use Change and Forestry (LULUCF) included; aviation/shipping excluded
    • Equity Element:
      • No binding targets for developing nations like India and China
      • Developed nations held accountable for historical emissions

    Vijai Sharma’s Contributions:

    • Climate Negotiations Leader: India’s chief negotiator (1995–2001), led G77+China, defended equity and exemptions for developing nations
    • Policy Architect: Helped shape CDM governance, promoted India’s clean-tech access
    • Environmental Reformer: As Environment Secretary (2008–2010), improved clearance processes
    • Legacy: Called “Sir Humphrey Sharma” for his sharp wit and bureaucratic skill; key figure in India’s Kyoto-era climate diplomacy
    [UPSC 2016] Consider the following pairs:

    Terms sometimes seen in the news : Their origin

    1. Annex-I Countries : Cartagena Protocol

    2. Certified Emissions Reductions : Nagoya Protocol

    3. Clean Development Mechanisms : Kyoto Protocol

    Which of the pairs given above is/are correctly matched?

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