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GS Paper: GS3

  • Over 70% Farmers still use Cash to sell their Produce

    Why in the News?

    The Reserve Bank of India (RBI) survey on agricultural transactions reveals that cash remains the primary mode of payment among farmers, although digital payments are gradually increasing. Despite the rise of Unified Payments Interface (UPI) and mobile banking, over 70% of Indian farmers still rely on cash for selling their produce.

    Key Findings of the RBI Survey

    • In 2019, 88% of farmers used cash for transactions. By 2022, this figure dropped to 79% and further declined to 72% in 2024.
      • However, this transition is slow compared to other sectors of the economy.
    • The share of farmers using electronic payments has increased from 8% in 2019 to 18% in 2024.
    • Among traders, the adoption of digital payments has been faster, rising from 8% in 2019 to 31% in 2024.
    • Among retailers, the usage of electronic payments increased from 3% in 2019 to 22% in 2024.

    Reasons behind low Digital Adoption

    • 55% of farmers rely on traders to determine market prices, up from 47% in 2019. 47% depend on fellow farmers, while fewer than 10% use apps or websites to check market rates.
      • Despite the growth of agri-tech platforms, most farmers still depend on word-of-mouth rather than digital sources for price information.
    • Multiple intermediaries in the supply chain reduce farmers’ share in the final consumer price.
    • 64% of farmers reported crop damage during the 2023-24 rabi season. Unseasonal rainfall was cited as the top reason (37%), followed by heatwaves (30%).
    • As a result, 90% of farmers consider weather forecasts as the most important factor in crop-sowing/ harvesting decisions.

    PYQ:

    [2010] With reference to India, consider the following:

    1. Nationalisation of Banks
    2. Formation of Regional Rural Banks
    3. Adoption of village by Bank Branches

    Which of the above can be considered as steps taken to achieve the “financial inclusion” in India?

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

    [2016] Pradhan Mantri Jan Dhan Yojana (PMJDY) is necessary for bringing unbanked to the institutional finance fold. Do you agree with this for financial inclusion of the poorer section of the Indian society? Give arguments to justify your opinion.

     

  • SPHEREx Telescope

    Why in the News?

    NASA is set to launch its latest space telescope, SPHEREx (Spectro-Photometer for the History of the Universe, Epoch of Reionization and Ices Explorer) aboard a SpaceX Falcon 9 rocket from California.

    What is the SPHEREx Telescope?

    • SPHEREx is a new space telescope developed by NASA.
    • It is designed to map the entire sky in infrared light and provide insights into the origins of the universe, galaxy formation, and the distribution of life-forming molecules.
    • Its mission is expected to last 2 years, during which it will survey the sky 4 times.
    • Key Features of SPHEREx:
      • Infrared Spectroscopy: Unlike traditional optical telescopes, SPHEREx will capture the universe in 102 infrared colors, which are invisible to the human eye.
      • Wide-Sky Coverage: Unlike the James Webb Space Telescope (JWST), which focuses on narrow regions, SPHEREx will map the entire sky every 6 months.
      • High Data Output: It will collect data on one billion galaxies, 100 million stars, and 10,000 asteroids, creating an unprecedented cosmic map.
      • Study of Cosmic Inflation: SPHEREx will analyze the earliest moments after the Big Bang, helping scientists understand how the universe expanded rapidly in its infancy.
      • Search for Life-Forming Molecules: The telescope will identify biogenic molecules like water, carbon dioxide, and methanol in the Milky Way galaxy, revealing where the building blocks of life exist.

    SPHEREx Telescope

    How will SPHEREx Create the “Most Colourful” Map of the Cosmos?

    • Spectroscopic Imaging: SPHEREx will divide light from celestial objects into 96 infrared bands, significantly more than previous sky-mapping telescopes.
    • Mapping Galactic Evolution: By observing 450 million galaxies, SPHEREx will reveal how they evolved over cosmic history.
    • Identifying Cosmic Ice: The telescope will detect frozen water and organic molecules in interstellar dust clouds, essential for understanding planetary formation.
    • Unprecedented Infrared Insights: Unlike Hubble, which focuses on optical light, and JWST, which targets deep-space infrared observations, SPHEREx will capture broad infrared spectra across the entire sky, revealing hidden cosmic structures.

    PYQ:

    [2015] In the context of modern scientific research, consider the following statements about ‘IceCube’, a particle detector located at South Pole, which was recently in the news:

    1. It is the world’s largest neutrino detector, encompassing a cubic kilometre of ice.
    2. It is a powerful telescope to search for dark matter.
    3. It is buried deep in the ice.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

  • ‘Cali Fund’ launched at CBD COP16

    Why in the News?

    A new international biodiversity fund, the ‘Cali Fund’, was launched at the 16th Conference of Parties (COP16) to the United Nations Convention on Biological Diversity (CBD) in Rome.

    What is the Cali Fund?

    • The Cali Fund is an international biodiversity financing mechanism launched on February 25, 2025, at COP16 of the UN Convention on Biological Diversity (CBD) in Rome.
    • It collects funds from private companies that utilize Digital Sequence Information (DSI) from nature in their businesses.
    • The fund supports biodiversity conservation, scientific research, and indigenous communities.

    Key Features of the Cali Fund:

    • Funding Source: Businesses using genetic data (DSI) from plants, animals, and microorganisms will contribute financially.
    • Utilization of Funds:
      • 50% allocated to indigenous and local biodiversity projects.
      • Supports scientific research and developing nations’ biodiversity action plans.
    • Global Management: Managed by UNDP and UNEP, with MPTFO handling finances.
    • Alignment with Global Goals: Supports Kunming-Montreal Global Biodiversity Framework (KMGBF) to reverse biodiversity loss by 2030.
    • First-of-Its-Kind: Direct private sector contributions to a global UN biodiversity fund.

    What is Digital Sequence Information (DSI)?

    • DSI refers to genetic data extracted from plants, animals, and microorganisms.
    • Used extensively in industries such as:
      • Pharmaceuticals (medicine development).
      • Cosmetics (natural ingredient research).
      • Agriculture (crop improvement, pest resistance).
      • Biotechnology (genetic engineering, bioinformatics).

    About the Convention on Biological Diversity (CBD):

    • The CBD, with 196 contracting parties, stands as the most comprehensive international agreement focused on nature conservation and the sustainable use of natural resources.
    • It was opened for signing at the 1992 UN Conference on Environment and Development in Rio de Janeiro.
    • The CBD has 3 main objectives:
    1. Conservation of biological diversity (including genetic, species, and habitat diversity).
    2. Sustainable use of biological diversity.
    3. Fair and equitable sharing of benefits arising from the use of genetic resources.
    • It addresses biodiversity at all levels: ecosystems, species, and genetic resources.
    • The Conference of the Parties (COP) is the CBD’s governing body, and it meets biennially to assess progress, set priorities, and develop action plans.
    • The Secretariat of the CBD is located in Montreal, Canada.
    • To further its goals, the CBD includes two binding protocols:
    1. The Cartagena Protocol (2000), which regulates the transboundary movement of living modified organisms (LMOs) and came into force in 2003.
    2. The Nagoya Protocol (2010), which provides a legal framework for the access to genetic resources and the fair sharing of benefits from their use.

    PYQ:

    [2014] With reference to ‘Global Environment Facility’, which of the following statements is/are correct?

    (a) It serves as financial mechanism for ‘Convention on Biological Diversity’ and ‘United Nations Framework Convention on Climate Change’

    (b) It undertakes scientific research on environmental issues at global level

    (c) It is an agency under OECD to facilitate the transfer of technology and funds to underdeveloped countries with specific aim to protect their environment.

    (d) Both A and B

     

  • Species in news: Gharials

    Why in the News?

    Madhya Pradesh CM released 10 gharials into the Chambal River at the National Chambal Gharial Sanctuary in Morena.

    Species in news Gharials

    About Gharial

    • The gharial (Gavialis gangeticus) is a unique species of crocodilian, characterized by its long, slender snout, which is perfectly adapted for catching fish.
    • The species derives its name from the “ghara”, a bulbous growth found on the snouts of adult males, which aids in vocalization and mating displays.
    • It is a fish-eating crocodile native to the Indian subcontinent.
    • They are a crucial indicator of clean river water.

    Conservation Status:

    • Recognizing the rapid decline in gharial populations, India launched captive breeding and release programs in the late 1970s.
    • Between 1975 and 1982, the country established 16 captive breeding centers and 5 protected sanctuaries to ensure the survival of the species.
    • Gharials are ‘Critically Endangered’ in the IUCN Red List of Species.
    • The species is also listed under Schedule I of the Wildlife (Protection) Act, 1972.
    • Today, gharials primarily survive in 5 major refuges:
    1. National Chambal Sanctuary (NCS) – The largest stronghold of gharials.
    2. Katerniaghat Wildlife Sanctuary in Uttar Pradesh.
    3. Chitwan National Park in Nepal.
    4. Son River Sanctuary in Madhya Pradesh.
    5. Satkosia Gorge Sanctuary in Odisha.

    PYQ:

    [2013] Consider the following fauna of India:

    1. Gharial

    2. Leatherback turtle

    3. Swamp deer

    Which of the above is/are endangered?

    (a) 1 and 2 only

    (b) 3 only

    (c) 1, 2 and 3

    (d) None

     

  • What is Black Plastic?

    Why in the News?

    A recent study suggested that black plastic contains harmful flame retardants, which may leach into food at hazardous levels.

    What is Black Plastic?

    • Black plastic is often made from recycled electronic waste like old computers, TVs, and appliances.
    • These electronics contain flame retardants (such as bromine-based compounds), heavy metals (lead, cadmium, mercury), and other hazardous chemicals.
    • Flame retardants are added to prevent fire hazards, but they can persist in recycled plastics.
    • Many of these chemicals are now banned in several countries due to their toxicity.
    • However, legacy plastics containing these substances continue to enter the recycling stream, leading to contamination of household products.

    Threats Posed by Black Plastic:

    • Contains Toxic Chemicals: Made from recycled e-waste, it may have flame retardants, heavy metals, and antimony.
    • Food Contamination: Heat and acidic foods can leach harmful chemicals into meals.
    • Environmental Impact: Difficult to recycle, it pollutes landfills and groundwater.
    • Health Risks: Linked to hormonal issues, neurological damage, and cancer.

    PYQ:

    [2019] Why is there a great concern about the ‘microbeads’ that are released into environment?

    (a) They are considered harmful to marine ecosystems.

    (b) They are considered to cause skin cancer in children.

    (c) They are small enough to be absorbed by crop plants in irrigated fields.

    (d) They are often found to be used as food adulterants.

     

  • New Experiment to Test Quantum Gravity

    Why in the News?

    A new proposal published on October 29, 2024, suggests an experiment that could provide direct evidence for quantum gravity, unifying general relativity and quantum mechanics. A new experiment proposes testing weak gravitational fields at the quantum level, a historic breakthrough in physics if successful.

    What is Quantum Gravity?

    • Quantum Gravity is a theoretical framework that aims to unify general relativity (which explains gravity at large scales) and quantum mechanics (which governs subatomic particles).
    • Since gravity behaves differently from the other fundamental forces in quantum mechanics, physicists have been searching for a theory that integrates gravity into the quantum world.
    • General relativity treats gravity as the curvature of spacetime, while quantum mechanics describes forces through particle interactions.
    • Gravity has never been directly observed in quantum form, unlike the other fundamental forces.
    • Theories like String Theory and Loop Quantum Gravity attempt to explain quantum gravity but lack experimental validation.

    Significance of the Experiment

    • First Realistic Test for Quantum Gravity: Most quantum gravity theories rely on extreme conditions (e.g., black holes), making them impossible to test. This experiment provides a lab-based alternative.
    • Testing Gravity at the Quantum Level: If a small mass in quantum superposition is influenced by gravity, it could prove gravity itself is quantum in nature.
    • Weak Gravity Instead of Strong Gravity: Unlike previous studies focused on black holes, this experiment explores weak gravitational interactions, making it more feasible.
    • Towards a Unified Theory of Physics: Proving quantum gravity could merge general relativity and quantum mechanics, solving a major gap in modern physics.
    • Challenging Existing Theories: If results differ from both classical and quantum predictions, it could suggest a new force or a modified gravity theory.

  • Not business as usual: On upholding India’s reputation for quality drugs

    Why in the News?

    The pharmacy of the Global South is facing a reputation crisis after cough syrups made by Indian pharmaceutical companies were found to contain harmful levels of diethylene glycol and/or ethylene glycol.

    Why is the pharmacy of the Global South facing a reputation crisis?

    • Quality Control Failures and Contaminated Products:
      • Gambia (2022): Cough syrups made in India containing diethylene glycol and ethylene glycol killed 66 children.
      • Uzbekistan (2022): Similar contamination led to the deaths of 65 children.
      • U.S. (2023): India-made eye drops contaminated with drug-resistant bacteria caused 3 deaths and 8 cases of blindness.
    • Illegal Manufacturing and Unapproved Drugs: Unauthorized drug production and export are damaging India’s credibility. Example: Aveo Pharmaceuticals (Maharashtra) illegally exported unapproved opioid combinations to West Africa, exposed by a BBC investigation in 2023.
    • Regulatory Lapses and Weak Oversight: Inconsistent enforcement by regulatory authorities enables violations. Example: State drug authorities in India have issued licenses for unapproved Fixed Dose Combinations (FDCs) without clearance from the Central Drugs Standard Control Organization (CDSCO).
    • Global Scrutiny and Trade Barriers: Increased surveillance by international health bodies and trade restrictions. Example: The WHO’s alert on toxic cough syrups led to enhanced inspections of Indian pharmaceutical exports, impacting trade with African and Southeast Asian nations.

    How does this impact India’s hegemony?

    • Erosion of Soft Power and Global Reputation: India’s image as the “Pharmacy of the Global South” is under threat due to quality concerns and regulatory lapses. Example: The WHO alerts on contaminated cough syrups in Gambia and Uzbekistan have damaged India’s credibility as a reliable supplier of affordable medicines.
    • Reduced Diplomatic Influence in Developing Countries: Many nations in Africa and Southeast Asia, which depend on Indian pharmaceuticals, may seek alternative suppliers, weakening India’s influence in these regions. Example: Countries like Nigeria and Kenya exploring Chinese and Brazilian pharmaceutical alternatives.
    • Economic and Trade Consequences: Heightened global scrutiny could lead to export restrictions and trade losses, affecting India’s dominance in the generic drug market. Example: In 2023, the U.S. imposed tighter checks on Indian pharmaceutical imports following incidents of contaminated eye drops, impacting Indian drug exports.

    What is the extent of India’s pharmaceutical exports?

    • Total Export Value: India’s pharmaceutical exports were valued at USD 27.85 billion, contributing substantially to the nation’s economy.
    • Global Market Share: India stands as the world’s third-largest producer of pharmaceuticals by volume, supplying approximately 20% of global generic drugs, with North America being a major recipient.
    • Key Export Destinations: The United States remains the largest importer of Indian pharmaceutical products, accounting for 17.90% of India’s total merchandise exports in this sector.
      • India supplies about 26% of Africa’s generic pharmaceutical market, highlighting its role as a key provider of affordable medicines on the continent.

    What steps has the Indian government taken in this situation?

    • Strengthening Regulatory Oversight: The Central Drugs Standard Control Organization (CDSCO) has intensified inspections of pharmaceutical manufacturing units to ensure compliance with Good Manufacturing Practices (GMP). Example: Following the Gambia and Uzbekistan incidents, the government ordered inspections of 76 cough syrup manufacturers across 20 states, leading to the suspension of several licenses.
    • Policy Reforms and Legal Action: The government introduced a mandatory quality certification for drug exports to certain countries to prevent the export of substandard medicines. Example: After the Aveo Pharmaceuticals case, the Maharashtra government revoked the company’s manufacturing license and seized 13 million illegal medicines.
    • International Collaboration and Transparency: The Indian government has increased cooperation with the World Health Organization (WHO) to address quality concerns and strengthen pharmacovigilance. Example: India joined hands with African health regulators to enhance quality assurance for pharmaceuticals exported to African countries.

    Way forward: 

    • Strengthen Regulatory Oversight: Implement stricter quality controls, regular audits, and a centralized tracking system to ensure compliance with global standards.
    • Enhance Global Collaboration: Partner with international health bodies and key importing nations to improve quality assurance and rebuild trust in Indian pharmaceuticals.

    Mains PYQ:

    Q Why is there so much activity in the field of biotechnology in our country? How has this activity benefitted the field of biopharma? (UPSC IAS/2018)

  • What is the ‘Quality of Public Expenditure’ Index?

    Why in the News?

    The Quality of Public Expenditure (QPE) Index, developed by the RBI, evaluates how efficiently government funds are used, focusing on expenditure composition and its long-term impact on economic growth.

    About the QPE Index

    • The QPE Index by the Reserve Bank of India (RBI) measures how effectively government funds are utilized.
    • It focuses on fiscal discipline, capital investment, and efficient allocation of public resources for long-term growth.
    • Key Indicators of the QPE Index:
    1. Capital Outlay to GDP Ratio: Measures government spending on infrastructure as a percentage of GDP. Higher ratio = better quality expenditure.
    2. Revenue Expenditure to Capital Outlay Ratio: Lower ratio preferred, as excessive spending on salaries & subsidies reduces funds for development.
    3. Development Expenditure to GDP Ratio: Tracks spending in education, healthcare, infrastructure, improving human capital & productivity.
    4. Development Expenditure as % of Total Expenditure:  Higher share indicates better resource allocation.
    5. Interest Payments to Total Expenditure Ratio:  Lower ratio = better debt management & fiscal sustainability.

    Key Findings from RBI’s QPE Index Analysis:

    • 1991-2003: Post-liberalization, focus on reducing fiscal deficit led to a decline in public investment.
    • 2003-2008:  FRBM Act (2003) improved fiscal discipline, increasing capital spending & state revenues.
    • 2008-2013: Global Financial Crisis (GFC) led to higher government spending, increasing fiscal deficits but supporting recovery.
    • 2013-2017: 14th Finance Commission (2015) increased states’ share in central taxes, boosting development expenditure.
    • 2017-2020:  GST implementation challenges affected the Centre’s revenues, but states benefited from higher tax shares.
    • 2020-Present:  Record capital expenditure boosted infrastructure & economic recovery, improving public expenditure quality.

    PYQ:

    [2014] With reference to Union Budget, which of the following, is/are covered under Non-Plan Expenditure?

    1. Defence-expenditure

    2. Interest payments

    3. Salaries and pensions

    4. Subsidies

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2, 3 and 4

    (d) None

     

  • Rupee-Dollar Swap Auction

    Why in the News?

    The Reserve Bank of India (RBI) will conduct a $10 billion dollar-rupee swap auction on February 28, 2025, aimed at injecting durable rupee liquidity into the banking system.

    This 3-year forex swap is expected to inject ₹86,000 crore into the banking system at a time when there is a liquidity deficit of ₹1.7 lakh crore in the financial sector.

    What is the RBI’s Forex Swap Auction?

    • Forex swap auctions are a tool used by the RBI to manage liquidity and stabilize financial markets.
    • In return, the RBI will inject rupee liquidity into the banking system.
      • Buy-Sell Swap: RBI buys dollars now and sells them back later (liquidity injection).
      • Sell-Buy Swap: RBI sells dollars now and buys them back later (liquidity absorption).
    • After 3 years, the transaction will be reversed, with the RBI selling dollars back to banks and absorbing rupee liquidity from the system.

    How does it work?

    • Auction Process:
      • Banks bid in the swap auction by quoting the swap rate (forward premium).
      • The lowest premium bids are accepted first (similar to G-sec auctions).
    • Liquidity Injection:
      • Banks sell US dollars to the RBI at the prevailing exchange rate.
      • The RBI provides rupees in exchange, boosting liquidity in the banking system.
    • Reverse Swap After Three Years:
      • On March 6, 2028, the swap will be reversed.
      • The RBI will return US dollars to the banks and absorb the equivalent amount of rupees.
    • This allows the RBI to control liquidity over a longer period without permanently altering its forex reserves.

    Significance of this move

    • Reduces Borrowing Costs: More liquidity in the system lowers short-term interest rates. Bond yields and corporate borrowing costs decline, benefiting businesses and NBFCs.
    • Stabilizes Foreign Exchange Markets: The rupee’s availability increases, reducing pressure on exchange rates. Lower hedging costs for companies with foreign liabilities.
    • Enhances RBI’s Monetary Policy Toolkit: This approach provides a temporary boost to liquidity, while ensuring a controlled reversal in the future.

    PYQ:

    [2015] Convertibility of rupee implies:

    (a) Being able to convert rupee notes into gold

    (b) Allowing the value of rupee to be fixed by market forces

    (c) Freely permitting the conversion of rupee to other currencies and vice versa

    (d) Developing an international market for currencies in India

     

  • Indian industry needs innovation, not mindless toil

    Why in the News?

    Indian industry leaders are hurting their future by depending too much on cheap labour for growth.

    What are the issues related to cheap labour in India? 

    • Long Working Hours: Migrant industrial workers often work 11-12 hours a day without breaks during peak demand, compromising their physical and mental well-being.
    • Informal Employment: As per the 2023-24 Periodic Labour Force Survey, only 21.7% of workers hold regular jobs with salaries. Even within this group, nearly half face informal conditions (no contracts, paid leave, or social security).
    • Exploitation via Contract Work: 56% of workers joining the factory sector since 2011-12 are contract workers, lacking legal protection and receiving lower wages.
    • Migrant Worker Vulnerability: Migrant workers face multiple disadvantages due to social position, lack of assets, and inadequate access to social security.
    • Profit Maximization: Industries prioritize profit over worker welfare, with profit shares rising from 31.6% in 2019-20 to 46.4% in 2021-22 in the factory sector.

    What is the current situation of the garment industry in India?

    • Stagnant Share in Global Exports: India’s share in global garment exports has remained stagnant at 3.1% over the past two decades. Example: In contrast, Bangladesh (7.9%) and Vietnam (6.4%) have increased their market share by investing in modern technologies and efficient supply chains (Economic and Political Weekly, August 2024).
    • Over-Reliance on Cheap Labour: The industry depends heavily on low-cost, unorganized labour rather than technology and automation, limiting productivity. Example: Over 70% of the workforce in garment manufacturing operates in small, unregistered enterprises with poor working conditions and low wages (PLFS 2023-24).
    • Declining Competitiveness: Rising competition from China, Vietnam, and Bangladesh has reduced India’s competitiveness in both mass-market and premium garment segments. Example: India’s textile and garment exports dropped by 13.3% to $32 billion in 2023-24, while Vietnam’s exports rose to $44 billion (Ministry of Commerce data, 2024).
    • Lack of Innovation and Modernization: Indian firms lag in adopting advanced production technologies, affecting product diversity and design innovation. Example: While countries like Vietnam invest in smart textiles and sustainable practices, Indian firms focus primarily on basic, low-margin garments.
    • Impact of Policy and Infrastructure Gaps: Inadequate government support, high logistics costs, and delayed payments to small firms hinder sectoral growth. Example: The Textile PLI Scheme launched in 2021 aimed to boost manufacturing but has had limited uptake, particularly among smaller manufacturers due to complex compliance issues.

    How can India benefit from its cheap labour?

    • Investing in Skill Development and Training: Enhancing workers’ skills can increase productivity while maintaining cost advantages. Example: The Skill India Mission has trained over 50 million workers since its launch in 2015, improving output quality in sectors like textiles, automotive, and electronics.
    • Promoting Labour-Intensive Industries: Expanding labour-intensive sectors (e.g., textiles, leather, and electronics assembly) can maximize employment and exports. Example: The Apparel Park Scheme in Tamil Nadu supports garment clusters, increasing job opportunities while improving global competitiveness.
    • Strengthening MSMEs and Local Supply Chains: Supporting Micro, Small, and Medium Enterprises (MSMEs) through policy incentives and better access to credit can utilize cheap labour efficiently. Example: The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme has provided ₹3.7 lakh crore in credit to over 65 lakh MSMEs (as of 2024).
    • Encouraging Export-Oriented Production: Facilitating exports through simplified regulations and logistical improvements can enhance global market access. Example: The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme helps Indian exporters by reimbursing embedded taxes, making Indian goods more competitive.
    • Adopting a Hybrid Model of Labour and Technology: Combining low-cost manual labour with affordable automation can balance efficiency with cost advantages. Example: Maruti Suzuki uses a man-machine hybrid system for auto production, reducing costs while maintaining high output, making it India’s largest car exporter.

    Why are industries falling behind in innovation?

    • Low Investment in Research and Development (R&D): India’s gross domestic expenditure on R&D (GERD) is 0.65% of GDP (2022), significantly lower than countries like China (2.4%) and South Korea (4.8%). Example: In the pharmaceutical sector, while India is a major producer of generic medicines, it lags in developing innovative drugs due to limited R&D spending.
    • Dominance of Low-Cost, Labor-Intensive Models: Indian industries prioritize cheap labour over adopting advanced technologies, limiting productivity gains and innovation. Example: In the textile industry, India’s share in global garment exports is 3.1%, while Bangladesh (7.9%) and Vietnam (6.4%) have overtaken India by modernizing production systems.
    • Limited Collaboration between Industry and Academia: Weak ties between academic research institutions and industries hinder the commercialization of innovative ideas. Example: In 2021, only 36 patents were filed jointly by Indian universities and private firms compared to 5,000+ in China under their “Industry-Academia Collaboration” model.
    • Lack of Policy Incentives for Innovation: Insufficient government policies and weak implementation of initiatives like Atal Innovation Mission (AIM) reduce incentives for private-sector innovation. Example: While China’s “Made in China 2025” policy incentivizes innovation-led manufacturing, India’s PLI (Production-Linked Incentive) scheme primarily focuses on output rather than R&D-driven innovation.
    • Financial Constraints on Small and Medium Enterprises (SMEs): SMEs, which form 70% of the manufacturing workforce, face difficulties accessing credit for innovation and upgrading technology. Example: Despite initiatives like CGTMSE, only 15% of MSMEs in India receive formal credit, limiting their ability to invest in new technologies.

    Way forward: 

    • Enhance Technology Adoption and Innovation: Encourage investment in advanced manufacturing technologies and R&D through better policy incentives and stronger industry-academia collaboration to improve productivity and global competitiveness.
    • Support Labour Welfare and Formalization: Implement policies to improve working conditions, ensure social security for informal workers, and promote skill development programs to balance cost efficiency with worker well-being.

    Mains PYQ:

    Q Can the strategy of regional-resource based manufacturing help in promoting employment in India? (UPSC IAS/2019)