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GS Paper: GS3

  • Recasting insolvency resolution

    Why in the News?

    The recent Supreme Court judgment in the Jet Airways case has highlighted several major problems in India’s insolvency system.

    What is the Insolvency and Bankruptcy Code (IBC)? 

    • The Insolvency and Bankruptcy Code (IBC), enacted in 2016, is a comprehensive legal framework in India aimed at consolidating the existing laws governing insolvency and bankruptcy.
    • It establishes a structured process for resolving insolvency for corporate entities, individuals, and partnership firms, promoting timely resolution and maximizing asset value.

    What are the structural inefficiencies in the current Insolvency and Bankruptcy Code (IBC)?

    • Overburdened Tribunals: The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) are tasked with handling both corporate insolvencies under the IBC and cases under the Companies Act. This dual burden leads to inefficiencies and delays in resolving insolvency cases.
    • Inadequate Institutional Capacity: The NCLT’s structure, established in 1999, is outdated and does not align with contemporary economic demands. With only 63 sanctioned members, many of whom split their time across multiple benches, the tribunal struggles to manage its caseload effectively, resulting in significant backlogs.
    • Lack of Domain Expertise: Members of the NCLT often lack the necessary domain knowledge to handle complex insolvency cases effectively. This deficiency hampers their ability to make informed decisions, as highlighted by the Supreme Court in the Jet Airways case.
    • Procedural Delays: The requirement for mandatory hearings for all applications contributes to lengthy delays. The average time for insolvency resolutions has increased, indicating that procedural inefficiencies are exacerbating the situation.
    • Ineffective Urgent Listings: There is no robust system for urgent listings before the NCLTs, leading to further delays in critical cases. The discretion given to registry staff regarding case listings can lead to inconsistencies and unpredictability in case management.
    • Judicial Discretion Issues: There is a growing tendency among NCLT and NCLAT members to ignore Supreme Court orders, undermining judicial authority and eroding trust in the system.

    How can procedural innovations enhance the effectiveness of insolvency resolution?

    • Specialized Benches: Establishing specialized benches for different categories of insolvency cases could improve efficiency and ensure that cases are handled by members with relevant expertise.
    • Mandatory Mediation: Introducing mandatory mediation before filing insolvency applications could reduce the number of cases entering the formal insolvency process, alleviating pressure on tribunals.
    • Streamlined Hearing Processes: Revising the requirement for mandatory hearings on all applications could expedite processes, allowing for more efficient case management and resolution.
    • Improved Infrastructure: Investing in adequate courtrooms and permanent support staff is essential to enhance operational capacity and ensure that tribunals can function effectively within the broader economic framework.

    What reforms are necessary to transform the IBC into a proactive economic tool?

    • Reassessment of Tribunal Structure: A comprehensive review of the NCLT and NCLAT structures is needed to align them with current economic realities and demands, potentially increasing their sanctioned strength and operational hours.
    • Focus on Domain Expertise in Appointments: Reforming the appointment process for tribunal members to prioritise candidates with relevant experience in insolvency matters will enhance decision-making quality.
    • Encouraging Alternative Dispute Resolution (ADR): Promoting alternative dispute resolution methods within the insolvency framework can help manage caseloads more effectively while providing quicker resolutions for stakeholders.
    • Legislative Amendments: Continuous legislative amendments should be made based on empirical data and stakeholder feedback to address emerging challenges within the IBC framework.
    • Cultural Shift Towards Credit Discipline: Encouraging a cultural shift that emphasizes credit discipline among borrowers will support a healthier economic environment conducive to investment and growth.

    Way forward: 

    • Strengthen Institutional Capacity and Expertise: Enhance the operational capacity of NCLT and NCLAT by increasing strength by appointing members with domain expertise, and providing adequate infrastructure and support staff to streamline case management and reduce delays.
    • Promote Alternative Dispute Resolution (ADR): Integrate mandatory mediation and other ADR mechanisms within the IBC framework to alleviate tribunal workload, ensure quicker resolutions, and foster a collaborative insolvency ecosystem.

  • How is TRAI and the govt. combating spam?

    Why in the News?

    The Telecom Regulatory Authority of India (TRAI) plans to use blockchain technology (DLT) to track and manage customer preferences for blocking spam, according to its chairman, Anil Kumar Lahoti.

    What is the Telecom Regulatory Authority of India (TRAI)?

    • The Telecom Regulatory Authority of India (TRAI) plays a crucial role in regulating Unsolicited Commercial Communications (UCC), commonly referred to as spam. Established under the Telecom Regulatory Authority of India Act, 1997.

    What is TRAI’s role in fighting spam?

    • Do-Not-Disturb (DND) Registry: Launched in 2007, the DND registry allows customers to opt out of receiving commercial calls and messages. Users who register are not supposed to receive any spam communications.
    • Telecom Commercial Communication Customer Preference Regulation (TCCCPR): Enacted in 2018, this regulation penalizes telemarketers who violate DND preferences. It includes warnings for offenders and potential blacklisting from sending messages if they accumulate enough violations.
    • DND App Development: TRAI collaborated with external agencies to create a DND application that enables users to register their preferences and report complaints. By 2024, it became mandatory for telecom providers to include DND reporting features in their apps.

    What role does blockchain play?

    TRAI has mandated the use of Distributed Ledger Technology (DLT) to enhance its spam control measures:

    • Immutable Record Keeping: Blockchain technology allows for a constantly updated and tamper-proof list of approved SMS senders and message formats. This ensures that only legitimate messages are sent, as each entry is unalterable by any party involved.
    • Message Traceability: Regulations require that messages be sent using sender IDs instead of phone numbers, enhancing traceability. This measure helps prevent unauthorized entities from sending spam by ensuring that all message origins are recorded.
    • Enhanced Regulations: In 2024, TRAI tightened regulations to ensure complete traceability of messages, addressing previous loopholes that allowed fraudulent registrations on blockchain systems

    What are the other steps taken by the government to end spam?

    • Sanchar Saathi Portal: This portal includes a reporting platform called Chakshu for complaints about fraudulent calls and messages. It collaborates with law enforcement and banks to identify and cancel numbers associated with unauthorised telemarketers.
    • Real-Time Monitoring: The establishment of the Telecom Security Operation Centre enables real-time monitoring of suspicious internet traffic, enhancing the government’s ability to respond promptly to spam-related threats.
    • AI-Based Detection: Telecom companies like Airtel have begun using Artificial Intelligence to label suspicious calls as “Suspected Spam,” a practice that is being adopted by other providers as well.

    Way forward: 

    • Strengthen International Collaboration: Partner with global VoIP providers and international regulators to curb spam and fraudulent calls originating from abroad, ensuring seamless enforcement across borders.
    • Promote AI and ML Integration: Expand the use of AI/ML technologies for proactive detection and blocking of spam calls and messages, while continuously improving user-friendly reporting mechanisms.

    Mains PYQ:

    Q For achieving the desired objectives,it is necessary to ensure that the regulatory institutions remain independent and autonomous. Discuss in the light of experiences in recent past. (UPSC IAS/2015)

  • What is Dark Oxygen?

    Why in the News?

    Deep-sea researchers have initiated a groundbreaking project to explore dark oxygen, a form of oxygen produced in complete darkness on the ocean floor.

    What is Dark Oxygen?

    • Dark oxygen refers to oxygen produced at extreme ocean depths without the involvement of photosynthesis.
    • This process occurs in total darkness on the ocean floor, challenging the traditional understanding that sunlight is necessary for oxygen generation.
    • It was first discovered in 2024 by researchers studying deep-sea environments.
    • The strange nodules found at a depth of 13,000 feet act like natural batteries, splitting water molecules into oxygen and hydrogen using electrical charges.
    • These nodules function in areas where light does not penetrate, under extreme pressure and low-temperature conditions.
    • Occurrence:
      • Found in specific deep-sea zones, particularly in regions characterized by unique electrochemical activity.
      • Occurs in places previously considered incapable of supporting oxygen production.

    Features and Significance of Dark Oxygen:

    • Unlike traditional oxygen production, dark oxygen does not rely on photosynthesis or sunlight.
    • It is driven by electrochemical reactions occurring naturally in the ocean floor.
    • Strange nodules on the ocean floor possess an electric charge, enabling them to split water molecules into oxygen and hydrogen.
    • The process releases hydrogen, which could potentially serve as an energy source for microbial life in these regions.

    PYQ:

    [2012] Which one of the following sets of elements was primarily responsible for the origin of life on the Earth?

    (a) Hydrogen, Oxygen, Sodium

    (b) Carbon, Hydrogen, Nitrogen

    (c) Oxygen, Calcium, Phosphorus

    (d) Carbon, Hydrogen, Potassium

  • 1st Battalion of NDRF celebrates 20th Raising Day

    Why in the News?

    The 1st Battalion of the National Disaster Response Force (NDRF) celebrated its 20th Raising Day.

    About the National Disaster Response Force (NDRF)

    Details
    About 
    • Constituted under Section 44 of the Disaster Management Act, 2005 for specialized disaster response.
    • Functions under the Ministry of Home Affairs (MHA) and is headed by a Director General (DG), typically an IPS officer.
    • Initially established in 2006 with 8 battalions, now expanded to 16 battalions.
    • Operates under the National Disaster Management Authority (NDMA), chaired by the Prime Minister.
    Powers and Functions
    • Primary Role: Rescue and relief operations during natural and man-made disasters such as floods, cyclones, earthquakes, landslides, building collapses, and accidents.
    • Strategic Deployment: Resources are pre-positioned during imminent disaster situations to minimize damage.
    • Active in international relief efforts, including the 2011 Fukushima disaster and the 2015 Nepal Earthquake.
    • Provides multi-skilled, highly specialized responses, with capabilities for handling complex disaster scenarios.
    Composition
    • Consists of 16 battalions, each with 1,149 personnel.
    • Personnel are drawn from Central Armed Police Forces (CAPFs): CRPF, BSF, CISF, ITBP, SSB, and Assam Rifles.
    • Members are trained in disaster response, relief, and recovery operations.
    • Focus on proactive availability and pre-positioning during disasters to ensure quick response.

     

    IMPORTANT: National Disaster Response Fund (NDRF)

    • The NDRF is a statutory body constituted under the Disaster Management Act, 2005.
    • It supplements State Disaster Response Fund (SDRF) of a State, in case of a disaster of severe nature, provided adequate funds are not available in SDRF.
    • The July 2015 guidelines states that natural calamities of cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack and cold wave and frost will qualify for immediate relief assistance from NDRF.
    • NDRF is managed in the “Public Accounts” under “Reserve Funds not bearing interest”.
    • The Comptroller and Auditor General of India (CAG) audits the accounts of NDRF.

     

    PYQ:

    [2020] Discuss the recent measures initiated in disaster management by the Government of India departing from the earlier reactive approach.

  • Can Bhopal waste be safely disposed of?

    Why in the News?

    The Madhya Pradesh High Court gave authorities four weeks to dispose of the waste, nearly 40 years after the gas disaster that killed over 4,000 people and left thousands more injured or disabled.

    What are the plans for the hazardous gas leak waste? 

    • Waste Transportation: The Madhya Pradesh government has successfully transported 358 tonnes of hazardous waste from the Union Carbide facility in Bhopal to the Treatment, Storage, and Disposal Facility (TSDF) in Pithampur, Dhar district, following a court order.
    • Incineration Process: The waste will be incinerated at the Pithampur facility, with an initial timeline of three to nine months for complete disposal, depending on emissions and safety assessments during the process.
    • Emission Controls: To mitigate air pollution, the incinerator will utilize four-layer special filters to ensure that the smoke emitted does not contaminate the surrounding environment.
    • Post-Incineration Measures: After incineration, the resulting ash will be covered with a two-layer membrane and buried in a landfill to prevent any contact with soil and water sources.
    • Expert Supervision: The entire disposal process will be overseen by officials from the Central Pollution Control Board and State Pollution Control Board, ensuring compliance with safety regulations and environmental standards.

    How much has been allocated to incinerate the waste and deposit the residue at a landfill in Pithampur?

    • The Central government has allocated ₹126 crore (approximately $15 million) to facilitate the incineration of this waste and ensure that any resulting residue is safely deposited in a landfill at the Pithampur facility.

    Why have there been protests?

    • Health and Environmental Fears: Residents are worried that the incineration of toxic waste will pose significant health risks and environmental hazards to the local population and surrounding areas, with claims that it could lead to harmful emissions affecting air quality.
    • Historical Context: The protests are fueled by the legacy of the 1984 Bhopal gas tragedy, which resulted in thousands of deaths and long-term health issues. This history has heightened sensitivity to any activities involving hazardous materials in the region.
    • Community Mobilization: Local organizations, such as the ‘Pithampur Bachao Samiti’, have organized bandhs (shutdowns) and demonstrations, leading to widespread participation from residents who are calling for the waste to be returned to Bhopal instead of being incinerated locally.

    What is the 1984 Bhopal gas tragedy?

    The Bhopal gas tragedy, also known as the Bhopal disaster, occurred on the night of December 2-3, 1984, at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh, India.  

    • Chemical Leak: The disaster was triggered by a leak of approximately 40 tons of methyl isocyanate (MIC), a highly toxic gas used in pesticide production. This gas escaped from a storage tank due to a combination of operational failures and safety deficiencies at the plant.
    • Immediate Impact: The gas cloud spread over densely populated areas surrounding the plant, leading to immediate chaos and panic. Official estimates indicate that around 3,787 people died as a direct result of the gas exposure, while other estimates suggest that the death toll could be as high as 15,000 to 20,000 over subsequent years due to related health complications.
    • Injuries and Long-term Effects: Over 558,000 individuals suffered injuries ranging from respiratory problems to permanent disabilities. Many survivors continue to experience health issues related to their exposure to the toxic gas.

    Way forward: 

    • Strengthen Public Engagement and Transparency: Conduct comprehensive awareness campaigns involving scientific experts to address community concerns, ensuring transparent communication about safety measures, emission controls, and environmental safeguards during the incineration process.
    • Enhance Monitoring and Compliance: Implement stringent real-time monitoring of emissions and groundwater quality during and after waste disposal, supervised by independent experts and regulatory bodies, to uphold environmental and public health standards.

    Mains PYQ:

    Q What are the impediments in disposing the huge quantities of discarded solid wastes which are continuously being generated? How do we remove safely the toxic wastes that have been accumulating in our habitable environment? (UPSC IAS/2018)

  • Survey adds 24 new species to Munnar’s faunal stock

    Survey adds 24 new species to Munnar’s faunal stock

    Why in the News?

    A recent faunal survey conducted in the Munnar Wildlife Division has documented 24 new species of birds, butterflies, and odonates, enriching its biodiversity checklist.

    Which are the surveyed sites?

    All the surveyed national parks and wildlife sanctuaries are located in Kerala, India, specifically in the Idukki district:

    • Mathikettan Shola National Park (MSNP): It is a biodiversity hotspot and part of the Western Ghats.
    • Pambadum Shola National Park (PSNP): It is Kerala’s smallest national park and home to unique flora and fauna.
    • Anamudi Shola National Park (ANP): Named after Anamudi, the highest peak in South India.
    • Kurinjimala Wildlife Sanctuary (KWLS): Located in Idukki, it protects the habitat of the Neelakurinji (Strobilanthes kunthiana), a flower that blooms once every 12 years.
    • Eravikulam National Park (ENP): Famous for the Nilgiri Tahr.
    • Chinnar Wildlife Sanctuary (CWLS): Situated in the rain-shadow region of the Western Ghats, near the Kerala-Tamil Nadu border in Idukki.

    Key Highlights of the Survey

    • New Species Added: 24 new species, including birds (11), butterflies (8), and odonates (5).
    • Total Documentation:
      • Birds: 217 species recorded; checklist updated to 258.
      • Butterflies: 166 species recorded; checklist updated to 246.
      • Odonates: 5 new records, checklist updated to 58 species.
    • Notable Wildlife Observed: Mammals like Nilgiri Tahr, tigers, leopards, and elephants; 12 species of reptiles and amphibians.

    About the Added Species

    • Birds:
      • New Additions: Brown Hawk Owl, Barred Buttonquail, Spotted Owlet, Mottled Wood Owl, Baya Weaver, Red Munia, Richard’s Pipit, Jerdon’s Bushlark, Golden-Headed Cisticola, Large Grey Babbler, Chestnut-Bellied Nuthatch.
      • Highlights: Nilgiri Wood Pigeon, Steppe Eagle, Peregrine Falcon, Indian Grey Hornbill, and Blue-eared Kingfisher.
    • Butterflies:
      • Endemic Species: Red-disc Bushbrown, Palni Fritillary, Nilgiri Tiger, Nilgiri Four-ring.
      • Unique Sightings: Grass Jewel (smallest butterfly in Kerala), Southern Birdwing (largest butterfly in India).
    • Odonates (flying insects):
      • New Records: Cratilla lineata calverti, Macrodiplax cora, Palpopleura sexmaculata, Tholymis tillarga, Lestes elatus.

    PYQ:

    [2020] With reference to India’s biodiversity Ceylon frogmouth, Coppersmith barbet, Gray-chinned minivet and White-throated redstart are:

    (a) Birds

    (b) Primates

    (c) Reptiles

    (d) Amphibans

  • Third launchpad at Satish Dhawan Space Center, Sriharikota

    Why in the News?

    The Union Cabinet approved the construction of a third launchpad at Sriharikota, Andhra Pradesh.  In 2024, PM laid the foundation stone for ISRO’s second rocket launchport at Kulasekarapattinam in Tamil Nadu’s Thoothukudi district. (The first one being the Dr Abdul Kalam Island, Odisha.)

    Who was Satish Dhawan?

    • Born in Srinagar, Satish Dhawan was a prominent Indian rocket scientist and is hailed as the ‘Father of Experimental Fluid Dynamics Research’ in India.
    • Succeeded Vikram Sarabhai as ISRO Chairman in 1972.
    • Oversaw a period of extraordinary growth in India’s space program, including the development of:
      • INSAT: India’s telecommunications satellite system.
      • IRS: The Indian Remote Sensing satellite program.
      • PSLV: Polar Satellite Launch Vehicle, which positioned India as a major spacefaring nation.
    • Legacy:
      • Passed away in 2002, after which the Sriharikota space center was renamed the Satish Dhawan Space Centre in his honor.

    About the New Launchpad 

    • The new launchpad at Sriharikota aims to bolster India’s space capabilities.
    • It will support Next Generation Launch Vehicle (NGLV) missions and enhance ISRO’s capacity to launch advanced satellites and spacecraft.
    • Significance: This is India’s sole operational spaceport, serving as the hub for spacecraft and satellite launches since its inception.

    How and why was Sriharikota selected as the Launch Site?

    • 1960s Search: India’s search for an ideal launch site began in the 1960s when the country decided to develop indigenous satellites and launch vehicles.
    • Vikram Sarabhai, the father of India’s space program, tasked EV Chitnis to identify a site on the east coast.
    • Survey and Acquisition: By October 1968, approximately 40,000 acres of land were acquired in Sriharikota.
    • Reasons for Choosing Sriharikota:
      • East Coast Location: Launching rockets eastward takes advantage of Earth’s rotational speed, adding an extra velocity boost of 450 m/s, especially beneficial for geostationary satellites.
      • Proximity to the Equator: Rockets launching near the equator require less energy to reach geostationary orbits, making the location ideal for such missions.
      • Uninhabited Area: The site’s sparse population minimizes risks during rocket launches and component re-entry.
      • Access to the Sea: Proximity to the Bay of Bengal ensures that rocket debris falls into the sea, avoiding hazards to land or human settlements.
      • Strategic Accessibility: Adequate access to resources, infrastructure, and government support facilitated the development of a robust launch facility.

    PYQ:

    [2018] With reference to India’s satellite launch vehicles, consider the following statements:

    1. PSLVs launch the satellites useful for Earth resources monitoring whereas GSLVs are designed mainly to launch communication satellites.
    2. Satellites launched by PSLV appear to remain permanently fixed in the same position in the sky, as viewed from a particular location on Earth.
    3. GSLV Mk III is a four-staged launch vehicle with the first and third stages using solid rocket motors; and the second and fourth stages using liquid rocket engines.

    Which of the statements given above is/are correct?

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

  • In news: Yala Glacier

    Why in the News?

    Yala Glacier in Nepal is predicted to disappear by the 2040s due to rapid retreat and mass loss. It is the only glacier in the Himalayas listed on the Global Glacier Casualty List, an initiative launched in 2024 to document endangered or vanished glaciers worldwide.

    Note:  The UN has designated 2025 as the International Year of Glacier Preservation, with March 21st to be observed annually as World Glacier Day starting from 2025.

    About the Yala Glacier 

    • Yala Glacier is located in the Langtang Valley, central Nepal, and is influenced by the Indian summer monsoon.
    • It is one of the most studied glaciers in Nepal and represents the Hindu Kush Himalayan region in the World Glacier Monitoring Service (WGMS) database.
    • The glacier has been monitored for over a decade using stakes, snow pits, and satellite images, providing crucial data on the state of Himalayan glaciers.
    • It is the only glacier in the Himalayas included in the Global Glacier Casualty List, a recognition of its critical status.
    • It plays a vital role in studying the cryosphere, a critical water resource supporting 240 million people in the Himalayan region.

    Retreat of Yala Glacier

    • Yala Glacier is projected to disappear by the 2040s, reflecting the growing threat to Himalayan glaciers.
    • It has retreated by 680 meters between 1974 and 2021, with a 36% reduction in area during this period.
    • Its elevation, which ranged between 5,170m and 5,750m in 2011, has significantly declined.
    • The glacier has lost so much mass that it no longer meets scientific standards for effective observation.
    • The Hindu Kush Himalayan cryosphere is warming twice as fast as the global average, leading to rapid glacial retreat.

    About the Global Glacier Casualty List

    • It was launched in 2024 by a consortium of institutions including Rice University, World Glacier Monitoring Service (WGMS), World Meteorological Organization (WMO), and UNESCO.
    • It documents endangered or vanished glaciers.
    • Glaciers Listed: Includes 15 glaciers, such as:
      • Pico Humboldt Glacier (Venezuela): Disappeared in 2024.
      • Sarenne Glacier (France): Vanished in 2023.
      • Dagu Glacier (China): Categorized as “critically endangered,” expected to vanish by 2030.
    • Significance:
      • Highlights the urgency of glacier preservation, as these ice masses store 70% of global freshwater and influence water security for billions of people worldwide.
      • Reinforces the need for global cooperation to address the accelerating loss of glaciers due to climate change

     

    PYQ:

    [2019] Consider the following Pairs :

    Glacier: River

    1. Bandarpunch : Yamuna
    2. Bara Shigri : Chenab
    3. Milam : Mandakini
    4. Siachen : Nubra
    5. Zemu : Manas

    Which of the following pairs given above are correctly matched?

    (a) 1,2 and 4

    (b) 1,3 and 4

    (c) 2 and 5

    (d) 3 and 5

  • [18th January 2025] The Hindu Op-ed: India’s real growth rate and the forecast

    PYQ Relevance:

    Q) Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC CSE 2021)

    Mentor’s Comment: UPSC mains have always focused on major issues like the methodology of India’s Gross Domestic Product (GDP)  (2021) and steady GDP growth and low inflation (2019).

    The real GDP growth of 6.4% in 2024-25, while slightly below the Reserve Bank of India’s forecast of 6.6% which should not be seen as disappointing. The growth rate is expected to improve in the second half, with manufacturing showing a significant slowdown, contributing to a decline from 8.2% growth in the previous year.

    Today’s editorial highlights the growth rates of India in Nominal and real terms and what are the factors behind the low growth rate of India.  This content can be used in mains answer GS paper 3 related to GDP of India.

    _

    Let’s learn!

    Why in the News?

    The First Advance Estimates (FAE) of National Accounts for 2024-25 indicate a real GDP growth of 6.4% and a nominal GDP growth of 9.7%.

    Note: The National Statistical Office (NSO) of the Ministry of Statistics and Programme Implementation (MOSPI) releases the FAE.

    What is the difference between Real and Nominal GDP growth rates? 

    • Real GDP growth rate is the rate of change in the volume of goods and services produced, while nominal GDP growth rate is the rate of change in the total value of goods and services produced. 
    • The nominal GDP growth rate includes the effects of inflation, while the real GDP growth rate does not.

    What factors are contributing to the slowdown in India’s GDP growth?

    • Decline in Government Investment: The Government of India’s capital expenditure growth has been negative at (-)12.3%, which has significantly impacted overall GDP growth. Limited capital expenditure, reaching only 46.2% of the budget target after eight months, is a primary reason for the slowdown.
    • Weak Manufacturing Sector Performance: The manufacturing sector has experienced a sharp decline in growth from 9.9% in 2023-24 to 5.3% in 2024-25, contributing to lower Gross Value Added (GVA) figures.
    • Global Economic Uncertainty: Anticipated uncertainties stemming from global economic conditions, including changes in leadership in major economies like the United States, may hinder India’s export performance and overall economic stability.
    • Lower Private Consumption Growth: Although Private Final Consumption Expenditure (PFCE) is projected to grow by 7.3%, this is still a potential concern if consumer confidence does not recover adequately.
    • Previous High Base Effect: The high GDP growth of 8.2% in 2023-24 creates a challenging comparison, leading to perceptions of slowdown even when current growth rates may be consistent with long-term potential.

    How will different sectors of the economy perform in the upcoming fiscal year?

    • Agriculture and Allied Sectors: Growth in agriculture is expected to improve significantly, with estimates suggesting a rise to 3.8% compared to 1.4% in the previous year.
    • Manufacturing Sector Recovery: There is an expectation for recovery in manufacturing, although it remains uncertain given past performance trends.
    • Construction and Services Sectors: The construction sector is projected to grow at around 8.6%, while financial services are expected to see growth of approximately 7.3%, indicating resilience and potential for expansion.
    • Private Consumption: Continued growth in private consumption is anticipated which is driven by rural demand and government spending initiatives.

    What are the implications of these growth forecasts for policy and investment?

    • Need for Sustained Government Capital Expenditure: The government must prioritize capital expenditure to stimulate economic growth and encourage private investment, targeting at least a 20% increase based on revised estimates.
    • Focus on Structural Reforms: Policymakers should consider structural reforms that enhance productivity across sectors, particularly in manufacturing and agriculture, to support sustainable growth.
    • Investment in Infrastructure: Increased investment in infrastructure projects can provide a multiplier effect on the economy, fostering job creation and boosting demand.
    • Monitoring Global Economic Trends: Given the potential impact of global economic conditions on domestic growth, India should remain vigilant and adaptable to external shocks while focusing on strengthening domestic demand.
    • Long-Term Growth Strategies: With a potential long-term real GDP growth rate of around 6.5%, strategies should be developed to ensure that this target is met consistently over the next five years through innovation and investment in human capital.

    Way forward: 

    • Accelerate Infrastructure Investment: The government should prioritize and fast-track capital expenditure, especially in infrastructure, to stimulate economic activity, enhance private sector participation, and create jobs, aiming for at least 20% growth in capital investment for the upcoming fiscal year.
    • Enhance Sectoral Productivity through Reforms: Implement structural reforms in key sectors like manufacturing, agriculture, and services to boost productivity, reduce bottlenecks, and ensure sustainable long-term growth, focusing on innovation and skill development.

    https://www.thehindu.com/opinion/lead/indias-real-growth-rate-and-the-forecast/article69109601.ece#:~:text=term%20growth%20prospects-,In%20the%20light%20of%20a%20potential%20growth%20rate%20of%206.5,a%20flash%20in%20the%20pan

  • RBI allows NRI to open rupee accounts abroad with authorized banks

    Why in the News?

    The Reserve Bank of India (RBI), along with the Central government, has reviewed the rules under the Foreign Exchange Management Act 1999 (FEMA) to make it easier to carry out cross-border transactions in Indian rupees (INR) according to a statement by the RBI.

    What are the recent changes made in FEMA regulations by RBI?

    • Opening Rupee Accounts for Non-Residents: Overseas branches of authorized dealer (AD) banks can now open rupee accounts for non-residents, enabling them to conduct current and capital account transactions with Indian residents.
    • Settlement of Transactions: Non-residents can use their balances in repatriable rupee accounts, including Special Non-Resident Rupee Accounts (SNRAs) and Special Rupee Vostro Accounts (SRVAs), to settle transactions with other non-residents abroad.
    • Investment Opportunities: Balances in these accounts can be utilized for foreign investments, including Foreign Direct Investment (FDI) in non-debt instruments, thereby promoting rupee-based investments.
    • Flexibility for Exporters: Indian exporters are now permitted to open foreign currency accounts overseas to receive export proceeds and use these funds for import payments, enhancing operational flexibility.
    • Support for Local Currency Transactions: The new guidelines support cross-border transactions in local currencies, reducing reliance on dominant foreign currencies like the US Dollar

    What is Internationalisation of Rupee?

    • The internationalization of the rupee refers to the process of increasing the use and acceptance of the Indian rupee (INR) in global trade, investment, and cross-border transactions. This initiative aims to promote the rupee as a viable alternative to dominant currencies like the US dollar in international markets.

    What are the key features of the Internationalisation of Rupee?

    • Cross-Border Transactions: The primary goal is to facilitate more cross-border transactions in rupees, allowing businesses and individuals to conduct trade and investments without relying on foreign currencies.
    • Current and Capital Account Transactions: Initially focused on promoting the rupee for import and export trade, the process will extend to other current account transactions and eventually capital account transactions, enabling investments in rupee-denominated assets.
    • Full Convertibility: Achieving full capital account convertibility is essential for internationalization, meaning there would be no restrictions on converting rupees into foreign currency or vice versa for investments and loans.
    • Strengthening Economic Sovereignty: Reducing reliance on foreign currencies enhances India’s economic sovereignty and minimizes exposure to currency fluctuations, thereby stabilizing trade relations.
    • Enhancing Global Trade: By allowing direct transactions in rupees, internationalization can simplify cross-border trade processes, eliminate currency conversion needs, and reduce transaction costs.

     

    What are the significance of Internationalisation of Rupee? 

    • Reducing Exchange Rate Risks: By promoting INR usage in international trade, India can mitigate exchange rate risks associated with reliance on major currencies like the USD.
    • Enhancing Trade Competitiveness: Facilitating rupee transactions can improve India’s trade competitiveness by lowering transaction costs and simplifying payment processes for exporters and importers.
    • Strengthening Economic Sovereignty: Greater acceptance of the INR in global markets can enhance India’s economic sovereignty and reduce vulnerability to external economic shocks and geopolitical tensions.
    • Encouraging Foreign Investment: The ability to conduct transactions in INR may attract more foreign investors looking for stable investment opportunities in India

    Way forward: 

    • Strengthen Global Agreements: Expand bilateral and multilateral trade agreements to encourage invoicing and settlement in rupees, promoting its global acceptability.
    • Enhance Domestic Financial Infrastructure: Improve financial systems to support seamless cross-border rupee transactions, including achieving full capital account convertibility and increasing trust in the INR.

    Mains PYQ:

    Q How would the recent phenomena of protectionism and currency manipulations in world trade affect macroeconomic stability of India? (UPSC IAS/2018)