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GS Paper: GS3

  • Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP?

    Potential GDP refers to the maximum sustainable output an economy can produce without generating inflationary pressure, when all resources are fully and efficiently employed.

    Determinants of Potential GDP

    Labour Force & Human Capital – Size, skill, and productivity of the workforce.

    Capital Formation – Investment in infrastructure, machinery, and technology.

    Technology & Innovation – R&D and digital transformation driving productivity.

    Institutional Quality – Governance, regulatory efficiency, and property rights.

    Total Factor Productivity (TFP) – Efficiency in using labour and capital together.

    Prevailing Inflation Rate – Persistent inflation distorts real GDP from its potential level.

    Global Conditions – Protectionism, trade restrictions, and geopolitical tensions. Eg- Tariff Wars

    Factors Inhibiting India from Realizing Potential GDP

    Low Female Labour Force Participation – FLFPR only 41.7% (PLFS) against global average of 48%

    Slow Capital Formation – GFCF at ~29.6% of GDP (2024) vs 34% in 2023.

    Skill Mismatch & Education Gaps – Only 4.7% of workforce formally skilled (NSDC).

    Infrastructure Bottlenecks – Logistics cost ~13% of GDP vs 8% in USA

    Weak Productivity Growth – Low TFP and informal sector dominance. (83% informal sector)

    Regulatory Cholesterol – Delays, compliance burden, weak contract enforcement.

    Way Forward

    Enhance Human Capital – Invest in education, healthcare, and skill development

    Accelerate Investment & Infrastructure Growth through faster project execution under PPP.

    Create safe workplaces, flexible jobs, and childcare support to tap women’s economic potential.

    Increase R&D spending to 2.5% of GDP (currently <1% of GDP) for productivity gains.

    To realize its potential GDP and Viksit Bharat 2047, India must shift from factor accumulation to productivity-driven growth

  • Explain intra-generational and inter-generational issues of equity from the perspective of inclusive growth and sustainable development.

    Inclusive growth and sustainable development emphasise fair distribution of opportunities, resources, and benefits both within the present generation and across future generations.

    Intra-Generational Equity issues (Equity Within the Present Generation)

    Income and Wealth Inequality – the top 1% of adults in India control almost 40% of net personal wealth. (World Inequality Report)

    Social Exclusion – Caste, gender, disability, and minority identity restrict access to education, jobs, assets. Eg- Glass Ceiling for Women

    Poorer communities face greater vulnerability to pollution, floods, heatwaves, violating equity. Eg- Disaster induced migration

    Regional disparities – Eg- BIMARU States lag behind national averages in health, education and income.

    Low female labour force participation (41% vs 48% global average) limits inclusive access to economic opportunities.

    Inter-Generational Equity issues (Equity Across Future Generations)

    Climate change burden on future generations – Eg- Rising sea levels threatening the survival of low-lying island countries.

    Low social mobility- Eg – India ranks 76th in the Global Social Mobility Index (WEF), indicating persistence of inequality across generations.

    Failing to invest in research, innovation, and human capital reduces competitiveness of future generations. (R&D investment only 0.7% of GDP)

    Fiscal Burden – Unsustainable borrowing today limits fiscal space for future welfare and development spending.

    Way Forward

    Capability Approach (Amartya Sen) – increase Education and health spending to 6% and 2.5% of GDP respectively

    Strengthen progressive taxes, wealth taxes and targeted subsidies to reduce income inequality and expand welfare spending.

    Align national policies with Paris Agreement targets

    Universalise social security, pensions, maternity benefits, and unemployment allowance

    A nexus approach towards sustainability and inclusiveness is needed for ‘Sabka Saath, Sabka Vikas.’

  • Analyse the complexity and intensity of terrorism, its causes, linkages and obnoxious nexus. Also, suggest measures required to be taken to eradicate the menace of terrorism

    As per Bruce Hoffman, “Terrorism is the deliberate creation and exploitation of fear through violence or the threat of violence in the pursuit of political change.”

    Complexity of Terrorism

    Absence of a universally accepted definition makes global consensus and coordination difficult.

    Multi-actor nature – Involves state-sponsored, non-state, proxy and lone-wolf actors

    Decentralised structure limits traceability. Eg- lone wolf attacks

    Transnational character – Funding, training, ideology and operations span across borders.

    Technological sophistication increases operational complexity. Eg- Use of encrypted communication, drones and digital finance.

    Intensity of Terrorism (Global Terrorism Index 2025)

    Over 8,000 terrorism-related deaths globally (2024)

    Islamic State (IS) expanded its operations to 22 countries

    Terrorist attacks jumped by 63% in the West

    India witnessed Pahalgam terrorist attack in 2025

    High psychological impact

    Causes of Terrorism

    Political Causes

    Political instability – Weak or exclusionary governance fuels extremism. Eg- in Syria

    Ideological radicalisation through identity and grievance politics. Eg- ISIS

    State repression – Eg- Militant recruitment in Kashmir exploiting allegations of rights abuses.

    Socio-Economic Causes

    Poverty and unemployment Create fertile ground for recruitment. Eg- in Palestine (Hamas)

    Inequality – Disparity between haves and have-nots fuels resentment.

    Regional underdevelopment and ‘Governance vaccum’- Eg- Insurgency in India’s Northeast

    Geopolitical Causes

    Proxy warfare and state sponsorship – Eg- Pakistan’s policy of bleeding India by thousand cuts

    Regional conflicts – Eg- Iran’s support “Axis of Resistance” including Lebanon’s Hezbollah, Yemen’s Houthis.

    Technological and Global Factors

    Online radicalisation – Eg- Use of Telegram and encrypted platforms by terror outfits.

    Ease of connectivity and funding – Eg- Hawala networks financing terror modules in India

    Linkages and Obnoxious Nexus

    Terrorism-Organised Crime Nexus – Eg- role of D-Company in 1993 Bombay blast

    Terrorism-Narco Nexus – Drug trade finances terror operations and insurgency.

    Terrorism-Religious Extremism Nexus for recruitment and legitimacy.

    Terrorism-Cyber Nexus – Use of social media and encrypted platforms for propaganda

    Terrorism-State and Non-State Actor Nexus. Eg- Pakistan’s support to LeT and JeM

    The zero tolerance against terrorism strategy needs 6-fold approach

    Robust counter-terror legal framework – Swift investigation, prosecution and conviction.

    Strengthening HUMINT (Human Intelligence) and TECHINT (Technological Intelligence).

    SMART Borders (Madhukar Gupta Committee)

    Raising cost of terrorism for Pakistan. Eg- Operation Sindoor

    Human-centric Counterinsurgency

    International Cooperation – Intelligence sharing, financial sanctions and diplomatic pressure on sponsors of terrorism. Eg- FATF Grey Listing

    Thus a holistic strategy is needed for ‘Terror free world’.

    Role of External State and Non-state Actors

  • Keeping in view India’s internal security, analyse the impact of cross-border cyber attacks. Also, discuss defensive measures against these sophisticated attacks.

    As per report of CloudSEK, India emerged as the second most targeted nation in terms of cyber attacks in 2024.

    Impact of Cross-Border Cyber Attacks

    Threat to Critical Information Infrastructure (CII) – Eg – attempts by the Pakistan-linked APT36 group to infiltrate India’s Northern Power Grid

    Economic Destabilization by attacks on financial gateways like UPI or BSE.

    Salami-Slicing of Intellectual Property (IP)- Eg- theft of IP from manufacturing and pharmaceutical sectors to weaken India’s “Make in India” competitive edge.

    State-Sponsored Advanced Persistent Threats (APTs)- Eg- Pakistan-linked actors used “Dance of the Hillary” malware to infiltrate DRDO systems during “Operation Sindoor”

    Compromise of National Defense & Military Intelligence- “Operation FlightNight” targeted Indian defense and energy sectors using malware disguised as an Indian Air Force invitation.

    Psychological Warfare- Eg- Following the Pahalgam attack, Pakistan-linked groups flooded social media with 2 lakh deepfakes and “forged” government documents to spread panic.

    Threat to privacy. Eg- Star Health Insurance breach leaking data of 31 million customers

    “Mass Defacement” – Simultaneously taking down hundreds of government websites to Undermine government authority

    Measures to Strengthen Cyber Security in India

    Legal Measures

    Stringent implementation of the Digital Personal Data Protection Act to hold “Data Fiduciaries” (companies) accountable for breaches.

    Empower the CBI to investigate cybercrime cases nationwide without needing general consent from state. (Parliamentary panel on home affairs)

    Replacing the IT Act, 2000, with the proposed Digital India Act to address modern threats like Deepfakes, AI-driven extortion.

    Institutional Measures

    Expanding the Indian Cyber Crime Coordination Centre to serve as a 24/7 national “War Room” for real-time threat mitigation and interstate coordination.

    Strengthening the NCIIPC to secure “Critical Information Infrastructure” (CII).

    Establishing dedicated cyber-police stations in every district, integrated with the National Cybercrime Reporting Portal (1930).

    Policy Measures

    Implementing the National Cyber Security Strategy focusing on Sovereign Cyber Defense and building a “Cyber-Resilient” ecosystem.

    Adhering to the CERT-In Cyber Security Audit Policy, which mandates annual third-party audits for all government and critical sector entities.

    Promoting the Golden Hour Protocol to report financial frauds within the first 2 hours.

    Technological Measures

    Zero-Trust Architecture (ZTA)- Transitioning from traditional perimeter security to a “Never Trust, Always Verify” model for all digital access requests.

    AI-Driven Threat Intelligence- Deploying machine learning algorithms for real-time detection of anomalies and Automated Incident Response (AIR).

    Promoting the “Atmanirbhar” development of indigenous operating systems and security software. Eg- Maya OS

    Global Measures

    Leveraging partnerships like the Quad Senior Cyber Group to share threat intelligence on state-sponsored APTs (Advanced Persistent Threats) in the Indo-Pacific.

    Collaborating with Interpol (Project Gateway) and FATF to track and dismantle the financial backbones of transnational “Cyber Slavery” hubs.

    Social Measures

    Digital Literacy (Cyber Shikshaa)- awareness campaigns like #CyberDost

    Capacity building of the judicial and police workforce through the CyTrain portal

    Cyber Hygiene- Eg- Multi-Factor Authentication (MFA) and use of the “Chakshu” portal for reporting suspicious communications.

    As cybercrimes move into the realm of “Grey Zone Warfare,” India’s cyber defense must be proactive rather than reactive.

  • Analyse the multidimensıonal challenges posed by external state and non-state actors, to the internal security of India. Also, discuss measures required to be taken to combat these threats

    Internal security can be defined as the management of security within the border of a country. It involves the maintenance of peace, law and order, upholding the sovereignty of the country and dealing with external state and non-state actors.

    Multidimensional Challenges Posed by External Actors

    Challenges from External State Actors

    Proxy Warfare by Pakistan to ‘Bleed India by thousand cuts’. Eg- Pakistan-backed LeT and JeM in Jammu & Kashmir.

    Border incursions by china. Eg- Galwan clash

    Cyber spionage targeting digital and critical systems. Eg- APT41 (China), targeted Indian telecom, power grids

    Strategic Encirclement under ‘string of pearls’. Eg- Chinese presence at Gwadar, Hambantota and Maldives.

    Disinformation Operations – Use of social media and digital platforms to spread fake news, incite communal unrest, and delegitimize democratic institutions.

    Hybrid Warfare – Eg- use of drones by Pakistan to challenge India’s air defenses during 2025 Operation Sindoor

    Illegal migration along porus border impacting demography in border states and leading to social unrest. Eg- Rohingya infiltration via Bangladesh

    Challenges from External Non-State Actors

    Terrorist Organisations – Violence to create fear and instability. Eg- Red Fort Bombings

    Organized Crime Syndicates – Terror-financing, arms & drug smuggling, extortion, money laundering etc. Eg- D-Company

    Left-Wing Extremists (Naxalites) – Guerrilla attacks on police and destruction of infrastructure. Eg- dantewada attack

    North-East Insurgent Groups – Ethnic militancy, drug and human trafficking along India-Myanmar border. Eg- NSCN (IM), ULFA

    Cyber Criminals – Data breaches, espionage, financial frauds, infrastructure sabotage etc. Eg- RedEcho group (China-linked)

    Foreign-Funded NGOs – Anti-development protests, exploitation of tribal/ethnic fault lines (loss of 2% of GDP – IB Report).

    Narco-Terrorism – Drug trade funding violence and terrorism. Eg- Heroin and arms smuggling via Punjab border.

    Measures required

    Policy measures

    Finalisation of National security doctrine

    Federal coordination through national internal security council

    Security and Intelligence Measures

    Strengthening HUMINT (Human Intelligence) and TECHINT (Technological Intelligence).

    SMART Borders (Madhukar Gupta Committee)

    Legal and Institutional Measures

    Robust Counter-Terror and AML Frameworks – Swift investigation, prosecution and conviction under UAPA and PMLA

    Cyber Security Capacity – Expansion of CERT-In, cyber commands and AI-based monitoring.

    Diplomatic Measures

    International Cooperation through intelligence sharing and financial sanctions. Eg- FATF Grey Listing

    Raising cost of terrorism for Pakistan. Eg- Operation Sindoor

    Social and developmental Measures

    De-radicalisation and Counselling of youth

    Heart and mind strategy – Eg- Operation Sadbhavana (Goodwill) of Indian Army

    Employment and Skill Development to mainstream youth. Eg- Udaan Scheme

    Technological Measures

    Use of AI, Big Data and Satellites – Predictive policing and early threat detection.

    As per Kautilya, security witthin borders is indispensible for achieving Yogakshema – security, welfare, and prosperity of citizens

  • Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels.

    As per FATF, “Money laundering is the processing of criminal proceeds to disguise their illegal origin in order to legitimize the ill-gotten gains of crime.”

    As per UNODC, money laundering costs around 2-5% of global GDP ($2 to $5.5 trillion)

    Role of emerging technologies

    Cryptocurrencies and Virtual Assets – Enable anonymous, borderless and rapid transfers. Eg- Laundering through Bitcoin and privacy coins.

    Dark Web and Encrypted Platforms – Facilitate illegal marketplaces and untraceable transactions. Eg- “Hydra Market”

    Fintech and Digital Payments – Micro-transactions and layering obscure audit trails. Eg- Use of mule accounts in UPI scams.

    AI Tools – Creation of fake digital identities to open mule accounts.

    Online Gambling and Gaming Platforms – Convert illicit funds into in-game assets and winnings. Eg- betting apps linked to Mahadev Book

    NFT Markets – Buying and selling NFTs at inflated prices to legitimise funds.

    DeFi Platforms – use mixers, decentralized exchanges (DEXs), and cross-chain bridges to obscure the origins of illicit funds. Eg- internationally sanctioned Tornado Cash

    Impact of Globalisation on Money Laundering

    Ease of Cross-Border Capital Mobility. Eg- Nirav Modi-PNB scam funds traced across Hong Kong, Dubai and the UK

    Offshore Financial Centres and Tax Havens. Eg- Eg- Pandora Papers (2021) revealed shell companies in British Virgin Islands used to hide assets.

    Complex Global Trade Networks – Trade-based laundering through invoice manipulation.

    Multinational Corporate Structures launder money through Shell companies. Eg- Eg- Adani-Hindenburg case (2023)

    Migration and Remittance Networks – Eg- Hawala networks in Gulf-Kerala corridor linked to gold smuggling and laundering.

    Measures taken

    At national Level

    PMLA, 2002 and Amendments

    Definition of “proceeds of crime” expanded to include assets held abroad.

    Virtual digital assets (VDAs) like cryptocurrencies, online gaming and betting platforms brought under PMLA.

    PMLA linked with National Financial Information Registry (RBI) to improve real-time data monitoring.

    ED- Investigates offences under PMLA, including attachment and confiscation of properties. Eg- over 6000 cases filed

    Financial Intelligence Unit – India (FIU-IND)- Receives and analyses suspicious transaction reports from banks and financial institutions.

    Regulatory Measures by Financial Regulators (KYC norms)

    RBI for banking

    SEBI for capital markets

    IRDAI for insurance

    At international level

    Vienna convention on money laundering 1988.

    FATF – Intergovernmental body setting global AML standards. (India in “regular follow-up” category – highest rating by FATF)

    Egmont Group – International network of FIUs for sharing of financial intelligence across borders.

    Basel AML Index – Ranks countries on AML risk.

    OECD Common Reporting Standard (CRS) – Information exchange among countries to detect offshore tax evasion and illicit financial flows.

    India has signed DTAA with 85 countries to prevent illegal activities like tax evasion & money laundering.

    These measures India’s commitment to zero tolerance for money laundering and terror funding.

  • Describe the key points of the revised Global Air Quality Guidelines (AQGs) recently released by the World Health Organisation (WHO). How are these different from its last update in 2005? What changes in India’s National Clean Air Programme are required to achieve these revised standards?

    According to the World Air Quality Report 2024 by IQAir, India is the 5th most polluted country, with an average PM2.5 level of 50.6 ”g/m³, 10 times the WHO safe limit (5 ”g/m³).

    Key Points of the Revised WHO Global Air Quality Guidelines (AQGs)

    The 2021 AQGs set significantly lower recommended levels for major pollutants to better protect health.

    Coverage of Six Key PollutantsPM2.5, PM10, ozone (O₃), nitrogen dioxide (NO₂), sulfur dioxide (SO₂) and carbon monoxide (CO).

    Include stepwise interim targets to help countries progressively reduce pollution. Eg- Short-term and long-term average recommendations for NO₂ and CO

    Provide guidance on specific particle types (black carbon, ultrafine particles)

    Differences from the 2005 Update

    More Stringent Pollutant Thresholds

    The annual PM2.5 guideline was halved, from 10 ”g/m³ (2005) to 5 ”g/m³ (2021)

    PM10 and NO₂ limits are also significantly reduced.

    Expanded Pollutant Coverage – include updated short-term exposure metrics and carbon monoxide.

    Stronger Scientific Basis – incorporate global epidemiological data and new evidence on low-level health effects, unlike the more limited evidence base of 2005.

    New emphasis on interim milestone targets for progressive improvement, unlike the broader recommendations in 2005.

    Changes Required in India’s National Clean Air Programme (NCAP)

    Revise Reduction Targets to align with WHO’s stricter limits rather than the current 20-40% reduction targets.

    Broaden the air quality monitoring network to include more cities, rural zones, and all six pollutants to match WHO standards.

    Improve enforcement and adopt binding air quality targets rather than advisory ones

    Implement an airshed-based approach that addresses transport, industry, biomass burning and regional pollution transport collaboratively.

    Integrate health impact data and public communication into NCAP, promoting behaviour change

    Strengthening NCAP to meet WHO AQGs supports India’s Panchamrit climate goals, and long-term sustainable development objectives.

  • Explain the purpose of the Green Grid Initiative launched at the World Leaders Summit of the COP26 UN Climate Change Conference in Glasgow in November 2021. When was this idea first floated in the International Solar Alliance (ISA)?

    Green Grid Initiative, launched by India and UK, seeks to establish an inter-connected global renewable power grid, under the principle of “one sun, one world, one grid.”

    Purpose of Green Grid Initiative

    It is based on three thematic pillars:

    Finance – Mobilise investment to double grid funding by 2030.

    Planning, Permits & Operation – Improve long-term planning and speed up approvals for faster grid development.

    Supply Chains – Strengthen manufacturing and match demand with supply of grid components.

    “The Sun Never Sets” Vision – Ensure continuous solar availability globally by connecting regions in different time zones.

    Build international collaboration for the effective use of renewable energy.

    Global Interconnected Grid to accelerate the transition to renewable energy.

    Energy Sharing Mechanism – Enable countries with low sunlight to access power from regions with surplus solar energy.

    Ensuring energy equity and access: enabling mini-grids and off-grid communities

    Accelerate the shift away from fossil fuels by enhancing deployment of clean energy

    History of Green Grid Initiative

    The concept of OSOWOG was first introduced by India’s Prime Minister at the first Assembly of ISA in October 2018.

    It was formally launched by India and UK in COP26

    By building a framework for international cooperation, it strengthens the global pathway towards decarbonisation and energy security by 2030, making it a pivotal instrument for achieving SDG-7 and supporting global climate action.

  • Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are the commitments made by India in this conference?

    The 26th Conference of the Parties (COP-26) to the UNFCCC, held in Glasgow in 2021, sought to accelerate global efforts to limit warming to 1.5°C under the Paris Agreement.

    Major Outcomes of COP-26

    Recognition of Climate Emergency – Countries reaffirmed the goal of limiting warming to 1.5°C.

    Accelerating Climate Action

    Countries acknowledged this as a critical decade, requiring 45% CO₂ reduction by 2030 to reach net-zero by mid-century.

    They agreed to submit stronger NDCs by 2022, and an annual NDC synthesis report.

    For the first time, parties agreed to phase down unabated coal and phase out inefficient fossil-fuel subsidies, though language was weakened from “phase-out” to “phase-down.”

    Urged immediate fulfilment of Climate Finance Commitments by Developed countries

    Countries agreed to double adaptation finance for developing nations and launched a Global Goal on Adaptation work programme.

    Completing the Paris Rulebook – Consensus achieved on Article 6 (carbon markets), Enhanced Transparency Framework, and common reporting formats.

    Strengthening of the Santiago Network for technical assistance and launch of the Glasgow Dialogue on funding arrangements for loss and damage.

    Major Side Deals & Announcements

    Forests: 137 countries committed to halt and reverse deforestation by 2030.

    103 countries joined the Global Methane Pledge to cut emissions by 30% by 2030.

    Zero-Emission Vehicles: Over 30 countries and major automakers committed to new zero-emission vehicle sales by 2035/2040.

    India’s Commitments at COP-26

    Panchamrit – Five Key Climate Targets

    500 GW of non-fossil electricity capacity by 2030

    50% of energy requirements from renewables by 2030

    Reduction of emissions intensity of GDP by 45% (from 2005 levels) by 2030

    1 billion tonnes reduction in projected carbon emissions by 2030

    Net-zero by 2070

    India, along with the UK, launched the Green Grids Initiative – One Sun, One World and One Grid mission to connect grids

    Call for Climate Justice & Equity – India emphasised Common but Differentiated Responsibilities (CBDR-RC) and demanded enhanced finance and technology transfer from developed countries.

    The mantra of LIFE- Lifestyle for Environment as a mass movement for Environment Conscious Lifestyles.

    The summit produced new “building blocks” to advance implementation of the Paris Agreement for sustainable, low-carbon pathway forward.

  • How is S-400 air defence system technically superior to any other system presently available in the world?

    The S-400 Triumf, developed by Russia’s Almaz-Antey, is widely regarded as one of the most potent long-range Surface-to-Air Missile (SAM) systems.

    Technical Superiority of the S-400 System

    Multi-Missile Capability: Unlike other systems that fire a single type of missile, the S-400 can launch four different types of missiles.

    Unmatched Range and Reach: Its longest-range missile (40N6E) can engage targets at 400 km, nearly double the effective range of the Patriot PAC-3 (approx. 160-180 km).

    360-Degree Coverage: The S-400 uses cold-vertical launch technology. This provides 360-degree coverage, whereas the Patriot is a “tilted” launcher that must be rotated to face the threat.

    Target Engagement Capacity: A single S-400 battalion can track up to 300 targets and engage 36 targets simultaneously with 72 missiles.

    High Mobility and Deployability: The entire system is truck-mounted and can be deployed or packed up in 5 to 10 minutes.

    Hypersonic Target Engagement: The system is designed to intercept targets traveling at speeds up to Mach 14, making it capable of countering most modern tactical ballistic missiles.

    Anti-Electronic Warfare Protection: The S-400 are equipped with advanced frequency-hopping and electronic counter-countermeasures, making them highly resistant to jamming.

    Interoperability: It can be integrated into existing air defense networks, acting as a “Command and Control” hub for a country’s entire airspace.

    Altitude Versatility: It can engage targets as low as 10 meters (cruising drones) and as high as 30 km (near-space aircraft/ballistic missiles)

    While the US Patriot system is highly battle-proven and excels in point-defense, the S-400 offers an “Area Denial” (A2/AD) capability that is unmatched in terms of range, target variety, and rapid response.