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GS Paper: GS3

  • How do astronauts return from space and survive re-entry

    Why in the News?

    India is advancing its human spaceflight ambitions under ISRO’s Gaganyaan programme, with successful Crew Escape System tests and re-entry validation experiments demonstrating safe atmospheric descent capability. Since re-entry involves extreme heat (over 1,500°C) and velocities exceeding 25,000 km/h, mastering this phase is a critical milestone that places India closer to joining the limited group of nations capable of independently returning astronauts safely from space.

    What is spacecraft re-entry?

    Spacecraft re-entry is the critical process of a vehicle returning from space, passing through a planet’s atmosphere to land on the surface. It is a controlled deceleration process in which a spacecraft transitions from orbital velocity to safe landing conditions.It involves using atmospheric drag and heat shielding to dissipate immense kinetic energy (approx. mph) while managing temperatures up to caused by compressed air.

    Key aspects of re-entry include:

    1. Deceleration and Heating: As the spacecraft hits the dense atmosphere, it experiences extreme deceleration and intense heat, often creating a “wall of fire” around the craft.
    2. Thermal Protection: Vehicles use specialized heat shields, such as ablative materials, to protect against temperatures exceeding 1650 degree celsius.
    3. Methods: Re-entry can be controlled (using engines for precise, safe, or targeted landing) or uncontrolled (naturally falling back).
    4. Phases: It typically involves deorbiting, atmospheric entry, and landing (often using parachutes).
    5. Challenges: The “entry corridor” must be precisely navigated; entering too steeply causes excessive heat, while too shallow causes the craft to skip back into space

    Why is Re-entry Considered the Most Critical Phase of Spaceflight?

    1. Orbital Velocity: Spacecraft travel at ~7.8 km/s in Low Earth Orbit, generating extreme kinetic energy during descent.
    2. Thermal Load: Atmospheric compression produces temperatures above 1,500°C, sufficient to melt structural metals.
    3. Deceleration Stress: Astronauts experience high G-forces due to rapid velocity reduction.
    4. Historical Precedent: Early scientific belief held that re-entry survival was impossible due to predicted structural failure from heat loads.

    How Does a Spacecraft Dissipate Immense Heat During Re-entry?

    1. Blunt Body Design: Rounded capsule structure disperses heat around the vehicle rather than allowing penetration.
    2. Aerodynamic Braking (Aerobraking): Uses atmospheric drag to systematically reduce speed without propulsion fuel.
    3. Thermal Protection System (TPS): Shields internal structure from heat exposure.
    4. Ablation Mechanism: Outer material chars and erodes, carrying heat away from the capsule.
    5. Heat Shield Materials: Designed to prevent thermal transfer to primary structure and crew module.

    What is the “Re-entry Corridor” and Why is It Crucial?

    1. Optimal Angle Window: Ensures safe atmospheric penetration between overshoot and undershoot limits.
    2. Overshoot Risk: Too shallow angle causes the capsule to skip back into space.
    3. Undershoot Risk: Too steep angle results in excessive heating and structural stress.
    4. Precision Navigation: Onboard guidance systems adjust trajectory within strict tolerances.

    Why Does Communication Blackout Occur During Re-entry?

    1. Plasma Formation: Extreme heat ionizes surrounding air, forming an electrically charged plasma layer.
    2. Signal Obstruction: Plasma sheath blocks radio communication between crew and ground stations.
    3. Blackout Duration: Persists until velocity reduces sufficiently for plasma dissipation.
    4. Mitigation Strategy: Use of relay satellites and high-frequency transmission pathways through thinner plasma regions.

    How Do Parachutes Enable Safe Landing?

    1. Terminal Velocity Reduction: Atmospheric drag alone remains insufficient for safe splashdown.
    2. Multi-stage Deployment: Drogue parachutes stabilize descent; main parachutes reduce final speed.
    3. Controlled Splashdown: Ensures low-impact landing in designated sea recovery zones.
    4. Landing Example: Bay of Bengal identified as primary splashdown zone for Indian missions.

    How Will India’s Gaganyaan Crew Module Execute Re-entry?

    1. Crew Module (CM): Maintains trajectory within re-entry corridor and survives thermal stress.
    2. Service Module (SM): Provides propulsion during orbital phase; separates before re-entry.
    3. Controlled Manoeuvres: Adjusts lift-to-drag ratio for precise landing.
    4. Thermal Validation: Crew Module Atmospheric Re-entry Experiment validated full-scale heat shield.
    5. Operational Significance: Positions India among nations capable of independent human re-entry systems.

    Conclusion

    Safe atmospheric re-entry represents the ultimate test of a nation’s human spaceflight capability, demanding mastery over thermal protection, trajectory precision, communication resilience, and controlled descent systems. As India advances toward operationalizing Gaganyaan, successful re-entry validation will not only ensure astronaut safety but also strengthen technological sovereignty, strategic autonomy, and India’s position among leading spacefaring nations.

    PYQ Relevance

    [UPSC 2017] India has achieved remarkable successes in unmanned space missions including the Chandrayaan and Mars Orbiter Mission, but has not ventured into manned space mission. What are the main obstacles to launching a manned space mission, both in terms of technology and logistics? Examine critically.

    Linkage: This GS-3 question examines the technological and logistical challenges in shifting from unmanned missions to human spaceflight. It directly links to Gaganyaan, especially re-entry systems, crew safety, and human-rated launch capability.

  • New GDP Series: Why Fiscal Targets and $4 Trillion Goal Get Harder

    Why in the News

    The Ministry of Statistics and Programme Implementation released the new GDP series with 2022-23 as base year, lowering nominal GDP by about 3 to 4 percent. This affects fiscal deficit ratios, debt calculations and India’s timeline to become a 4 trillion dollar economy.

    What Changed in the New GDP Series

    • 2023-24 growth revised down from 9.2% to 7.2%.
    • Nominal GDP for 2025-26 reduced by about 3.3%.
    • Real GDP now calculated using double deflation method.
    • Better data sources such as GST, ASUSE, PLFS integrated.
    • Lower nominal GDP means the economy is slightly smaller in rupee terms than previously estimated.

    Impact on Fiscal Deficit

    Fiscal deficit is calculated as a percentage of GDP.

    1. Current Year Impact

    • 2025-26 fiscal deficit moves from 4.4% to 4.5%.
    • Past years’ ratios also rise slightly due to smaller GDP base.

    2. FY27 Target Problem

    • Target: 4.3% of GDP
      Absolute deficit: Rs 16.96 lakh crore
    • To achieve this ratio:
      • Nominal GDP must grow 13 to 14% next year.
      • Budget assumption was only 10% nominal growth.
    • This implies either: Higher growth, or Lower borrowing, or Expenditure compression.

    Impact on Debt to GDP Ratio

    • Debt ratio projected to rise to about 58% in 2025-26.
    • Target is 55.6%.
    • Lower GDP denominator pushes ratio upward.
    • New GDP series makes fiscal consolidation slightly tougher mathematically.

    Impact on $4 Trillion Economy Goal

    • At exchange rate of about Rs 90.98 per dollar: 2025-26 GDP is around 3.8 trillion dollars.
    • If nominal growth is 10% and rupee remains stable: India can cross 4 trillion dollars in 2026-27.
    • However:
      • Rupee depreciation can delay milestone.
      • Dollar GDP depends on both growth and exchange rate.
    • Nigeria example shows how currency depreciation can shrink dollar GDP even if domestic output rises.

    Broader Implications

    • Ratios worsen even without policy slippage.
    • Government may need borrowing recalibration.
    • Fiscal arithmetic becomes tighter.
    • Market expectations on growth become crucial.

    Prelims Pointers

    • GDP can be measured by production, income and expenditure methods.
    • Nominal GDP uses current prices.
    • Real GDP adjusts for inflation.
    • Fiscal deficit equals total expenditure minus total receipts excluding borrowings.
    • Debt to GDP ratio indicates sustainability of public debt.
    [2015] With reference to Indian economy, consider the following statements: 

    1. The rate of growth of Real Gross Domestic product has steadily increased in the last decade. 
    2. The Gross Domestic product at market prices (in rupees) has steadily increased in the last decade. 

    Which of the statements given above is/are correct? 

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

  • GST Collections Rise 8.1% to ₹1.83 Lakh Crore in February

    Why in the News

    Gross Goods and Services Tax collections rose 8.1% year on year to over ₹1.83 lakh crore in February 2026, indicating steady consumption and import activity.

    Key Figures

    • Gross GST: ₹1.83 lakh crore
    • Net GST: ₹1.61 lakh crore up 7.9%
    • Gross domestic revenue: ₹1.36 lakh crore up 5.3%
    • Import revenue: ₹47,837 crore up 17.2%
    • Refunds: ₹22,595 crore up 10.2%
    • Cumulative GST collection so far this fiscal: ₹20.27 lakh crore up 8.3%.

    Policy Context

    • GST slabs merged into two major rates: 5% and 18%
    • 40% slab retained for ultra luxury goods and tobacco
    • Around 375 items saw rate cuts from September 2025
    • Initial dip in November after tax cuts followed by recovery in December, January and February.

    State Level Trends

    Negative growth observed in:

    • Tamil Nadu
    • Madhya Pradesh
    • Rajasthan

    Below national average growth in:

    • West Bengal
    • Haryana
    • Uttar Pradesh
    • Maharashtra

    Significance

    • Reflects resilience of consumption demand
    • Strong import growth suggests trade momentum
    • Stable revenue trend despite rate rationalisation
    • Indicates structural maturity of GST ecosystem
    [2017] What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’? 

    1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 
    2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves. 
    3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future. 

    Select the correct answer using the code given below: 

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

  • SEBI to Leverage AI and Tech to Crack Down on Market Manipulators

    Why in the News

    SEBI Chairman Tuhin Kanta Pandey said the regulator will strengthen surveillance using Artificial Intelligence and technology to curb market manipulation and cyber fraud.

    Key Announcements

    • Tech Driven Surveillance

      • Use of AI to detect market manipulation and suspicious trading patterns.
      • Stronger enforcement against fraudulent brokers and cyber criminals.

    • SEBI Check Tool

      • Integrated within UPI interface.
      • Helps investors verify registered intermediaries before making payments.
      • Aimed at curbing fake brokers promising unrealistic returns.
      • SEBI has partnered with Bengaluru based AI firm SARVAM for multilingual awareness campaigns.

    • Investor Awareness Push

      • AI based outreach pilot contacted 3.85 lakh people.
      • Campaigns to caution against financial influencers promising “astronomical” returns.
      • Emphasis on disciplined and long term investing.

    • Derivatives & Market Stability

      • Measures introduced to cool speculation in equity derivatives.
      • Focus on short duration options segment.
      • SEBI says no signs of systemic instability.

    • Enforcement Record

      • Action against unregistered advisors and alleged market manipulators.
      • High success rate in tribunal and Supreme Court cases.
      • Regulator defends combined legislative, executive and quasi judicial role.

    • Future Focus Areas

      • Revitalising agricultural commodity markets.
      • Deepening corporate bond market.
      • More scientific policy making with impact assessment.

    Significance

    • Strengthens investor protection.
    • Improves trust and transparency in capital markets.
    • Reflects shift toward data driven regulation.
    • Aligns with digital public infrastructure ecosystem including UPI.
    [2025] Consider the following statements: I. India accounts for a very large portion of all equity option contracts traded globally, thus exhibiting a great boom. 

    II. India’s stock market has grown rapidly in the recent past, even overtaking Hong Kong’s at some point in time. 

    III. There is no regulatory body either to warn small investors about the risks of options trading or to act on unregistered financial advisors in this regard. 

    Which of the statements given above are correct? 

    (a) I and II only (b) II and III only (c) I and III only (d) I, II and III

  • President Undertakes Sortie in LCH Prachand

    Why in the News

    President Droupadi Murmu undertook a sortie in the indigenous Light Combat Helicopter Prachand at Air Force Station Jaisalmer on February 27, 2026.

    About LCH Prachand

    • India’s indigenously developed Light Combat Helicopter.
    • Designed for high altitude warfare and desert operations.
    • Equipped with:
      • Air to ground missiles
      • Rocket systems
      • 20 mm turret gun
    • Developed by Hindustan Aeronautics Limited

    Significance

    • Highlights indigenous defence capability.
    • Demonstrates operational readiness of the Indian Air Force.
    • Symbolic boost to Aatmanirbhar Bharat in defence manufacturing.

    Prelims Pointers

    • LCH Prachand inducted into Indian Air Force in 2022.
    • Designed for operations at high altitude including Himalayan region.
    • Air Force Station Jaisalmer is a key western sector air base.
    • President is Supreme Commander of the Armed Forces under Article 53.
    [2025] With reference to India’s defence, consider the following pairs: Aircraft type : Description 

    I. Dornier-228 : Maritime patrol aircraft 

    II. IL-76 : Supersonic combat aircraft 

    III. C-17 Globemaster : Military transport aircraft 

    How many of the pairs given above are correctly matched? 

    (a) Only one (b) Only two (c) All the three (d) None

  • Vayu Shakti 2026 Exercise

    Why in the News

    The President of India Droupadi Murmu witnessed the Vayu Shakti 2026 exercise at Pokhran Firing Range, Jaisalmer.

    About Vayu Shakti

    • Conducted by the Indian Air Force
    • Venue: Pokhran Firing Range, Rajasthan
    • Simulated integrated combat theatre
    • Objective: Demonstrate precision strike capability and operational readiness

    Prelims Pointers

    • Pokhran Firing Range located in Rajasthan
    • Vayu Shakti is a firepower demonstration by the Indian Air Force
    • Rafale inducted into IAF in 2020
    • Tejas is India’s indigenous Light Combat Aircraft
    • Apache and Chinook are US origin helicopters inducted into IAF
    [2024] Consider the following aircraft: 1. Rafael 

    2. MiG-29 

    3. Tejas MK-1 

    How many of the above are considered fifth generation fighter aircraft? 

    (a) Only one (b) Only two (c) All three (d) None

  • INS Anjadip Commissioned

    Why in the News

    The Indian Navy commissioned INS Anjadip, the fourth indigenously designed and built Anti Submarine Warfare Shallow Water Craft, at Chennai Port.

    About INS Anjadip

    • Type: Anti Submarine Warfare Shallow Water Craft
    • Length: 77 metres
    • Built by: Garden Reach Shipbuilders & Engineers at Kattupalli
    • Named after: Anjadip Island off Karwar coast

    Key Capabilities

    • Designed for shallow and coastal waters
    • Detect, track and neutralise enemy submarines
    • Equipped with:
      • Shallow water sonars
      • Lightweight torpedoes
      • Anti submarine rockets
      • Combat management system

    Operational Roles

    • Anti submarine warfare in littoral zones
    • Coastal surveillance
    • Low intensity maritime operations
    • Search and rescue missions

    Significance

    • Enhances India’s anti submarine warfare capability
    • Strengthens coastal defence architecture
    • Reflects Aatmanirbhar Bharat in naval shipbuilding
    • Boosts indigenous defence manufacturing ecosystem
    [2016] Which one of the following is the best description of ‘INS Astradharini’, that was in the news recently? (a) Amphibious warfare ship 

    (b) Nuclear-powered submarine 

    (c) Torpedo launch and recovery vessel 

    (d) Nuclear-powered aircraft carrier

  • [27th February 2026] The Hindu OpED: The shift of critical minerals to India’s strategic centre

    PYQ Relevance

    [UPSC 2022] Do you think India will meet 50 percent of its energy needs from renewable energy by 2030? Justify your answer. How will the shift of subsidies from fossil fuels to renewables help achieve the above objective? Explain.

    Linkage: Renewable energy expansion depends on critical minerals like lithium and rare earths used in solar, wind, and EVs. Achieving 50% renewable capacity by 2030 requires secure mineral supply chains and shifting subsidies from fossil fuels to clean energy.

    Mentor’s Comment

    Critical minerals are now central to India’s industrial and geopolitical strategy. The Union Budget 2026 marks a shift from policy intent to implementation, focusing on processing capacity, domestic value addition, and secure supply chains. With 30 minerals identified and ₹16,300 crore allocated under the National Critical Minerals Mission, India is prioritising strategic autonomy amid global supply disruptions.

    Why is the shift to critical minerals a strategic turning point for India?

    1. Policy Mainstreaming: Moves critical minerals from peripheral policy concern to core industrial and geopolitical agenda. Budget speech shifts focus from identification to execution
    2. Institutional Framework: Establishes National Critical Minerals Mission (NCMM) with ₹16,300 crore outlay to coordinate exploration, mining, and processing.
    3. Strategic Context: Responds to global weaponisation of rare earth magnets and battery supply chains in 2025, exposing industrial vulnerabilities
    4. Global Concentration Risk: China controls up to 90% of global processing capacity for several critical minerals, creating supply asymmetry.
    5. Implementation Phase: Shifts discourse from “Does India need a policy?” to “Can India execute at scale, speed, and depth?”

    How does governance architecture address exploration and processing gaps?

    1. Mineral Identification: Notifies 30 critical minerals to guide regulatory and fiscal prioritisation
    2. Exploration Reform: Eases mineral exploration norms for junior miners and rationalises royalty rates.
    3. Project Pipeline: Targets 1,200 exploration projects by FY2031 under NCMM.
    4. Fiscal Incentives: Enables tax deductions for exploration expenditure for nine critical minerals.
    5. Processing Capability: Leverages existing capacity in copper, graphite, rare earth oxides, tin, and titanium, often exceeding 99.9% purity.
    6. Technological Upgradation: Recognises need for deeper refining and advanced processing for clean energy and defence applications.

    Does demand creation remain the missing link in mineral security?

    1. Capital Goods Rationalisation: Removes import duties on capital goods used in processing of critical minerals
    2. Domestic Manufacturing Push: Links mineral processing to batteries, solar modules, wind turbines, and electric vehicles.
    3. Demand Constraint: Identifies lack of assured domestic demand as a barrier to private investment in refining capacity.
    4. Industrial Multiplier: Expands electric mobility and renewable energy deployment to generate downstream mineral demand.
    5. Backward Integration: Addresses delays in domestic value chain integration that create uncertainty for midstream processors.

    Can technology and AI-driven governance enhance mineral discovery and efficiency?

    1. AI-First Exploration: Mandates Artificial Intelligence integration in mineral exploration to de-risk investments.
    2. Institutional Convergence: Aligns IndiaAI Mission, National Geospatial Policy, and Mission Anveshan for data-driven exploration.
    3. Hydrocarbon Model Extension: Expands seismic and geospatial analytics used in hydrocarbon discovery to mineral exploration.
    4. Geoscience Data Repository: Improves prospectivity analysis and site discovery through centralised digital data systems.
    5. Tax Support: Extends tax deductions for exploration expenditure to reduce risk premium.

    How does geopolitical disruption reshape India’s strategic mineral policy?

    1. Rare Earth Corridors: Announces development of rare earth corridors across coastal States.
    2. Import Substitution: Reduces import duties on monazite sands to secure feedstock.
    3. Technological Sovereignty: Uses supply chain disruption as leverage to build domestic magnet and battery ecosystems.
    4. State Role: Encourages States to upgrade port infrastructure and manpower to serve global demand.
    5. Regional Growth: Links mineral processing clusters to job creation and industrial diversification.

    Are international partnerships aligned with domestic capacity building?

    1. Strategic Partnerships: Expands cooperation with Australia, European Union, Japan, United Kingdom, and United States.
    2. Technology Transfer Challenge: Addresses reluctance of advanced economies in sharing high-end processing technologies.
    3. Regulatory Certainty: Strengthens legal frameworks to attract foreign mineral processing investment.
    4. Sintered Magnet Scheme: Allocates ₹7,280 crore for permanent magnet manufacturing ecosystem.
    5. Trade Integration: Aligns mineral strategy with India-EU Free Trade Agreement and global supply chain networks.
    6. Research Collaboration: Enhances academic and industrial linkages through UK-India Critical Minerals Supply Chain Observatory.

    Conclusion

    Critical mineral security is no longer a sectoral concern but a strategic imperative linking energy transition, manufacturing growth, and geopolitical autonomy. Budget 2026 signals a shift from ambition to execution, with emphasis on processing, technology, and global partnerships. Sustained coordination between the Union, States, and industry will determine whether India can convert mineral potential into long-term industrial and strategic strength.

  • Have AI products/LLMs started to disrupt the software services industry?

    Why in the News?

    India’s $250+ billion IT services industry is witnessing structural churn due to rapid enterprise adoption of Artificial Intelligence (AI) and Large Language Models (LLMs). AI has rapidly moved from pilot projects to full-scale deployment in India’s IT services industry. Companies are restructuring teams and changing billing models as automation begins to reduce dependency on large manpower-based delivery.

    Is AI-driven productivity restructuring India’s traditional labour-arbitrage IT model?

    1. Labour Arbitrage Model: India’s IT growth historically depended on low-cost skilled manpower and time-and-material billing structures.
    2. AI-Enabled Productivity Gains: Generative AI assists coding, testing, documentation, and DevOps processes, reducing manual effort.
    3. Reduced Headcount Dependency: Tasks earlier requiring 8-10 engineers may now require significantly fewer personnel.
    4. Shift in Developer Roles: Engineers increasingly supervise AI outputs instead of manually writing baseline code.
    5. Enterprise Adoption: AI tools are embedded in workflow systems rather than treated as experimental add-ons.

    Does AI disproportionately impact entry-level and BPO/KPO employment structures?

    1. Routine Automation: Repetitive and well-defined tasks in BPO/KPO segments are highly automatable.
    2. Entry-Level Vulnerability: Coding support, documentation drafting, and testing roles face reduction.
    3. Reskilling Imperative: Demand shifts toward prompt engineering, AI model supervision, and domain integration.
    4. Net Employment Effect: Overall revenue per engineer may increase, but entry pathways narrow.
    5. Mid-Level Stability: Complex integration, client management, and architecture roles remain comparatively resilient.

    Is the IT services billing architecture shifting from manpower-based to outcome-based pricing?

    1. Traditional Pyramid Model: Revenue historically linked to number of deployed engineers.
    2. Automation Impact: AI reduces billable hours while increasing efficiency.
    3. Outcome-Based Pricing: Clients demand delivery linked to quality, productivity, and time benchmarks.
    4. Margin Preservation: Firms attempt to maintain profitability despite lower headcount expansion.
    5. Service Model Transformation: Predictable delivery replaces volume-based staffing.

    Are Indian IT firms building foundational AI capabilities or remaining service integrators?

    1. Foundational Model Ownership: Major LLM development remains concentrated in US and Chinese firms.
    2. Service-Dominant Strategy: Indian companies focus on AI integration, customization, and enterprise embedding.
    3. Infrastructure Constraints: Limited domestic investment in compute capacity and advanced semiconductor ecosystems.
    4. Strategic Choice: Debate between investing in sovereign AI models versus deepening service specialization.
    5. Global Competitiveness: Scaling, execution efficiency, and process rigour remain India’s strengths.

    Does AI transformation necessitate new regulatory and social protection frameworks?

    1. Employment Transition Risks: Automation may temporarily increase unemployment in routine segments.
    2. Skill Certification Gap: Absence of standardized AI skill accreditation mechanisms.
    3. Data Governance Concerns: AI deployment raises issues of data privacy, algorithmic bias, and compliance.
    4. Energy & Environmental Costs: Data centres increase electricity consumption and water usage.
    5. Policy Preparedness: Need for labour transition planning, digital skilling missions, and regulatory clarity.

    Is AI replacing software engineers or redefining their functional role?

    1. Task Automation vs Role Elimination: AI reduces repetitive coding but increases need for oversight.
    2. AI-Assisted Development: Engineers validate AI-generated code for architectural integrity.
    3. Domain Integration: Banking, healthcare, and financial services require contextual expertise.
    4. Product Engineering Shift: Movement from services to proprietary frameworks and tools.
    5. Horizontal Skill Structure: Less hierarchical team pyramids.

    Conclusion

    AI-led transformation marks a structural shift in India’s IT services growth model from labour arbitrage to productivity arbitrage. The challenge is not technological disruption itself, but managing its employment, skill, and regulatory implications. A calibrated approach that combines innovation, large-scale reskilling, data governance, and employment-sensitive growth strategy will determine whether AI becomes a source of competitive advantage or structural imbalance.

    PYQ Relevance

    [UPSC 2022] ‘Economic growth in the recent past has been led by increase in labour productivity.’ Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.

    Linkage: This question links directly to GS-3 themes of jobless growth, labour productivity, digitalisation, and structural transformation of the Indian economy, especially in the context of AI-driven automation. It is also highly relevant for Essays on “Growth vs Employment,” “Technology and Jobs,” and “Inclusive Development in the Age of AI.”

  • SEBI Revamps Mutual Fund Rulebook

    Why in the News

    The Securities and Exchange Board of India introduced major reforms for the ₹81 lakh crore mutual fund industry to ensure schemes remain true to their stated objectives.

    Key Changes

    1. Solution-Oriented Schemes Discontinued

    • No fresh inflows allowed in retirement and children funds.
    • Existing schemes to be merged with similar asset allocation schemes.
    • Aim: Remove redundant category and improve clarity.

    2. Introduction of Life Cycle Funds

    • Goal-based, open-ended schemes.
    • Asset allocation shifts automatically over time via glide path.
    • Designed around target maturity dates.

    3. Higher Exposure Limits

    • Up to 35% investment allowed in:
      • Gold
      • Silver
      • Infrastructure Investment Trusts
    • Provides equity funds greater flexibility and diversification.

    4. Restriction on Portfolio Overlap

    • Less than 50% overlap required:
      • Between sectoral and thematic funds
      • Between equity and sectoral or thematic funds
    • Objective: Reduce duplication and ensure differentiated strategies.

    5. Relaxation for Contra and Value Funds

    • Earlier: Only one of the two allowed per fund house.
    • Now: Both can be offered.

    Prelims Pointers

    • SEBI regulates securities market and mutual funds in India.
    • InvITs pool funds for infrastructure projects.
    • Life cycle funds follow glide path asset allocation.
    • Portfolio overlap norms aim to prevent excessive duplication across schemes.
    [2023] Consider the following statements: Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable. 

    Statement-II: InvITs are recognized as borrowers under the ‘Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’. 

    Which one of the following is correct in respect of the above statements? 

    (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I 

    (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I 

    (c) Statement-I is correct but Statement-II is incorrect 

    (d) Statement-I is incorrect but Statement-II is correct