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GS Paper: GS3

  • UPI One World Wallet Extended for Foreign Visitors

    Why in the News?

    The National Payments Corporation of India has extended the UPI One World wallet facility to visitors from over 40 countries attending the India AI Impact Summit 2026 held in New Delhi from 16 to 20 February 2026.

    About UPI One World Wallet

    • A prepaid wallet based on the PPI UPI model designed for inbound international travellers.
    • Launched by: NPCI through authorised Prepaid Payment Instrument issuers.

    Key Features

    1. No Indian bank account or mobile number required: Foreign visitors can make UPI payments without opening an Indian bank account.
    2. Person to Merchant P2M Payments: Payments can be made by scanning UPI QR codes across India.
    3. Multiple Loading Options: Wallet can be loaded using various international payment methods.
    4. Availability Points: Available at New Delhi International Airport and NPCI Pavilion at Bharat Mandapam.
    5. Refund Facility: Unused balance can be transferred back to the original payment source as per forex rules.

    What is PPI?

    Prepaid Payment Instrument: A payment instrument where money is loaded in advance and used for transactions without direct linkage to a bank account for each payment.

    Significance

    • Promotes India’s digital public infrastructure globally
    • Facilitates seamless real time retail payments for foreign tourists
    • Reduces dependence on cash and currency exchange
    • Demonstrates scalability of UPI as a cross border payment solution

    About UPI

    • Unified Payments Interface UPI is a real time payment system developed by NPCI that enables instant fund transfers between bank accounts using mobile platforms. It is currently the world’s largest real time payment ecosystem.
    [2025] Consider the following countries: I. United Arab Emirates 

    II. France 

    III. Germany 

    IV. Singapore 

    V. Bangladesh 

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

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

  • What are bio-based chemicals and enzymes

    Why in the News?

    The Biotechnology for Economy, Employment and Environment (BioE3) Policy has prioritised bio-based chemicals and enzymes as strategic sectors. Bio-based chemicals and enzymes use renewable biological feedstocks and reduce dependence on fossil-based industrial inputs. The sector is important for India to cut petrochemical imports (e.g., $479.8 million acetic acid in 2023), strengthen energy security, and support climate goal.

    What are Bio-based chemicals and enzymes?

    1. Bio-based chemicals are industrial chemicals produced using biological feedstocks like sugarcane, corn, starch, or biomass residues, often through fermentation or enzymatic processes. 
    2. Examples include organic acids (such as lactic acid), bio-alcohols, solvents, surfactants, and intermediates used in plastics, cosmetics, and pharmaceuticals. 
    3. Enzymes are biological catalysts widely used in detergents, food processing, pharmaceuticals, textiles, pulp and paper, and increasingly in biomanufacturing. 
    4. Enzymes often work at lower temperatures and pressures, reducing energy use and emissions.

    How Do Bio-based Chemicals Align with India’s Energy Security and Industrial Policy Objectives?

    1. Import Substitution: Reduces dependence on petrochemical imports such as acetic acid valued at $479.8 million in 2023.
    2. Feedstock Utilisation: Leverages agricultural residues, sugarcane, and starch base to create industrial value chains.
    3. Manufacturing Expansion: Strengthens domestic production capacity in sustainable chemicals.
    4. Energy Efficiency: Enables lower temperature and pressure processing, reducing industrial energy consumption.
    5. Strategic Autonomy: Diversifies raw material base beyond fossil fuels.

    How Does the BioE3 Policy Institutionalise Bio-manufacturing as a Governance Priority?

    1. Policy Prioritisation: Places bio-based chemicals and enzymes under the Department of Biotechnology’s BioE3 framework.
    2. Economic Integration: Links biotechnology with employment generation and environmental sustainability.
    3. Sectoral Coordination: Aligns industrial biotechnology with manufacturing sector expansion.
    4. Innovation Ecosystem: Encourages microbial strategy development for chemical production.

    Does India Possess Institutional and Market Capacity to Scale Bio-based Production?

    1. Corporate Leadership: Praj Industries and Godrej Industries lead bio-chemical initiatives.
    2. Refinery Innovation: Godavari Biorefineries produces acetyls and intermediates such as acetic anhydride (ethyl acetate).
    3. Enzyme Market Consolidation: Top players account for over 75% market share.
    4. Key Industry Actors: Novozymes India, DuPont, DSM, Advanced Enzyme Technologies, BASF SE, and Ultreze Enzymes Private Limited operate in India.
    5. Fermentation Expertise: Strong pharmaceutical and vaccine manufacturing base supports scaling.

    What Governance and Regulatory Challenges Constrain Sectoral Expansion?

    1. Capital Intensity: Bio-refineries require high initial investment.
    2. Feedstock Volatility: Agricultural raw material supply fluctuates seasonally.
    3. Technology Dependence: Advanced microbial engineering still requires global collaboration.
    4. Regulatory Clearances: Multi-layer approvals delay commercial scaling.
    5. Market Competitiveness: Petrochemical alternatives remain cost-competitive due to legacy infrastructure.

    How Does Global Policy Context Shape India’s Strategic Choices?

    1. EU Bioeconomy Strategy: Integrates bio-based chemicals into circular economy and climate transformation goals.
    2. USDA BioPreferred Program: Mandates federal procurement preference for bio-based products.
    3. Climate Alignment: Links industrial decarbonisation with bio-manufacturing.
    4. Waste Reduction: Encourages conversion of biomass residues into chemicals.
    5. Global Competition: Positions bio-based chemicals as emerging industrial frontier.

    Conclusion

    Bio-based chemicals and enzymes integrate industrial growth with environmental sustainability. India’s agricultural base, fermentation expertise, and BioE3 policy provide structural advantage. Scaling requires regulatory reform, technology deepening, and feedstock security. The sector offers scope for import substitution, green growth, and strategic industrial positioning.

    PYQ Relevance

    [UPSC 2023] Discuss several ways in which microorganisms can help in meeting the current fuel shortage.

    Linkage: This PYQ tests understanding of industrial biotechnology in addressing energy security and reducing fossil fuel dependence under GS 3. Bio-based chemicals and enzymes similarly use microbial processes to enable green manufacturing and reduce petrochemical imports.

  • CBDC Based Public Distribution System Launched in Gujarat

    Why in the News?

    The Union Home Minister launched a Central Bank Digital Currency based Public Distribution System in Gandhinagar, Gujarat. This marks the integration of digital currency into the food security delivery mechanism.

    What is CBDC?

    • Central Bank Digital Currency is a digital form of sovereign currency issued and regulated by a central bank.
    • In India, the digital rupee is issued by the Reserve Bank of India.
    • It is different from cryptocurrency because it is legal tender and backed by the government.

    What is the Public Distribution System?

    • The Public Distribution System is a food security system that distributes subsidised food grains to eligible beneficiaries under the National Food Security framework.
    • Around 80 crore beneficiaries receive free food grains under the scheme.

    Key Features of CBDC Based PDS

    1. Digital transfer and settlement using CBDC.
    2. Reduction of leakages and middlemen.
    3. Transparent and traceable transactions.
    4. Faster and automated grain dispensing via Annapurna machine.
    5. Planned nationwide rollout within 3 to 4 years.

    The Annapurna machine reportedly dispenses 25 kg of food grains in about 35 seconds.

    Governance Linkages

    • Linked to Digital India initiative.
    • Inspired by Direct Benefit Transfer model.
    • Reflects the principle of minimum government maximum governance.
    • Strengthens last mile delivery through technology.

    Related Schemes Mentioned

    • Pradhan Mantri Garib Kalyan Anna Yojana providing 5 kg free food grains per person per month.
    • PM SVANidhi providing working capital loans to street vendors.
    [2024] Consider the following statements in respect of the digital rupee: 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy. 

    2. It appears as a liability on the RBI’s balance sheet. 

    3. It is insured against inflation by its very design. 

    4. It is freely convertible against commercial bank money and cash. 

    Which of the statements given above are correct? 

    (a) 1 and 2 only (b) 1 and 3 only (c) 2 and 4 only (d) 1, 2 and 4

  • India’s Power Generation Capacity Update

    Why in the News?

    India has added 52,537 MW of electricity generation capacity in the current financial year up to January 31, 2026. This is the highest ever annual capacity addition, taking total installed capacity to 5,20,510.95 MW.

    Key Data

    1. Total capacity addition (FY 2025-26 till Jan 31): 52,537 MW
    2. Previous record: 34,054 MW in FY 2024-25
    3. Total installed capacity (Jan 31, 2026): 5,20,510.95 MW
    4. Growth over last FY: More than 11 percent increase

    Breakup of Installed Capacity

    1. Renewable Energy:
      • 2,63,189.33 MW
      • Around 50.5 percent of total capacity
      • Solar: 34,955 MW added this year
      • Wind: 4,613 MW added
    2. Fossil Fuel Based:
      • 2,48,541.62 MW
      • Around 48 percent of total
    3. Nuclear Energy:
      • 8,780 MW
      • Around 1.6 percent

    Important Concepts for Prelims

    • Installed Capacity: Maximum electricity that can be generated under ideal conditions.
    • Renewable Energy Sources: Solar, wind, hydro, biomass etc.
    • Energy Mix: Composition of different energy sources in total generation capacity.

    Significance

    • India’s renewable share has crossed 50 percent of installed capacity.
    • Indicates progress toward climate commitments and energy transition goals.
    • Strengthens energy security and reduces fossil fuel dependence in long term.
    [2025] Consider the following statements about ‘PM Surya Ghar Muft Bijli Yojana’: I. It targets installation of one crore solar rooftop panels in the residential sector. 

    II. The Ministry of New and Renewable Energy aims to impart training on installation, operation, maintenance and repairs of solar rooftop systems at grassroot levels. 

    III. It aims to create more than three lakhs skilled manpower through fresh skilling and up-skilling, under scheme component of capacity building. 

    Which of the statements given above are correct? 

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

  • How hate groups and terrorist organizations use gaming platforms to recruit children

    Why in the News?

    Extremist organisations are using mainstream gaming platforms such as Roblox and Minecraft to recruit children. Counter-terrorism agencies in the United States, Australia, and Europe have documented cases of minors being radicalised through simulated violent worlds. The problem is expanding: investigations across 40 countries reveal a sharp rise in terror-linked online activity since 2021.

    How are gaming platforms being exploited for extremist recruitment, and what governance gaps enable this shift?

    1. Immersive Simulation: Enables recreation of real-world terror attacks within game environments; example: simulation of the Christchurch mosque shooting.
    2. Private Servers: Facilitates closed-group indoctrination without public scrutiny; platforms allow creation of restricted-access worlds.
    3. Gamified Propaganda: Embeds violent extremist narratives within interactive gameplay.
    4. Algorithmic Reinforcement: Promotes similar content once initial extremist content is accessed.
    5. Weak Age Verification: Allows minors aged 9-12 to access unmoderated spaces.

    What constitutional and child protection obligations arise in regulating online radicalisation of minors?

    1. Right to Protection (Article 21): Ensures state obligation to protect life and personal liberty of minors from digital harm.
    2. Best Interest Principle: Strengthens state responsibility under child protection jurisprudence.
    3. Freedom of Speech Limits (Article 19(2)): Permits reasonable restrictions on incitement to violence.
    4. Juvenile Justice (Care and Protection of Children) Act, 2015: Enables state intervention where minors are victims of online grooming, exploitation, or psychological harm through digital platforms.
    5. Information Technology Act, 2000 and Intermediary Guidelines, 2021: Mandate due diligence by platforms to ensure safe digital ecosystems and removal of unlawful or harmful online content.

    How effective are existing regulatory mechanisms in addressing platform-enabled extremism?

    1. Platform Moderation Tools: Provides content filtering and AI-based detection but remains reactive.
    2. Encryption Barriers: Limits proactive monitoring in private chats and servers.
    3. Cross-border Jurisdiction Issues: Weakens enforcement due to global server locations.
    4. Law Enforcement Intervention: Includes arrests such as UK-based cases involving bomb manuals.
    5. Regulatory Gaps: Fails to anticipate gaming ecosystems as recruitment hubs.

    What institutional accountability mechanisms must platforms adhere to under digital governance norms?

    1. Due Diligence Obligations: Requires proactive removal of unlawful content.
    2. Transparency Reporting: Ensures disclosure of extremist content removal statistics.
    3. Risk Assessment Protocols: Mandates evaluation of systemic risks to minors.
    4. Design Accountability: Requires embedding child-safety safeguards in platform architecture.
    5. Coordination with Counter-Terror Agencies: Facilitates intelligence sharing.

    How does digital radicalisation of children alter the nature of internal security challenges?

    1. Decentralised Recruitment: Eliminates dependence on physical contact networks.
    2. Early-age Indoctrination: Reduces threshold age of radicalisation to below 12 years.
    3. Loneliness Exploitation: Targets socially isolated minors.
    4. Gamification of Violence: Normalises extremist ideology through interactive immersion.
    5. Low-cost Global Reach: Enables transnational propaganda dissemination.

    Conclusion

    Gaming ecosystems now function as recruitment spaces for extremist organisations. The shift from physical indoctrination to immersive digital radicalisation lowers age thresholds and expands cross-border risks. Regulatory frameworks must integrate child protection, platform accountability, and counter-terror coordination to address this evolving threat landscape.

    PYQ Relevance

    [UPSC 2024]  Social media and encrypting messaging services pose a serious security challenge. What measures have been adopted at various levels to address the security implications of social media? Also suggest any other remedies to address the problem.

    Linkage: Gaming-based radicalisation of minors reflects the expanding misuse of digital platforms and gaps in cyber regulation.

  • NPS Equity Exposure Increased to 25% by FY27

    Why in the News?

    The Chairperson of the Pension Fund Regulatory and Development Authority announced that the National Pension System (NPS) will raise its equity exposure to 25 percent by FY2027, and that pension funds may begin investing in Alternative Investment Funds (AIFs) by March 2026.

    About the National Pension System

    • Launched in 2004 for government employees and extended to all citizens in 2009
    • Regulated by PFRDA
    • Defined contribution pension scheme
    • Market-linked returns
    • Two types:
      • Tier I: Mandatory retirement account
      • Tier II: Voluntary savings account

    Key Announcements

    • Increase in Equity Exposure

      • Equity cap in the Government Composite Scheme raised from 15 percent to 25 percent
      • Current equity exposure around 19 percent
      • Corporate bond exposure has reduced slightly
      • G Sec share remains largely stable
      • Objective: Improve long term returns while maintaining prudent risk levels.
      • Investment in AIFs: NPS to allow exposure to Alternative Investment Funds (AIFs) by March 2026

    • MARS Committee

      • PFRDA has constituted the Minimum Assured Return Scheme (MARS) committee
      • Exploring a pension product offering a guaranteed minimum return
    [2017] Who among the following can join the National Pension System (NPS)? (a) Resident Indian citizens only 

    (b) Persons of age from 21 to 55 only 

    (c) All State Government employees joining the services after the date of notification by the respective State Governments 

    (d) All Central Government Employees including those of Armed Forces joining the services on or after 1st April, 2004

  • [13th February 2026] The Hindu OpED: Farmers’ pulse: On India and its demand for pulses

    PYQ Relevance

    [UPSC 2017] Mention the advantages of the cultivation of pulses because of which the year 2016 was declared as the International year of Pulses by the United Nations.

    Linkage: It links to the pulses debate as it highlights their nutritional, ecological, and income-support role, strengthening arguments for procurement reform and crop diversification.

    Mentor’s Comment

    Pulses policy reflects a structural tension between consumer price stabilization and farmer income security. Weak procurement architecture, import dependence, and trade commitments intersect with federal politics and food security imperatives.

    Why in the News?

    India’s pulses policy is back in focus after reports of possible import commitments under a trade deal with the United States. This appears to clash with the government’s Mission for Aatmanirbharta in Pulses, raising fresh concerns among farmers about the gap between self-reliance goals and trade decisions.

    Why Are Pulses Crucial to India’s Food and Farm Economy?

    1. Protein Dependence: Pulses supply nearly 25% of non-cereal protein intake.
    2. Livelihood Base: Around five crore farmers depend on pulse cultivation.
    3. Persistent Demand Gap: Production ~2.5 crore tonnes; demand ~3 crore tonnes; imports fill deficit.
    4. Food Security Linkage: Dependence on imports exposes vulnerability to global price fluctuations.

    How Do Imports Create Immediate Market Distortions?

    1. Centralized Decision Impact: A single central decision to import can immediately lower domestic prices.
    2. Household Spending Relief: Imports reduce consumer expenditure when supply is tight.
    3. Farmer Income Shock: Price depression directly hurts domestic producers.
    4. Market Absorption Constraint: Domestic markets cannot always absorb “extra” supply, worsening price collapse.
    5. Political Sensitivity: Trade commitments perceived as favouring foreign producers revive post-2020 protest anxieties.

    Why Is the Procurement Regime Considered Structurally Weak?

    1. Limited Coverage: Procurement under the Price Support Scheme ranged between 2.9%-12.4% (2019-24).
    2. MSP Without Guarantee: Absence of reliable procurement undermines MSP credibility compared to rice and wheat.
    3. Organised Neglect: Weak procurement mechanisms, cereal bias, and institutional design collectively marginalize pulses.
    4. Distress Sales: Inadequate procurement centres force farmers to sell below MSP to private traders.
    5. Investment Disincentive: Uncertain returns discourage productivity-enhancing investments.

    What Structural Constraints Affect Pulse Cultivation?

    1. Rain-fed Cultivation: Pulses largely grown in rain-fed regions, increasing climate risk.
    2. Lower Yields: Productivity remains below international competitors.
    3. Underinvestment Cycle: Weak price assurance leads to low investment, perpetuating low yields.

    What Does the Mission for Aatmanirbharta in Pulses Seek to Achieve?

    1. Financial Allocation: ₹11,440 crore outlay.
    2. Area Expansion: Target of 310 lakh hectares.
    3. Production Goal: 350 lakh tonnes by 2030-31.
    4. Strategic Objective: Reduce import dependence and achieve self-sufficiency.
    5. Credibility Challenge: Past unfulfilled promises create farmer scepticism.
    6. Policy Contradiction Risk: Import commitments contradict mission objectives.

    Why Does This Issue Trigger Political Sensitivity?

    1. Farm Protest Context: Post 2020-21 protests, trade and agri-reform decisions face scrutiny.
    2. Federal Dimension: Central trade decisions affect state-level agriculture.
    3. Trust Deficit: Perception of favouring foreign producers undermines domestic policy legitimacy.
    4. Food Security Vulnerability: Continued import dependence sustains long-term strategic risk.

    Way Forward

    1. Stronger Procurement: Expand procurement centres in pulse-growing areas to ensure MSP reaches farmers and reduce distress sales.
    2. MSP Credibility: Ensure timely and predictable procurement to build farmer confidence and encourage investment.
    3. Stable Import Policy: Align imports with domestic production cycles to prevent sudden price crashes.
    4. Higher Productivity: Promote improved seeds, irrigation support, and climate-resilient varieties to raise yields.
    5. Crop Diversification: Reduce policy bias toward rice and wheat and incentivise pulses through procurement and subsidies.

    Conclusion

    Pulses policy reflects the tension between consumer price stability and farmer income security. Import dependence without strong procurement weakens domestic incentives and deepens vulnerability. Long-term food security requires credible MSP implementation, higher productivity, and a trade policy aligned with self-reliance goals.

  • The hidden cost of insurance distribution

    Why in the News?

    India’s life insurance industry paid ₹60,799 crore in commissions in FY2025, yet premium growth stood at only 6.7% while commission payouts increased by 18%. This divergence signals a structural imbalance between distribution costs and value creation. The Life Insurance Corporation (LIC) reduced its commission ratio from 5.45% to 5.17% despite premium growth of 2.8%, whereas private insurers increased commission ratios sharply to 7.21%-8.95%, leading to a 38.8% surge in commission payouts to ₹35,491 crore. Insurance penetration declined from 4% of GDP in FY2020 to 3.7% in FY2024. The issue marks a shift from episodic compliance concerns to a structural distribution faultline affecting financial stability and consumer welfare.

    Public-Private Structure of India’s Insurance Sector

    1. Life Insurance Composition: LIC, the sole public-sector life insurer, contributes 57.07% of total new business premiums (FY2024-25). The sector comprises 27 life insurers, including 26 private companies.
    2. General (Non-Life) Market Distribution: Private insurers hold approximately 64-66% market share, while Public Sector General Insurance Companies (PSGICs) account for 31-32%. The industry includes 34 non-life insurers, 6 public and 28 private (including standalone health and specialised insurers).
    3. Health Segment Significance: Health insurance constitutes 41.42% of gross direct premiums in FY2024-25, emerging as the largest non-life segment. Public sector general insurers’ premiums increased from ₹80,000 crore (2019) to approximately ₹1.06 lakh crore (early 2025).

    What Is the Structural Difference Between Public and Private Insurers?

    1. Channel Composition: LIC derives 95% of business from agency channels, enabling tighter commission control.
      1. Agency channels are individual agents appointed by an insurance company to sell its policies directly to customers.
    2. Commission Ratio Reduction: LIC reduced commission ratio from 5.45% to 5.17% despite 2.8% premium growth.
    3. Alternate Channel Dependence: Private insurers rely heavily on bancassurance, brokers, and marketing firms.
      1. Bancassurance is a distribution model where banks sell insurance products to their existing customers.
    4. Sharp Commission Escalation: Private commission ratios rose from 7.21% to 8.95% (174 basis points increase).
    5. Commission Outgo Surge: Private insurer commission payouts increased 38.8% to ₹35,491 crore from ₹25,564 crore.

    Why Does Distribution Cost Escalation Reflect Structural Market Imbalance?

    1. Bargaining Concentration: Twenty-six life insurers compete for access to banks operating over 4,00,000 branches, strengthening distributor leverage.
    2. High Switching Power: Banks and brokers control infrastructure and customer base, increasing negotiation power over insurers.
    3. Channel Dependence: Greater reliance on alternate channels directly increases commission payouts.
    4. Incentive Distortion: Competitive pressures push insurers to offer higher commissions to secure partnerships.
    5. Persistent Pattern: Rising commission ratios despite regulatory changes indicate systemic, not temporary, escalation.

    How Effective Have Regulatory Reforms Been?

    1. Product-Wise Caps: IRDAI introduced product-level commission ceilings to contain rising distribution payouts.
    2. Expense of Management (EOM) Consolidation: The regulatory framework later shifted to a unified Expense of Management structure, embedding commissions within overall expense limits.
    3. Competitive Structuring: Marketing tie-ups, infrastructure arrangements, and distribution negotiations limited the restraining effect of reforms.
    4. Structural Persistence: Commission escalation continued despite regulatory redesign, indicating unchanged bargaining asymmetry.

    What Changed in Expense of Management (EOM) Norms?

    1. Unified EOM Framework: 2023-24 reform merged management, acquisition, and commission expenses.
    2. Embedded Leverage: Commission expenses remained embedded within overall expense limits.
    3. Institutional Assertiveness: Institutions with bargaining power demanded higher payouts.
    4. Agent Retention Share: Agents retain approximately 35-40% of headline commissions after overrides and deductions.
    5. Concentration of Gains: Nearly ₹26,000 crore in FY2025 accrued to corporate intermediaries and large marketing firms.

    What Are the Consumer and Macroeconomic Implications?

    1. Limited Consumer Benefit: High distribution costs do not proportionately enhance policyholder value.
    2. Low Visibility Incentives: Informal rebates push transactions outside regulatory transparency.
    3. Penetration Decline: Insurance penetration declined from 4% (FY2020) to 3.7% (FY2024).
    4. Middle-Income Impact: High costs restrict sustainable inclusion for middle-income households.
    5. Financial Stability Concern: RBI flagged distribution cost sustainability concerns in the Financial Stability Report (December 2025).

    What Policy Correction Is Proposed?

    1. Outcome-Based Regulation: Focus on retention, service quality, and claim settlement ratios.
    2. Joint Oversight: IRDAI and RBI coordination on bancassurance governance.
    3. Commission Rebalancing: Shift from upfront commissions toward renewal-based income streams.
    4. Incentive Redesign: Align commissions with persistence and servicing metrics.
    5. Rational Cost Containment: Ensure sustainable penetration expansion.

    Conclusion

    Rising distribution costs signal a structural imbalance in India’s insurance ecosystem rather than a temporary market distortion. Regulatory recalibration under the amended IRDAI framework must prioritise cost efficiency, persistence-based incentives, and balanced public-private participation. Sustainable insurance penetration depends on correcting bargaining asymmetries while safeguarding financial stability and consumer interest.

    Value Addition

    Insurance Density 

    Key Figures & Trends: 

    1. Recent Density: Around $97 per person for 2024-25.
    2. Life Density: Increased to $72 in 2024-25.
    3. Non-Life Density: Stable at $25 in 2024-25.
    4. Growth: Gradual, steady increase observed since 2016-17.
    5. Comparison with Global Averages (Approximate):  India’s density ($97) is a fraction of the global average (around $874 in 2021-22).

    Insurance penetration 

    1. It in India stood at approximately 3.7% in FY25, remaining relatively stagnant and well below the global average of 7.3%. 
    2. Life insurance penetration dipped to 2.7%, while non-life insurance remained flat at 1.0%.

    PYQ Relevance

    [UPSC 2013] The product diversification of financial institutions and insurance companies, resulting in overlapping of products and services strengthens the case for the merger of the two regulatory agencies, namely SEBI and IRDA. Justify.

    Linkage: Recent amendments to the Insurance Regulatory and Development Authority Act have renewed focus on insurance sector reforms, making regulatory architecture and governance in insurance a high-priority area for GS II and GS III. The article’s discussion on distribution costs and bargaining asymmetry highlights why regulatory design under the revised IRDAI framework remains central to sectoral stability.

  • DAC Grants AoN Worth ₹3.6 Lakh Crore for Rafale, P-8I and Major Defence Modernisation Push

    Why in the News?

    The Defence Acquisition Council chaired by Rajnath Singh has granted Acceptance of Necessity for defence procurement proposals worth about ₹3.6 lakh crore, including 114 Rafale fighter jets and six P-8I aircraft.

    About Defence Acquisition Council

    • Apex decision making body for capital procurement in the Ministry of Defence after the Kargil War of 1999.
    • Headed by the Defence Minister
    • Grants Acceptance of Necessity, which is the first formal step in defence procurement
    • Functions under the framework of the Defence Acquisition Procedure 2020

    Composition 

    • The council is chaired by the Defence Minister (Raksha Mantri). Key members include the Chief of Defence Staff, the three Service Chiefs (Army, Navy, Air Force), and the Defence Secretary, with the Deputy Chief of Defence Staff (Planning & Procurement) as Member Secretary.

    Key Points: Recent procurement proposals: 

    • Acceptance of Necessity (AoN): First stage of capital procurement approval under Defence Acquisition Procedure 2020.
    • Indian Air Force: 114 Rafale Multi Role Fighter Aircraft, combat missiles, and High Altitude Pseudo Satellite for ISR and ELINT roles.
    • Indian Navy: Six P-8I long range maritime reconnaissance aircraft for anti submarine warfare and maritime strike capability.
    • Indian Army: Procurement of Vibhav anti tank mines and overhaul of T-72, BMP II and armoured recovery vehicles.
    [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

  • New CPI Inflation Series (Base Year 2024): Food Weight Reduced to 37%

    Why in the news?

    India’s new Consumer Price Index (CPI) series with base year 2024 will reduce the weight of food and beverages from 45.86% to 36.75%, aligning the inflation basket with updated household consumption patterns from the 2023–24 Household Consumption Expenditure Survey (HCES).

    What is CPI?

    The Consumer Price Index (CPI) measures retail inflation by tracking changes in prices of goods and services consumed by households.

    It is:

    • The headline inflation measure in India
    • Used by the Reserve Bank of India for monetary policy
    • Based on periodic base year revision to reflect current consumption patterns

    Key Changes in the New CPI Series

    • Food Weight Reduced
      • From 45.86% → 36.75%
      • Reflects decline in food expenditure share
      • Based on Engel’s Law: As income rises, share of food expenditure falls
    • HCES Findings:
      • Rural food share: 52.9% (2011–12) → 47.04% (2023–24)
      • Urban food share: 42.62% → 39.68%
    • Housing Weight Increased
      • From 10.07% → 17.66%
      • Now includes: Water, Electricity, Gas and Other fuels
      • Methodological change: Employer provided accommodation excluded
      • This may exert upward pressure on inflation.
    • Basket Expansion
      • Items increased from 299 → 358
      • Reclassification of categories
      • Linking factor to be released for back series comparison

    Why Was High Food Weight a Concern?

    • Food inflation is often supply driven.
    • Monetary policy cannot control vegetable or cereal supply in short run.
    • High food weight caused:
      • Excess volatility in headline inflation
      • Constraints on repo rate decisions

    Example:

    • October 2025 CPI: 0.25%
    • Food inflation: (-)5.02%
    • Food price fall dragged headline inflation sharply lower

    Implications for RBI

    • The RBI follows Flexible Inflation Targeting (FIT):
      • Target: 4%
      • Tolerance band: 2–6%
      • Mandated under RBI Act amendment (2016)
    • Lower food weight may:
      • Reduce volatility
      • Give clearer signal of core inflation
      • Improve monetary policy transmission
      • However, higher housing weight may increase measured inflation.
    [2020] Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that of Wholesale Price Index (WPI). 

    2. The WPI does not capture changes in the prices of services, which CPI does. 

    3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates. 

    Which of the statements given above is/are correct? 

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