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  • Saving faces: Use of facial recognition equipment at protest site is worrisome

    Why in the News

    The Delhi Police has told the Supreme Court that it deployed a facial recognition system at the site of the Cockroach Janta Party protests, along with a mobile surveillance van, a command and control vehicle, smart spectacles and drones. The disclosure came in the same proceeding. In that proceeding the force has continued to deny using excessive force or manhandling demonstrators, contrary to the protestors’ own testimonies. India is therefore normalising the technical ability to subject political gatherings to searchable biometric surveillance. Legislation and judicial oversight have not yet settled when the state may lawfully do so. The contest is between a policing capability that is already operational and a legal framework that names no threshold, no authorising authority and no retention rule for its use.

    What is a facial recognition system?

    1. It converts a face into a searchable record: The system extracts measurable geometric features from a face image and stores them as a numeric template that can be matched against other templates.
    2. Two distinct operations, two different risk profiles: Verification matches one face against one claimed identity. Identification matches one face against an entire database, and only the second turns a crowd into a search.
    3. Real time capture removes the choice to participate anonymously: Cameras enabled with Artificial Intelligence (AI) scan faces as people move and run matches against a database without any interaction with the person scanned.

    What surveillance equipment did the police say it had deployed?

    1. A facial recognition system with AI enabled cameras: These scanned faces in real time against a database. The demonstration was under way at the time.
    2. A mobile surveillance van: A vehicle mounted capture platform able to move with the crowd rather than covering a fixed field.
    3. A command and control vehicle: The on site node where feeds from the various capture devices were aggregated and acted on.
    4. Smart spectacles: Wearable devices used to identify individuals on the move, which extends identification beyond fixed and vehicle mounted cameras.
    5. Drones and videographers: Aerial and handheld recording covering the site from angles the ground cameras did not reach.
    6. Private contractors hold two of these systems: The van and the spectacles have been tied to private contractors on terms that have never been disclosed, so a commercial entity sits inside the capture chain on an unknown mandate.

    What did the police not disclose?

    1. Whether every face in range was processed: The force has not addressed whether actual biometric processing occurred for every individual within the range of the cameras, which is the difference between targeted identification and mass capture.
    2. Where discarded images went: Images from checks that produced no match were open to copying in the interim, and the force has not said whether any copy survives.

    Which laws currently govern facial recognition, and what do they leave open?

    1. No statute governs the technology: There is no law in force that regulates the use of facial recognition systems by the state, so deployment rests on executive decision alone.
    2. The data protection law is not yet operative on this point: The Digital Personal Data Protection Act, 2023, whose data processing obligations are not yet in force, still makes broad exemptions for state agencies.
    3. The existing police database is purpose limited: The Automated Facial Recognition System of the National Crime Records Bureau is meant for identifying criminals and unidentified bodies, not for scanning an assembly.
    4. The 2022 statute widened records, not subjects: The Criminal Procedure (Identification) Act, 2022 expanded the set of records the police may collect, but only from specified persons rather than from the public at large.
    5. The gap is the crowd: Every one of these instruments operates against identified groups of people, and none of them authorises indiscriminate capture of everyone present at a location.

    Can mass biometric capture at a protest survive the proportionality test?

    1. The state carries the burden: Interference with the right to privacy must clear a well established proportionality test, and the burden of establishing each limb sits on the state.
    2. The first limb already fails on the facts: The existence of a legitimate objective is hard to establish for facial recognition used en masse, because the technology is indiscriminate at the point of capture and cannot be aimed at a suspect.
    3. A less restrictive alternative exists: Conventional policing achieves the same objective of maintaining order and identifying offenders without capturing the biometrics of every person present.
    4. Constitutional validity is not the only test: Even leaving aside the constitutionality of the police action, a capability deployed without a governing standard sets the precedent for the next deployment.

    How does biometric surveillance affect the right to protest?

    1. The deterrent operates before any legal restriction: The chilling effect on potential participants curtails the right to protest without any order prohibiting the protest.
    2. Anonymity is part of the freedom: Assembly has historically carried the assurance that presence in a crowd is not the same as being recorded as an individual participant.
    3. The cost falls on people with the most to lose: Government employees, students facing institutional discipline and people in precarious work self select out once presence becomes a permanent identified record.
    4. The chill is unfalsifiable: Nobody counts the people who stayed home, so the harm never appears in the record a court would examine.

    What remains unanswered before this use can be justified?

    1. The access controls: It is unknown which officers, agencies or contractor personnel could query the captured images and against which databases.
    2. The authorising legal provisions: The provisions relied on to authorise the major decisions, including the decision to scan an entire assembly, have not been identified.
    3. The false positive rate: The expected error rate of the system has not been stated, and a false match at a protest site produces detention of an innocent person on machine evidence.

    Challenges to the regulation of facial recognition technology in India

    1. Deployment has run far ahead of legislation: State and city police forces have procured systems under general policing powers rather than under any enabling statute. Eg. Several State police departments and airports adopted facial recognition without a dedicated legal framework in place. Fix. Enact a facial recognition statute prescribing permitted purposes, a judicial or independent authorisation requirement, and a fixed retention period.
    2. The data protection statute exempts the principal user: Broad exemptions for state agencies mean the very actor conducting mass capture falls outside the consent and purpose limitation architecture. Eg. The Justice B N Srikrishna Committee had recommended narrow and specified exemptions rather than open ended ones on grounds of sovereignty and public order. Fix. Replace the blanket agency exemption with a case by case exemption that must be notified with reasons and laid before Parliament.
    3. Accuracy is unequal across populations: Error rates for facial recognition are consistently higher for darker skinned faces, women and younger subjects, so the burden of false matches is not evenly distributed. Eg. Independent testing of commercial systems has repeatedly found the highest error rates for darker skinned women. Fix. Mandate published accuracy testing disaggregated by skin tone, sex and age before any system is procured for policing use.
    4. Private contractors sit inside the state’s capture chain: Outsourcing capture hardware and processing places biometric data with entities that are not accountable through public law remedies. Eg. Police facial recognition deployments in several States run on vendor supplied platforms whose procurement contracts are not in the public domain. Fix. Require every surveillance procurement contract to be published with its data handling clauses, and make the contractor a joint respondent in any privacy proceeding.
    5. There is no oversight body with jurisdiction: No standing authority audits police biometric systems, so no institution can verify retention, deletion or match logs after the event. Eg. Agencies conducting interception under existing law are reviewed only by an internal executive review committee. Fix. Establish a statutory surveillance oversight commission with power to inspect match logs and order deletion.
    6. Function creep is the default trajectory: A database built for one purpose is progressively opened to others once the infrastructure exists. Eg. Facial recognition adopted for airport boarding convenience has been proposed for wider identity verification uses. Fix. Write a statutory bar on cross purpose querying, with each authorised purpose requiring a separate legislative amendment.

    Conclusion

    The disclosure establishes that the capability to convert a political gathering into a searchable biometric record is already deployed, contracted out in part, and operating without a statute that says when it may be used. The proportionality test, on the facts available, is not close: the technology captures indiscriminately, a less restrictive alternative exists, and the state has not identified the provision that authorised the decision. Until Parliament enacts a facial recognition law with a stated purpose, an authorising authority, a retention limit and published accuracy standards, each deployment simply widens the precedent for the next one.

    “[2024, GS3, 10 marks] Describe the context and salient features of the Digital Personal Data Protection Act, 2023″

  • SIR’s exclusion of citizens is made possible by complicity of institutions

    Why in the News

    Tribunals in West Bengal are struggling to handle the caseload thrown up by the ongoing Special Intensive Revision (SIR) of electoral rolls, and every State running the exercise is reporting rising numbers of electors marked “absent”, “shifted”, “dead” and “duplicate”. The Supreme Court settled the legal question in Association for Democratic Reforms and Others v. Election Commission of India and Others (May 2026). That ruling upheld the Election Commission of India’s power to conduct the revision. It also recorded the Court’s satisfaction with the procedure the Commission adopted, holding the deletions to be within the parameters of that procedure. The contest is now over whether a constitutional court that declines to scrutinise an electoral authority is protecting institutional autonomy or removing the only check available to an elector who has been struck off.

    What is the Special Intensive Revision of electoral rolls?

    1. A house to house verification, not a paper update: SIR is a time bound enumeration of the whole roll. Booth Level Officers physically visit every household to verify each entry on it.
    2. It differs from the routine revision: The annual Summary Revision works off claims and objections filed by electors. SIR re-verifies every single existing entry.
    3. Its stated objects: It removes deceased, duplicate and permanently shifted entries, registers newly eligible electors, and extends high security Electors Photo Identity Cards to full coverage.
    4. It is periodic, not novel: Intensive revisions were first run between 1952 and 1956, and India has conducted roughly fourteen such exercises, including those of 1983, 1995, 2002 and 2004.

    What did the Court actually hold in the SIR case?

    1. The power was affirmed: The judgment upholds the Commission’s authority to conduct an intensive revision of the rolls.
    2. The procedure was endorsed: The Court recorded its satisfaction with the procedure the Commission adopted, rather than testing that procedure against outcomes.
    3. The deletions were validated collectively: Deletions were held to fall within the parameters of the approved procedure, which forecloses an individual challenge on the ground that the procedure itself is defective.

    Which of the two available approaches did the Court choose?

    1. The first option was structured suspicion: The Court could have adopted scepticism towards the Commission’s claims of authority, on the view that judicial vigilance is needed to hold the balance between asserted state power and citizens’ rights.
    2. The second option was institutional trust: It could instead repose trust in another constitutional authority, on the assumption that constitutional institutions are themselves sufficiently committed to protecting citizens’ rights, making intensive scrutiny unnecessary.
    3. It took the second: The judgment rests on the premise that a constitutional body does not need to be watched, which is precisely the premise a rights challenge exists to test.
    4. Rights are lost by practice, not only by intent: An authority can undermine citizens’ rights without any explicit intention to do so, simply through unreasonable practices applied at scale.
    5. Trust tests motive, scrutiny tests effect: A court satisfied that a body means well never reaches the question of what the body’s method actually produces on the ground.
    6. The error is not isolated: It sits inside a broader contemporary judicial tendency that increasingly privileges “authority” over the citizen asserting a right against it.

    How does the ruling fail the principle of representation?

    1. Representation was the missing anchor: The judgment is not anchored in the foundational principle underlying the controversy, which is representation, so the logic of representation did not inform how the Commission’s authority was read.
    2. Inclusion is now a defining requirement of citizenship: As democracy has evolved and the idea of citizenship has expanded, full inclusion has become one of its central requirements.
    3. The requirement runs in two directions: Citizenship must not be denied or diminished on grounds such as sex, religion, race, caste or class, and political representation is not meaningful if citizens are effectively disabled from participating in elections as voters.
    4. The arithmetic follows: Leaving eligible electors out of an election inevitably produces flawed representation, whatever the quality of the procedure that excluded them.

    Can a power to purify the rolls be exercised without becoming a power to exclude?

    1. The power was accepted without its limit: Having accepted that the Commission may prepare rolls and examine whether a person is genuinely entitled to be on them, the Court did not ensure that this power of scrutiny stops short of excluding or harassing eligible voters.
    2. The default duty runs the other way: In a democratic election the Commission’s first responsibility is to include, not to exclude, and a verification drive inverts that default by design.
    3. The Commission was not seized of inclusion: Nothing in the record shows the Commission asking whether its verification drive keeps eligible electors on the roll.
    4. The instrument turns on its purpose: Without a stated inclusion duty, the revision becomes a hatchet rather than a purifying procedure.

    Who bears the cost of a documentation based test of eligibility?

    1. Exclusion is not random in practice: The state’s exclusion operates randomly as a general rule, but a documentation regime used as evidence of citizenship does not fall evenly.
    2. The exposed groups are identifiable in advance: Vast numbers of women, the poor and the marginalised are particularly vulnerable to being trapped by such regimes, both as a matter of theory and as an empirical reality.
    3. The democratic cost is the endpoint: A disproportionate exclusion of these groups undermines democratic representation itself, not merely the individual entitlements of those removed.

    What happens to a citizen after the name is deleted?

    1. The verdict routes deletions to the executive: It directs the Commission to report to the Home Ministry the names of persons whose entries have been deleted, for further adjudication of their claims.
    2. The exercise acquires a second use: That direction allows the Commission and the government to weaponise the revision, pushing individuals into a zone of doubt, suspicion and harassment.
    3. A cautious judgment produced an expansive institution: A ruling anxious not to enter the Commission’s domain has obliquely enabled the Commission to transcend that domain and become enmeshed with executive authority.
    4. The consequences run past the vote: The exercise may end by creating a class of shifted, absent and duplicate persons pushed to the margins of formal existence, with passports and claims to welfare schemes also cast into doubt.

    Challenges to the Special Intensive Revision

    1. Booth level staff are set impossible targets: Verification of every entry within a compressed window is loaded onto officers who already hold full time teaching or clerical posts. Eg. Booth Level Officers in West Bengal reported acute duty stress during the current cycle, including cases of suicide. Fix. Cap the number of entries assigned per officer per day and pay a separate verification honorarium tied to that cap.
    2. Legacy document requirements exclude the undocumented: Asking for a birth certificate or an ancestral roll entry disqualifies people whose births were never registered. Eg. Civil registration of births was far from universal in the birth cohorts now in their fifties and sixties. Fix. Accept a widened evidence set including electricity bills, ration cards and community certificates, with a declaration by the Booth Level Officer as a residual proof.
    3. Grievance redress does not keep pace with deletions: Claims and objections pile up faster than hearing officers can dispose of them, so the roll freezes with the disputes unresolved. Eg. Only a fraction of the roughly six million claims filed in West Bengal were disposed of before the poll freeze. Fix. Constitute standing appellate tribunals for electoral rolls that sit year round rather than temporary benches raised at revision time.
    4. Field marking is subjective: A single officer decides on one visit whether an elector is “shifted” or “absent”, with no second visit and no corroboration requirement. Eg. Households locked at the time of a daytime visit are routinely marked absent. Fix. Mandate geotagged evidence of at least two visits at different times of day before any absence marking is recorded.
    5. Manual capture introduces avoidable error: Offline field data is later keyed into the database by hand, so transcription mistakes enter the roll after verification has finished. Eg. Name and age mismatches between the field form and the uploaded entry are a recurring source of objections. Fix. Issue tablets with offline forms that sync directly, removing the separate data entry step.
    6. Fear of a citizenship screen suppresses cooperation: Residents who read the exercise as a covert citizenship test refuse to produce documents, which raises the very deletion risk they fear. Eg. Households in border districts have declined to hand over papers during roll verification. Fix. Print on the enumeration form itself that the exercise determines electoral registration only and creates no finding on nationality.

    Conclusion

    The exclusions now surfacing across States are not an administrative accident sitting downstream of a sound legal position. They follow from the judicial choice set out above, and from the direction routing deleted names to the executive for further adjudication. What remains unresolved is whether a court will accept that a power to verify carries a matching duty to include, because until it does, the elector who is struck off has a procedure to follow and no forum that will ask whether the procedure was reasonable.

    “[2024, GS2, 10 marks] Examine the need for electoral reforms as suggested by various committees with particular reference to “one nation-one election” principle.”

  • Routine data or citizenship check? Why Census questionnaire sparked concern

    Why in the News

    The questionnaire for the population enumeration phase of Census 2027 has triggered a political controversy. The principal Opposition party has alleged that detailed questions about respondents and their parents could facilitate surveillance and serve a “deeper nefarious purpose”, and the Left has raised the same objection. The controversy follows a report of 15 August 2026 that several new or modified questions in the Census questionnaire were also part of the National Population Register (NPR) schedule notified in 2020. That schedule became contentious during protests over the Citizenship (Amendment) Act, 2019 and fears of a nationwide National Register of Citizens. Two things are now contested: whether a statistical exercise should collect identifiers that link a person across government databases, and whether a register of residents can stay separate from a register of citizens when the law connects the two.

    What is the National Population Register?

    1. A register of usual residents, not of citizens: The NPR records every person ordinarily resident in a local area, and it makes no finding on anyone’s nationality.
    2. Usual resident, defined: A usual resident is a person who has lived in a local area for at least six months, or who intends to stay there for the next six months.
    3. Foreigners can be on it: A foreign national who meets the six month residence test is a usual resident and is entered in the register.
    4. It is not a new exercise: The NPR was first prepared in 2010 alongside the houselisting phase of the 2011 Census, and it was updated through a door to door exercise in 2015.

    What is the National Register of Citizens?

    1. A register of verified citizens: The National Register of Citizens (NRC) is a list of persons established to be Indian citizens, prepared by verifying claims against documentary proof of descent or residence.
    2. It has been compiled only in one State: The single updated NRC exercise so far was the Supreme Court monitored update in Assam, completed in 2019.

    What exactly has changed in the Census 2027 questionnaire?

    1. Scale of the change: The schedule carries 40 questions, of which 14 are new or modified compared with the 2011 Census.
    2. Eight questions carried over from the 2020 NPR schedule: These are nationality as declared, father’s particulars, mother’s particulars, mobile number, Aadhaar, voter identity card, passport and driving licence.
    3. The parental fields are the most contested: The NPR schedule sought the date and place of birth of a person’s father and mother, down to the district and the State.
    4. A foreign birthplace had to be named: Where a parent was born outside India, the country of birth had to be recorded. These parental questions were at the centre of the political opposition to the NPR.

    Why is the privacy objection different from earlier Census rounds?

    1. The stated purpose has always been aggregate: Census data has traditionally been collected for population statistics and planning, not for identifying a named individual.
    2. The new schedule collects identifiers, not just attributes: It seeks a much wider range of personal information, including details that can identify a person or link that person to other government databases.
    3. The real question is downstream, not upstream: The issue is not how much data the government collects. It is how that data is stored, protected and used once collected.

    How is the Population Register linked in law to the citizens’ register?

    1. A statutory chain exists between the two: The Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, 2003 provide for the preparation of a Population Register and for its verification for the preparation of the citizens’ register.
    2. The Rules create a category of doubt: They also provide for individuals whose citizenship is considered doubtful to be marked for further inquiry.
    3. The link is legal, not political: The connection sits in subordinate legislation, so it survives any assurance given by a government of the day.

    Why did that legal link become politically explosive in 2019-20?

    1. The sequencing was the problem: The NPR was revived soon after the Citizenship (Amendment) Act, 2019 was passed by Parliament.
    2. Assam supplied the precedent: The NRC exercise in Assam had excluded around 19 lakh people, giving a concrete picture of what a documentation based citizenship test produces.
    3. The Union executive named the sequence itself: The Union Home Minister repeatedly spoke of a nationwide NRC and asked people to understand the “chronology”. That chronology placed the Act first and the register after it.
    4. Perception overtook the instrument: A previously uncontroversial statistical exercise came to be read as one associated with the possibility of citizenship being questioned.

    What did the government say in 2020, and why did the assurance not settle the issue?

    1. The contested fields were declared optional: The government stated that the questions on parents’ date and place of birth need not be answered.
    2. The stated purpose was welfare delivery: The NPR was described as primarily a database of residents intended to improve policy formulation and the delivery of welfare schemes.
    3. The administrative case was demographic: Knowing the demographic composition of an area was said to help governments plan services and identify beneficiaries.
    4. The assurance contradicted the record: In December 2019 the Union Home Minister said NPR data would never be used for an NRC and that the two exercises were governed by different laws. Earlier government statements in Parliament had taken the opposite position, as the statutory link set out above already did.

    Does the government have a legitimate case for collecting this data?

    1. Detailed demographic data has real administrative value: A comprehensive database of residents helps the government formulate policy, plan public services, identify beneficiaries and improve national security.
    2. Linkage cuts duplication: Information drawn from different government databases reduces duplication and discrepancies in records, and cuts paperwork for citizens.
    3. The identifiers were the design, not an add on: The NPR was envisaged as a way of bringing basic demographic information together with mobile numbers and identity documents, so that government services run more efficiently.
    4. The objectives are not unreasonable in themselves: Neither the resident register nor the citizens’ register is inherently improper as an exercise in public administration.

    Is the objection to the questions themselves or to the trust deficit around them?

    1. The questions are ordinary in isolation: A field asking for a parent’s place of birth is a standard demographic variable in statistical systems worldwide.
    2. Timing converted them into a citizenship test: The 2019-20 difficulty was that the register was revived at a moment of dented public trust, and the assurances offered failed to restore it.
    3. Trust, once lost, redefines the instrument: Questions that would otherwise read as routine are now read through the prism of citizenship and surveillance.

    Challenges to the Census 2027 data collection exercise

    1. No purpose limitation on identifier fields: Nothing in the notified schedule bars the linkage of Census records to other identity databases at a later date. Eg. The Aadhaar number was originally described as voluntary proof of residence and later became a precondition for a range of subsidies. Fix. Notify a purpose limitation clause under the Census Act, 1948 barring individual level linkage of Census records with any other database.
    2. Digital collection widens the breach surface: A mobile application based enumeration of over 1.4 billion people stores personally identifiable data in a way a paper schedule never did. Eg. The Bharat Sanchar Nigam Limited breach of May 2024 leaked 278 gigabytes of subscriber data from a public sector network. Fix. Designate the Census data centres as Critical Information Infrastructure and mandate independent security audits before the enumeration window opens.
    3. Self enumeration depends on digital capability: The self enumeration option assumes a smartphone, connectivity and the literacy to complete a 40 question schedule unaided. Eg. Rural self response rates in comparable digital surveys run far below urban rates. Fix. Fund assisted self enumeration desks at common service centres and panchayat offices for the duration of the window.
    4. Fear of citizenship scrutiny corrupts the data: Households that suspect the schedule feeds a citizenship check give incomplete or inaccurate answers, which damages the statistics the exercise exists to produce. Eg. Enumerators in Assam faced sustained non cooperation during the NRC update. Fix. Issue a public statement in the enumeration instructions that no Census response will be used in any individual citizenship or law enforcement proceeding.
    5. Caste enumeration invites organised inflation: Recording caste for the first time since 1931 creates an incentive for groups to coordinate responses in pursuit of quota gains. Eg. The Socio Economic and Caste Census of 2011 recorded over 46 lakh distinct caste and sub caste entries, which made the data unusable for policy. Fix. Publish a pre coded, State specific list of jatis drawn from State Backward Classes Commission records before enumeration begins.
    6. State capacity is stretched across two exercises: The same district administration runs the Census and the electoral roll work in the same period, which raises error rates in both. Eg. Booth level staff across several States have been simultaneously assigned roll revision and enumeration duties. Fix. Ring fence enumeration staff from all other duty assignments for the notified Census period.

    Conclusion

    The dispute is not really about how many questions the schedule carries. It rests on the statutory link set out above, which is why a statistical instrument can be read as the first step of an eligibility test. The government’s administrative case for richer data is sound on its own terms, and the downstream safeguard on that data remains unpublished. Until it is published, every additional field in the schedule will be argued over as a citizenship question rather than a statistical one.

    “[2021] With reference to India, consider the following statements:

    1. There is only one citizenship and one domicile.

    2. A citizen by birth only can become the Head of State.

    3. A foreigner, once granted citizenship, cannot be deprived of it under any circumstances.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) 1 and 3

    (d) 2 and 3

  • Pakistan factor: Why West Asia war hurt Indian airlines more than foreign ones

    Why in the News

    International air passenger traffic to and from India fell 9.1 per cent year on year in April to June 2026, to 1.72 crore, after the West Asia conflict closed large parts of Gulf airspace. The decline was driven entirely by Indian carriers, whose combined international traffic fell 26.6 per cent. Foreign airlines carried 6 per cent more passengers than a year earlier. India has barred its own carriers from Pakistani airspace since late April 2025, and Pakistan’s reciprocal closure applies only to them. The result is that a shared shock produced an asymmetric outcome, transferring market share on India’s own international routes to airlines that could still fly the short way west.

    How does an airspace ban change an airline’s operating economics?

    1. The right involved: A carrier overflies a third country under the International Air Services Transit Agreement of 1944 or under a bilateral permission, and either can be withdrawn at short notice.
    2. The detour cost: A closure forces a longer track, which adds block hours, fuel burn and crew duty time to every affected departure.
    3. The payload penalty: A longer sector makes the aircraft trade revenue payload for fuel, or forces a technical stop, and either outcome erodes the margin on the route.

    What does the passenger data show?

    1. Total volume: Total international air passenger volume to and from India fell 9.1 per cent year on year in April to June, from 1,89,12,598 to 1,72,00,140, in an analysis of Directorate General of Civil Aviation (DGCA) data.
    2. Indian carriers: Their combined international passenger numbers fell 26.6 per cent, from 87,34,038 to 64,14,896.
    3. Foreign carriers: Their cumulative passenger base rose 6 per cent, from 1,01,78,560 to 1,07,85,244.
    4. Market share shift: Foreign operators expanded their share of India’s international traffic to 62.7 per cent from 53.8 per cent, and domestic carriers dropped to 37.3 per cent from 46.2 per cent.

    Why did the loss fall on Indian carriers alone?

    1. Their biggest market closed: Flights to the United Arab Emirates and other West Asian markets, the largest destinations for Indian airlines, were heavily curtailed.
    2. The damage spread beyond West Asia: Indian carriers were forced to cut flights to destinations well outside the region, under war related financial pressure and the standing ban on flying over Pakistan since late April 2025.
    3. The route economics broke first: Air India and IndiGo curtailed their west bound network because the unavailability of Pakistani airspace made some services financially and operationally unviable to run.
    4. The pressure predated the war: Both leading carriers were already taking longer routes and adding refuelling halts on west bound services from their Delhi hub before the conflict began in late February, and some routes had been suspended outright.

    How did foreign carriers turn the same shock into share?

    1. They kept the short way west: Foreign carriers faced the same surging jet fuel prices, and many held one decisive advantage in the continued availability of Pakistani airspace.
    2. Spare capacity was redeployed: Once the war began, carriers from Europe and other regions west of India increased operations to and from the country using aircraft freed by their own curtailed West Asia flying.

    Which Indian airlines lost most?

    1. IndiGo: Remained the largest Indian carrier on international routes with a 15.4 per cent decline to 33.4 lakh international flyers, and an international market share slipping to 19.4 per cent from 20.9 per cent.
    2. Air India: Fell 27.2 per cent to 19.3 lakh passengers, with its international market share contracting to 11.2 per cent from 14 per cent.
    3. Air India Express: Its footfall halved to 8.34 lakh, since its network is highly concentrated in West Asia, and its share fell to 4.8 per cent from 8.9 per cent.
    4. The Air India group: Combined international traffic fell 36.3 per cent year on year to 27.61 lakh in the quarter.
    5. SpiceJet: Recorded the sharpest percentage fall at 56 per cent, to 1.38 lakh international flyers, with share contracting to 0.8 per cent from 1.7 per cent.
    6. Akasa Air: The only Indian airline to register higher international passenger numbers, growing on a low base through an expanding fleet.

    Challenges to Indian carriers on international routes

    1. Gulf hubs capture the through fare: Foreign carriers connect Indian cities to the West over their own hubs and book the full journey revenue. Eg. Emirates, Qatar Airways and Etihad carry a large share of India to Europe and North America traffic over Dubai, Doha and Abu Dhabi. Fix. Build a domestic transfer hub with matched arrival and departure banks, and price transfer charges to reward connecting traffic.
    2. Wide body fleet shortage: Non stop long haul flying needs aircraft Indian carriers do not have in sufficient number. Eg. Air India’s wide body cabin refit programme has run behind schedule because of queues at overseas retrofit facilities. Fix. Expand domestic maintenance, repair and overhaul capacity so heavy checks and retrofits are not queued abroad.
    3. Fuel taxation: Aviation turbine fuel sits outside the goods and services tax and carries high state value added tax, so the largest cost line is not creditable. Eg. Fuel accounts for about 40 per cent of an Indian airline’s operating cost. Fix. Bring aviation turbine fuel under the goods and services tax with input tax credit for carriers.
    4. Ageing bilateral entitlements: Traffic rights negotiated years ago cap Indian carriers in some markets. The same rights leave foreign carriers entitlements they can deploy at short notice. Eg. India’s bilateral seat entitlement with the United Arab Emirates has been unchanged for over a decade. Fix. Renegotiate bilaterals with entitlement tied to actual utilisation and reciprocal hub access.
    5. Financing and leasing sit offshore: Most aircraft are leased through foreign lessors, so rentals and repossession law lie outside Indian jurisdiction. Eg. The aircraft leasing framework at Gujarat International Finance Tec-City (GIFT City) remains small relative to the fleet on lease. Fix. Deepen the domestic leasing regime and fully operationalise the Protection of Interests in Aircraft Objects Act, 2025 giving effect to the Cape Town Convention.

    Conclusion

    The quarter’s traffic decline was distributed by airspace access rather than by exposure to the war, so Indian carriers absorbed the whole of a shock both sides faced. The share transferred to foreign operators is not automatically reversible, since network presence and slot use tend to persist once established. Recovery depends on the reopening of Pakistani airspace to Indian carriers and on the restoration of West Asian capacity, neither of which is within the sector’s control.

    “[2024, GS3, 15 marks] What is the need for expanding the regional air connectivity in India? In this context, discuss the government’s UDAN Scheme and its achievements.”

  • Indigenous N-reactors top pick for companies in nuclear power expansion

    Why in the News

    The indigenous Pressurised Heavy Water Reactor (PHWR) is emerging as the preferred technology for new entrants into India’s civil nuclear power sector, as the tightly regulated strategic sector opens to private players. Representatives of the National Thermal Power Corporation (NTPC), Adani Atomic Energy and Jindal Steel said at a panel discussion at the BloombergNEF Summit in New Delhi that the existing 700 megawatt electric (MWe) PHWR is the right starting point, given established design standards, a mature domestic supply chain and an existing ecosystem of vendors. The discussion followed the release of the draft rules under the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act, 2025 (SHANTI Act, 2025), about a week earlier. The choice is revealing: entrants are picking the reactor with the least regulatory and supply risk rather than the one that scales fastest, and that reactor alone cannot deliver the 100 gigawatt electric target set for 2047.

    What is a Pressurised Heavy Water Reactor?

    1. Design: A pressurised heavy water reactor uses heavy water as both moderator and coolant, which lets it run on natural uranium without any enrichment step.
    2. Why it suited India: Natural uranium fuelling matched a country with limited enrichment capacity that long stood outside international fuel supply arrangements.
    3. Place in the programme: It is Stage 1 of the three stage nuclear programme designed by Homi Bhabha, producing plutonium 239 as a by product for the fast breeder stage that follows.
    4. The Indian standard unit: The 700 MWe variant is the largest indigenous design in the series.

    What is a Small Modular Reactor?

    1. Definition: A small modular reactor (SMR) is an advanced reactor of up to 300 MWe, built as factory made modules and transported to site for assembly.
    2. Use case: The smaller unit size suits captive industrial power and the replacement of retiring coal units on existing sites.

    Why are private entrants choosing the 700 MWe PHWR?

    1. Design certainty: The 700 MWe design is standard, approved, operational and already carries regulatory clearance, in the assessment of the business head of Adani Atomic Energy.
    2. Supply chain depth: The supply chain for that design in India is almost fully indigenised, at 90 per cent to 95 per cent.
    3. What the sector is short of: The two major constraints named for the sector are the availability of a robust supply chain and the lack of standardised reactor designs, and the 700 MWe unit is the one design that resolves both.
    4. A second entrant agrees: Jindal Steel plans to go with 700 MWe PHWRs in its initial phase for the same reason, moving to other technologies in later phases as clarity emerges on supply chains, regulatory approvals and standardisation.

    What capacity are the new entrants targeting?

    1. The national target: India aims to scale domestic civil nuclear capacity to 100 gigawatt electric (GWe) by 2047.
    2. Corporate targets: NTPC’s capacity target is 30 GWe, the Adani group’s is 10 GWe, and Jindal Steel’s is 18 GWe in the coming years.

    What has opened the sector to private entrants?

    1. Statutory replacement: The SHANTI Act, 2025 supersedes the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010.
    2. End of the state monopoly: It permits private and foreign firms to build, own and operate reactors, which no earlier law allowed.
    3. Regulator strengthened: It gives the Atomic Energy Regulatory Board independent statutory status for safety oversight.
    4. Liability rewritten: It removes statutory supplier liability and sets tiered damage caps, with a Nuclear Damage Claims Commission to adjudicate compensation after an incident.
    5. What the Centre keeps: Enrichment, reprocessing and uranium and thorium exploration remain with the Union government.
    6. What the draft rules cover: The rules released in August 2026 set out the framework for private participation, captive generation, licensing, safety oversight and nuclear liability.

    Why will the PHWR alone not deliver 100 GWe?

    1. The stated limit: PHWRs alone will not be sufficient to reach 100 GWe by 2047, in the assessment of the Adani Atomic Energy business head.
    2. The intended sequence: Deploy 700 MWe PHWRs in fleet mode first, follow with pressurised water reactors (PWRs), and bring in small modular reactors at a later point.
    3. Where foreign designs fit: Foreign reactor technologies and SMRs are expected to play a role only at a later stage, once the sector matures.
    4. The phasing is deliberate: Later phases are contingent on clarity around supply chains, regulatory approvals and design standardisation, not on a fixed date.

    What will decide whether imported designs work in India?

    1. Localisation is the condition: Global reactor technologies, including PWRs and SMRs, would need to maximise localisation in India to stay commercially viable.
    2. Cost sets the ceiling: Cost matters a great deal in the Indian market, and any technology has to reach a price the buyer of the electricity will commit to.
    3. The buyer decides: For a project to make commercial sense the consumer has to accept the tariff, which puts affordability ahead of technology preference in the selection.

    Challenges to India’s 100 GWe nuclear target

    1. The heavy component vendor base is shallow: Only a handful of Indian firms can forge and supply large reactor components, so a fleet order queues behind them. Eg. Larsen and Toubro and Bharat Heavy Electricals supply most large forgings and steam generators for the domestic programme. Fix. Qualify a second tier of suppliers through advance purchase commitments tied to the sanctioned fleet order book.
    2. No certified standard design outside the heavy water line: A project without a frozen design spends years in negotiation before construction. Eg. The Jaitapur project with the European Pressurised Reactor has been under negotiation since 2010 without first pour of concrete. Fix. Certify one design per technology class through the regulator before any commercial order is placed.
    3. Tariff acceptance by distribution utilities: Nuclear power has to clear the price a distribution company will sign a purchase agreement at. Eg. Around 42 gigawatts of renewable capacity currently sits without a power purchase agreement on price grounds. Fix. Create a separate payment for firm, dispatchable low carbon power so the grid pays for reliability rather than for energy alone.
    4. Insurance capacity is thin: Liability caps do not create the underwriting capacity a reactor needs. Eg. The India Nuclear Insurance Pool formed in 2015 carries a capacity of ₹1,500 crore. Fix. Expand the pool with reinsurance from global nuclear insurance pools, now that supplier liability has been removed.
    5. Licensed operator manpower: A fleet of reactors needs certified control room staff that only one training system currently produces. Eg. Operator training runs almost entirely through the Department of Atomic Energy’s own training schools. Fix. Accredit private and university training programmes against a regulator certified curriculum and examination.

    Conclusion

    Private entry into nuclear power has reached the point where entrants are naming capacity targets and choosing a reactor, and all three have chosen the indigenous 700 MWe pressurised heavy water reactor over imported designs. The regulatory framework is at the draft rules stage under the SHANTI Act, 2025, released by the Department of Atomic Energy, with comments closing on 4 September 2026. Whether the 100 GWe target is reachable turns on the technologies after the first fleet, and on whether foreign designs localise enough to reach a tariff a distribution utility will sign.

    “[2018, GS3, 15 marks] With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy.”

  • The Silver Bullet: Why everyone loves a Metro

    Why in the News

    Around 200 residents of Greater Noida West tied ropes to the last Metro pillar at the Sector 71 intersection in April and pulled, in a protest organised by the Noida Extension Flat Owners Welfare Association to demand a Metro line for an area it calls underserved by public transport. Days earlier the Central government had rejected the proposal for the Noida to Greater Noida West Metro corridor. Meerut became the latest city to get a Metro in February 2026, with an interchange to the Regional Rapid Transit System (RRTS), India’s first semi high speed intercity rail service. The tension the two scenes expose is that demand for a Metro is now generated by politics and property. The ridership, fares and feeder transport that would justify one are generated by city planning that has not happened.

    What is the Metro Rail Policy, 2017?

    1. Purpose: It sets the conditions the Union government applies before it will approve or fund a metro rail project proposed by a state.
    2. Alternatives test: A state must evaluate cheaper options, including buses, bus rapid transit and trams, before committing to a metro, because metro rail is the costliest urban transport mode to build.
    3. Viability emphasis: It places greater weight on the financial viability of a project than earlier practice did.
    4. Appraisal method: It requires appraisal through economic and social cost benefit analysis, treating urban rail as a public project that delivers a public good.

    What is a Detailed Project Report?

    1. Definition: A Detailed Project Report (DPR) is the blueprint that lays out a metro project’s design, its costs, its ridership projection and its financial viability.
    2. Function: It is the document the Union government appraises the proposal against, and the document later audits measure actual performance against.

    How large has India’s Metro network become?

    1. Fourfold growth: The network has gone from around 250 km a decade ago to more than 1,100 km across 26 megacities and Tier 2 cities, with another 900 km under construction.
    2. Rate of sanction: The government is sanctioning 6 km of Metro lines every month.
    3. A young network: More than three fourths of the current network was conceived, constructed and operationalised less than 10 years ago.
    4. Aggregate ridership: Daily ridership across the country has crossed the 1 crore mark and is expected to exceed 1.25 crore in a year or two.
    5. The capacity argument: Some Delhi Metro corridors handle more than 50,000 passengers in the peak hour in the peak direction, and the Ministry of Housing and Urban Affairs calculated in January 2024 that serving that demand by bus would need 715 buses an hour in one direction, roughly one every five seconds.

    Which cities run a Metro, and how do the systems compare?

    1. Kolkata, 1984: The country’s first Metro system, and the only one run by the Indian Railways.
    2. Delhi, 2002: The Delhi Metro Rail Corporation (DMRC) now runs 416 km with an average daily ridership of about 64 lakh, the largest network in the country.
    3. Bengaluru, 2011: Namma Metro runs 96 km, the second largest operating system outside the National Capital Region.
    4. Meerut, 2026: The newest system runs 23 km with an average daily ridership of about 1 lakh, a figure that includes RRTS ridership at the shared station.
    5. The rest of the map: Gurgaon opened in 2013, Chennai in 2015, Hyderabad, Kochi and Lucknow in 2017, Ahmedabad and Nagpur in 2019, Noida in 2019, Kanpur in 2021, Pune in 2022, Navi Mumbai in 2023, Agra in 2024, and Bhopal, Indore and Patna in 2025.

    Why does every city want a Metro?

    1. Density of unserved demand: The Greater Noida West association puts around 10 lakh residents and at least 80 societies in the area it says has no rapid transit.
    2. A visible proof of development: Local administrations and politicians want a Metro network in their constituency to demonstrate development, in the assessment of a rail and Metro consultant and former country head of Bombardier Transportation India.
    3. It has entered the manifesto: In five of the last six state elections, in West Bengal, Tamil Nadu, Kerala, Assam, Bihar and Delhi, at least one major party promised Metro projects, their expansion, or fare concessions.
    4. Party specific claims: The Dravida Munnetra Kazhagam (DMK) claimed credit for bringing Metro Rail service to Chennai. The Bharatiya Janata Party (BJP) in Bihar promised Metro trains in Muzaffarpur, Gaya, Bhagalpur and Darbhanga.

    Why does ridership fall so far short of projection?

    1. The systemic gap: Most Metro systems are meeting just 25 per cent to 35 per cent of their projected ridership, in a 2023 analysis by professors at the Indian Institute of Technology Delhi. Delhi at 47 per cent and Kolkata at 38 per cent fared relatively better.
    2. Bengaluru: Namma Metro was projected to carry 18.54 lakh passengers a day by 2020-21, as recorded by the Standing Committee on Housing and Urban Affairs in a 2022 report, and carries around 10 lakh in 2026.
    3. Kochi: The 28 km system should have reached 5.39 lakh daily riders by now under its DPR and averages around a lakh, with the projection since revised to 1.5 lakh a day, a target the operator hopes to meet in the next 10 months.
    4. Jaipur: Average daily ridership was 51,000 in the inaugural month of June 2015 and stood at 53,000 in June 2026, and the Union Cabinet approved a second phase in April for ₹13,037 crore.
    5. Nagpur: A 2022 Comptroller and Auditor General report found the New Airport station averaged 47 passengers a day over 18 months from the start of commercial operation in March 2019, against 5,474 a day envisaged in the DPR.

    Why does the Metro not fit the way Indian cities actually travel?

    1. Trip length mismatch: Research at the Transportation Research and Injury Prevention Centre finds the Metro efficient only for commutes beyond 10 km. Most city commutes are shorter than 5 km, and even in Delhi only 15 per cent of trips exceed 10 km and 7 per cent exceed 20 km.
    2. What the short trip costs: For a short journey a passenger has to add the time taken to reach the station, the stops en route and the last mile at the other end, which other modes avoid.
    3. Alignments miss the destinations: The Ahmedabad Metro does not serve SG Highway, the commercial hub holding the city’s offices and malls, nor the university area.
    4. Last mile decides the mode: A commuter with neither home nor office near a station finds public transport more expensive than a personal scooter or a hired cab.

    What in the city’s own design keeps people out of the Metro?

    1. Driving is not priced: Low or non existent parking charges make private vehicle use cheaper than it should be, and poor footpaths make the walk to a station unattractive.
    2. Feeder networks are not built: Last mile connections and integration across modes rarely materialise once a line opens, in the assessment of a Metro consultant, so a passenger reaches the station on his own or not at all.
    3. The city is not shaped to feed the line: The Mumbai Metro struggles to perform because the city was not planned in a way that channels trips into it, in the assessment of a transportation researcher at the Indian Institute of Management Ahmedabad.

    Why are fares high, and who does that exclude?

    1. Fares follow the viability test: Metros are obliged to keep fares high mainly to make both ends meet, a consequence the first Managing Director of DMRC attributes to the emphasis the 2017 policy places on financial viability.
    2. Who is priced out: High fares keep out a section of the population. That section turns to less dependable but cheaper public transport.
    3. The pricing only works on some trips: A Lucknow resident finds the 23 km city Metro worth ₹70 for an airport trip against ₹400 by auto, and uses an auto or two wheeler for every daily commute.

    What do other countries’ networks show about where India stands?

    1. Absolute scale: India at 1,100 km is set to overtake the 1,400 km subway system of the United States, and remains far behind China’s 10,000 km network.
    2. Financing and operating culture: The Delhi Metro was funded by the Japan International Cooperation Agency through flexible loans. It adopted a Japanese operating ethic centred on punctuality and queue discipline, giving Indian cities a template for dignified urban transit.
    3. When to start planning: The developed country model is to begin planning a Metro when a city’s population crosses 10 lakh and to have the system running by the time it reaches 20 lakh, on which basis the Metros in Patna, Jaipur, Bhopal and Lucknow are justified.
    4. Networks are built over generations: Tokyo, Hong Kong and Paris were not built in a day, so a large infrastructure investment has to begin well ahead of the demand it will eventually serve.
    5. Optimism is not an Indian trait: Large infrastructure projects globally overestimate initial projections and underestimate costs, and the shortfall is routinely overlooked on the ground of greater public good.

    Who decides whether a city needs a Metro?

    1. The decision precedes the study: The process typically begins with a state government deciding it wants a Metro, an idea that crystallises quickly and often before any formal study is done.
    2. The assessor is the beneficiary: State governments create a Metro authority and then ask that same body, which stands to run the project, to assess whether the city should build a Metro at all.
    3. What that produced in Jaipur: A 2017 Comptroller and Auditor General report found the city, with a population of 2.3 million, was not eligible for a metro rail project, and concluded that defective planning and hasty decision making introduced a financially unviable Metro system in Jaipur.
    4. Accountability is thin: Queries to the Metro systems in Delhi, Lucknow, Ahmedabad, Hyderabad, Bengaluru, Nagpur, Jaipur and Chennai went unanswered.

    Is the Metro over built, or is it under fed?

    1. For some riders it is the only option: A 21 year old hospital intern living in a central Delhi slum reaches work 17 km away in Noida in 45 minutes by Metro, against a 6 am start at a bus stop to arrive at 9 am, and returns after 9 pm because the Metro feels safe.
    2. The cost of waiting is higher: It is easier and cheaper to build a Metro in a smaller city before it grows and congests, and cities that do not start now will face the situation their larger counterparts already face.
    3. The objection is to the trade off, not the mode: The problem is not that governments promote the Metro but that they do so at the cost of other public transport, so a city must still depend on a reliable road based system alongside it.
    4. The official defence: Ridership projections account for a city’s Master Plan and its future development potential, ridership is significantly influenced by network density and extent, and ridership on many DMRC lines has exceeded the projections made in their DPRs.

    Challenges to metro rail expansion in India

    1. Debt service migrates to the state budget: A corporation borrows against ridership that does not arrive, and repayment then falls on the exchequer. Eg. Kochi Metro Rail has run operating losses since 2017 and depends on continuing state support. Fix. Fund a defined share of operations from a dedicated urban transport levy on fuel and parking rather than from the farebox alone.
    2. No unified metropolitan transport authority: Bus, metro, suburban rail and para transit run as separate agencies with separate fares and no common timetable. Eg. Delhi’s Metro, cluster buses and Delhi Transport Corporation services operated for years without a single ticket. Fix. Constitute statutory Unified Metropolitan Transport Authorities with fare setting and route rationalisation powers, as the National Urban Transport Policy, 2006 envisaged.
    3. The land value the line creates is not captured: Property owners along a corridor capture the price rise that public investment produced. Eg. Land values near Delhi Metro corridors rose sharply with no betterment levy accruing to the operator. Fix. Levy a betterment charge along corridors and grant development rights over station land to the metro corporation.
    4. Fare revision is politically blocked: Costs rise annually and fares are revised only when a government is willing to absorb the reaction. Eg. Delhi Metro fares went unrevised for years after the 2017 revision despite rising energy and staff costs. Fix. Make revision automatic through an indexed formula operated by a statutory Fare Fixation Committee.
    5. Signalling and rolling stock depend on a few suppliers: Core train control technology is supplied by a small set of foreign vendors, which raises cost and lengthens delivery. Eg. Communications based train control systems on Indian metros are supplied largely by three global vendors. Fix. Use the domestic content requirement in metro procurement to qualify Indian signalling suppliers through a guaranteed order pipeline.

    Conclusion

    India is adding metro rail faster than it is adding the ridership, fares and feeder transport that would make the network work, because the demand being satisfied is political and territorial rather than a measured transport demand. Nothing in the record suggests the mode is wrong for the corridors that genuinely carry the volume, and the record does show that the appraisal deciding which corridors those are is conducted by the body that stands to build them. The unresolved question is whether appraisal will be separated from execution, and whether bus and road based transport will be funded alongside the Metro rather than after it.

    “[2014, GS3, 12.5 marks] National Urban Transport Policy emphasises on ‘moving people’ instead of ‘moving vehicles’. Discuss critically the success of the various strategies of the Government in this regard.”

  • On interest rates, can’t be both dovish & hawkish

    Why in the News

    The Monetary Policy Committee of the Reserve Bank of India (RBI) voted unanimously at its last meeting to hold the benchmark repo rate at 5.25 per cent, in a policy read as more dovish than expected. The minutes of that same meeting, released a few days ago, point the other way. Members drawn from the central bank displayed a distinct hawkishness, and the Bank’s own inflation projections imply negative real interest rates on a forward basis. The divergence is the problem: a stance described as neutral cannot be reconciled with projections that would stimulate activity, nor with a growth assessment the Bank itself calls resilient.

    What is a monetary policy stance?

    1. What it signals: The stance states the direction of the committee’s next expected move on the policy rate. That signal is separate from the rate set on the day.
    2. Accommodative: The committee signals that the next move is a cut, or that liquidity will stay supportive of demand.
    3. Neutral: The committee commits to no direction and keeps both a cut and a hike open at the following meeting.
    4. Tightening or withdrawal of accommodation: The committee signals that the next move is a hike, or the removal of surplus liquidity from the system.

    What is the real interest rate?

    1. Definition: The real interest rate is the nominal policy rate less expected inflation, so it measures what a lender actually earns once prices have risen.
    2. Why the sign matters: A negative real rate makes money cheaper than the rate at which prices are rising, which pushes households and firms toward borrowing and spending.

    What did the last policy decision signal?

    1. The stance retained: The committee kept the stance neutral alongside that hold.
    2. The tone: The policy read as more dovish than many analysts had expected at the time.
    3. The inference drawn: Analysts concluded that rate hikes were not imminent, even with inflation projected above target.

    How do the minutes of the same meeting read differently?

    1. A reversal in signal: The minutes suggest the current situation is unlikely to be maintained over the near term, and the divergence from the policy statement is striking.
    2. The internal members hardened: That hawkishness came from the members drawn from the central bank, not from the committee as a whole.
    3. How far each went: An assessment by economists at the State Bank of India reads the Governor’s minutes statement as showing an inclination toward policy tightening, records a Deputy Governor calling for a possible rate hike later in the year, and notes an Executive Director stopping just short of the same call.
    4. A different objection from outside: External members of the committee drew attention instead to the real interest rate.

    Can a neutral stance sit with negative real interest rates?

    1. The projections: The Bank has pegged inflation at 5.9 per cent in the third quarter, 5.5 per cent in the fourth quarter, and 5.3 per cent in the first quarter of the next financial year.
    2. What they imply: Against a repo rate of 5.25 per cent, those projections put real interest rates in negative territory on a forward basis.
    3. What negative real rates do: They stimulate economic activity, which is a different setting from the stance the committee has adopted.
    4. What neutral is supposed to mean: The Governor has previously stated that a neutral stance implies no support for economic activity and no support for controlling inflation.
    5. The growth assessment compounds it: The Bank describes growth as resilient, supported by domestic demand, sustained expansion in manufacturing and services activity, and robust exports, which removes the case for a stimulative real rate.

    What does the same uncertainty look like at other central banks?

    1. A shared condition: Central banks across the world are grappling with uncertainty over inflation and over the course of monetary policy.
    2. The United States: The Federal Reserve maintained interest rates in July, and the path of policy after that remains unclear.
    3. The same gap between decision and minutes: The minutes of that Federal Reserve meeting record that several participants favoured an increase of 25 basis points in the target range.

    What will decide the next move?

    1. The October meeting: By the time the committee meets next in October, there should be more clarity on agriculture and on the trajectory of inflation.
    2. The projections as the signal: The Bank’s revised inflation projections will show what it expects of underlying price pressures going forward.
    3. The consequence: Those expectations are what would produce an adjustment in the policy rate.

    Challenges to India’s flexible inflation targeting framework

    1. A headline target moved by food: Food and beverages carry close to half the weight in the Consumer Price Index, so the target responds to harvests that no policy rate can influence. Eg. Vegetable price spikes pushed headline inflation above the upper tolerance band in 2023 and 2024. Core inflation stayed subdued through the same period. Fix. Publish an explicit core inflation reference alongside the headline target, so the committee’s tolerance for supply shocks is visible in advance.
    2. An ageing consumption basket: The index in use rests on a consumption pattern captured years ago, so the measured basket drifts from what households actually buy. Eg. Services such as data, health insurance and education are underweighted relative to current household spending. Fix. Fix a statutory revision cycle for the index base year so the measure and the target are reset together.
    3. Exchange rate pressure competes with the target: Rate decisions taken for domestic prices collide with the management of capital flows. Eg. Record foreign portfolio outflows in 2025-26 forced heavy intervention to steady the rupee. Fix. State an explicit order of priority between the inflation target and exchange rate smoothing in the policy statement.
    4. No fiscal counterpart to the target: The framework binds the central bank alone, with no matching commitment on borrowing. Eg. Heavy government borrowing keeps longer tenor yields elevated regardless of where the repo rate is set. Fix. Pair each five year target reset with a stated debt to gross domestic product path under the Fiscal Responsibility and Budget Management Act, 2003.
    5. Accountability stops at a report: A sustained breach obliges a report and nothing further. Eg. The report on a target breach goes to the Central Government and is not laid before Parliament. Fix. Require the report to be tabled in Parliament with a stated corrective path and a review date.

    Conclusion

    A unanimous hold read as dovish now sits alongside minutes that record internal calls for tightening and projections that imply negative real rates. The policy statement, the stance and the projections are describing three different settings, and only one of them can be the policy. The October meeting, with clearer information on agriculture and on the inflation trajectory, is where that inconsistency has to be resolved into either a rate move or a change of stance.

    “[2023] Consider the following statements :

    Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.

    Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.

    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

  • Keep UPI free. Fund it from the savings it generates

    Why in the News

    Parliament has passed the Taxation and Other Laws (Amendment) Bill, 2026, rewriting Section 10A of the Payment and Settlement Systems Act, 2007. That section barred any charge on Unified Payments Interface (UPI) and RuPay transactions. The amendment replaces the bar with an enabling provision, letting the government notify in future which payment modes may carry a charge. No charge is imposed today. The tension is that the cost of running UPI is real and the state’s compensating outlay is shrinking. The only fee instrument available for recovering that cost would be levied on the smallest transactions in the economy.

    What is the Merchant Discount Rate?

    1. Definition: The Merchant Discount Rate (MDR) is the percentage of a transaction value that a merchant pays for accepting a digital payment, deducted before the money reaches the merchant’s account.
    2. Card world origin: It is an inheritance from card payments, with the card issuer, the acquiring bank and the network each taking a slice. A physical card, a terminal and credit default risk give the fee something real to recover.

    What has the amendment to Section 10A actually changed?

    1. From prohibition to permission: A statutory bar on charging has been converted into a discretionary power to allow charging on notified modes.
    2. The trigger moves to the executive: Imposing a charge no longer needs Parliament, only a notification.
    3. The status quo is unchanged today: No charge has been imposed on any mode as of the amendment.
    4. Why it still matters: A right protected by statute and a right held at executive discretion are different guarantees for a merchant deciding whether to accept digital payment.

    What has UPI become?

    1. Volume and value: In 2025-26 UPI carried over 24,000 crore transactions, roughly 66 crore a day, worth about ₹314 lakh crore.
    2. Share: It accounts for some 85 per cent of India’s digital retail payments and nearly half of the world’s real time payments.
    3. Ticket size: The average transaction is about ₹1,300, and 86 per cent of merchant payments are below ₹500.
    4. Who transacts: Payments at that size are made to the vegetable seller, the auto driver and the kirana shop, so a charge is a levy on the smallest transactions of the poorest rather than on commerce in the abstract.
    5. What was achieved: No other country has made real time digital payment free, instant and universal, and the transition pulled hundreds of millions of Indians into the formal economy.

    Why is UPI treated as public infrastructure rather than a company’s product?

    1. Most used digital public good: After Aadhaar gave every Indian a digital identity, UPI is the most visible piece of digital public infrastructure, and the citizen reaches for it many times a day rather than once.
    2. A protocol, not a platform: It is an open, protocol based public good, a shared language for money instead of any single firm’s product.
    3. What the protocol did to banking: Before UPI each bank ran its own closed application. UPI asked banks only to open their programming interfaces to a shared protocol, so any application can move money between any two accounts at any two banks.
    4. External validation: The model is being studied and adopted by other countries.

    Why is the Merchant Discount Rate the wrong instrument for UPI?

    1. The recoverable costs do not exist: The point of sale machine is the customer’s own phone, running on data he has already paid for. There is no card, no terminal, no credit risk, and settlement is instant.
    2. The work done test: Telecom interconnection regulation pays a network only for the work it actually performs, and the same test applies to a payment rail.
    3. The work actually performed: When A pays B, A’s bank makes a debit entry, the National Payments Corporation of India (NPCI) issues a settlement instruction, and B’s bank makes a credit entry. No cash moves at any point.
    4. What that work costs: NPCI runs the entire switch for about ₹500 crore a year, which is some two paise a transaction.

    The funding gap is real even where the fee is wrong

    1. Providers earn nothing directly: Banks and payment providers bear real costs, and under zero MDR they receive nothing from a UPI transaction itself.
    2. The bridge is being withdrawn: The government has covered the gap with an incentive, and the outlay is projected to fall to about ₹437 crore from about ₹3,631 crore two years ago.
    3. Traffic is moving the other way: The volume the incentive supports is multiplying and the incentive itself is shrinking. The shortfall widens each year without any policy decision being taken.

    Who actually captures the savings digitisation creates?

    1. Currency printing: The Reserve Bank spends some ₹5,000 crore to ₹6,400 crore a year merely printing currency notes, which is more than the government spends keeping UPI free, before storage and movement of cash is counted.
    2. Channel cost at the bank: A counter transaction costs a bank ₹40 to ₹50 and an automated teller machine (ATM) withdrawal costs ₹19 in interchange alone. A UPI transaction costs a small fraction of either.
    3. The float: By making an account as usable as cash, UPI keeps money in accounts rather than idle in pockets, and that low cost float is what banks earn a spread on and lend against.
    4. The mismatch: The beneficiary of digitisation is the state and the bank, and the party a merchant fee would tax is the merchant, so the instrument does not follow the benefit.

    What would a Merchant Discount Rate cost the transition?

    1. Price sensitivity: India is intensely price sensitive, and a digital payment costing even a rupee more than cash sends many users back to cash.
    2. Pass through at the counter: A merchant charged MDR passes it on as a stated surcharge for digital, or refuses digital payment altogether.
    3. Scale of the extraction: Even 0.3 per cent on merchant payments would take some ₹27,000 crore a year out of a thin margin retail economy.
    4. Reversal risk: Telling a hundred crore users that what was always free now costs money is the surest way to slow, and even reverse, a transition still forming, collecting a little and losing a great deal.
    5. A large merchant carve out will not hold: Confining the charge to large merchants offers no lasting protection, because thresholds slip and definitions widen.

    What funding model could cover the cost without charging the user?

    1. Return a share of the savings: The state, as steward of the public good and no longer obliged to print and move the cash UPI displaces, should return a small, defined share of its savings to those who run the rails.
    2. Formula, not discretion: The support should be transparent and formula based, funded specifically from savings in currency management.
    3. Not a subsidy: It is payment for value delivered, on the same principle by which the state pays a transmission company to carry electricity.
    4. The price stays off the citizen: The design keeps the charge out of sight of the user, so no price tag ever appears in front of the person paying.

    Challenges to keeping UPI free

    1. The support is a Budget line, not an entitlement: An annual allocation can be cut without any change in law, so the guarantee is only as durable as one fiscal year. Eg. The incentive allocation has been cut sharply across two consecutive Budgets. Fix. Convert the support into a formula linked to measured currency management savings, so the amount tracks the service rather than the fiscal cycle.
    2. Two applications carry most of the volume: Concentration lets a handful of private applications set the terms of access for banks and merchants. Eg. Two private applications account for roughly 80 per cent of UPI volume, and the market share cap on them has been deferred repeatedly. Fix. Fund interoperable merchant acquisition through smaller banks and the Bharat Interface for Money application to widen the base.
    3. Charged rails already run beside the free ones: Credit products routed over the same interface carry a fee, so the free character of the system is already partial. Eg. From June 2026 a merchant discount rate applies to large value RuPay credit on UPI transactions. Fix. Publish a single schedule stating exactly which flows carry a charge, so a merchant sees the boundary before accepting a payment.
    4. Fraud losses sit outside the pricing debate: The system’s real cost includes reimbursing victims, which no fee structure currently funds. Eg. Digital payment fraud losses have crossed ₹22,000 crore. Fix. Build a lagged credit window for high risk first time transfers, so a fraudulent transfer can be reversed before withdrawal.
    5. Downtime carries no consequence: Bank side outages take users off the network at peak hours with no compensation obligation. Eg. Server downtime at major banks has repeatedly disrupted time sensitive payments. Fix. Set a published per bank uptime standard with penalties credited directly to affected users.

    Conclusion

    The statutory prohibition on charging for UPI is gone and the power to permit a charge now sits with the executive, even though no charge exists today. The cost of running the rails is genuine and the compensating outlay is falling, so the funding question cannot be deferred much longer. The unresolved choice is between recovering that cost from the merchant, which taxes the smallest transactions and risks reversing adoption, and recovering it from the currency management savings the state already books because UPI exists.

    “[2018] Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news?

    (a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.

    (b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.

    (c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.

    (d) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.

  • SC trims law practice requirement to 1 year for judicial service

    Why in the News

    The Supreme Court has upheld the requirement of prior legal practice for entry into the judicial service. The same order cuts the mandated experience from three years to one. The decision came on review petitions filed against All India Judges Association v. Union of India (May 2025). That judgment had reintroduced a minimum practice condition for candidates applying to the post of Civil Judge (Junior Division), reversing an earlier position that allowed fresh law graduates to sit the examination. The present order was passed by a majority of 2:1 in a three judge Bench headed by the Chief Justice of India. What is contested is whether one year at the Bar can supply the courtroom exposure that the three year rule was designed to guarantee, or whether the shortfall has simply been shifted into training the judiciary itself will now have to deliver.

    What has the Court now ordered on eligibility for judicial service?

    1. The principle survives: Prior legal practice remains a precondition for applying to the judicial service, so the 2025 position that a law degree alone is insufficient is undisturbed.
    2. The quantum is cut by two thirds: The required period of active legal practice falls from three years to one year.
    3. The margin was narrow: The majority opinion was delivered by two judges of a three judge Bench, with the Chief Justice of India authoring it.
    4. The vehicle was a review: The order was passed on review petitions filed against the May 2025 verdict, so it revisits that judgment rather than deciding a fresh challenge.

    How is the shortened practice requirement compensated?

    1. A year at a judicial academy follows selection: A successful applicant carrying one year of legal practice undergoes a one year intensive training programme at the State judicial academy concerned.
    2. A clerkship year follows the academy: That training is followed by a final year of law clerkship with senior judicial officers and High Court judges.
    3. The total exposure is rebuilt to three years: One year of practice, one year of academy training and one year of clerkship together restore the three year period the 2025 judgment had demanded at the Bar alone.
    4. The locus of training shifts: Two of those three years are now delivered inside the judicial system rather than in independent practice.

    What happens to candidates who applied in the interregnum?

    1. A year has already elapsed: The majority noted that a full year has passed since the May 2025 judgment, during which recruitment continued under uncertainty.
    2. Interregnum applicants are deemed compliant: Candidates who applied for the post of Civil Judge (Junior Division) in that period are treated as having completed the required one year of active legal practice.
    3. No proof will be demanded from them: They will not be asked to furnish certificates of proof of practice.
    4. The rule bites from a fixed date: The one year prior practice requirement comes into force in earnest from 1 April 2027.

    Does a one year requirement still deliver what Bar experience was meant to supply?

    1. The dissent rejects the reduction: One judge on the Bench dissented from the majority view on the shortened period.
    2. The stated ground is readiness: The dissenting opinion holds that experience at the Bar is essential for students coming straight out of college, which is an argument about courtroom judgement rather than about length of service.
    3. The majority’s answer is substitution, not agreement: The majority accepts that one year of practice is by itself insufficient, and supplies the balance through the two internal years set out above.
    4. The unresolved question is equivalence: Structured training gives uniform instruction, and practice gives exposure to litigants, adversarial pressure and case failure. The order does not establish that the two are interchangeable.

    Challenges to a prior practice requirement for judicial service

    1. It delays entry and shrinks the applicant pool: A compulsory year at the Bar pushes the earliest entry age up and deters graduates who cannot fund an unpaid year. Eg. Stipends for junior advocates in district courts frequently fall below minimum wage levels in the same district. Fix. Make the practice year count only where the candidate is paid a notified minimum stipend, funded through a Bar Council administered corpus.
    2. Proof of practice invites certification abuse: Practice is usually certified by a senior advocate or a judicial officer, which turns an eligibility condition into a patronage transaction. Eg. Certificates of practice have historically been contested in service litigation over district judiciary appointments. Fix. Replace discretionary certificates with an objective test of appearances recorded on the National Judicial Data Grid.
    3. It falls unevenly on first generation and women entrants: Candidates without family in the profession lack the chambers access that makes a practice year viable. Eg. Women have been the majority of successful candidates in several State judicial service examinations, a pattern that a mandatory chambers year puts at risk. Fix. Create funded court attachment schemes at every district court reserved for first generation law graduates.
    4. Vacancies are already the binding constraint: Adding a filter at entry slows recruitment into a cadre where roughly one fourth of sanctioned posts already lie vacant. Eg. Subordinate courts carry a pendency of about 49 million cases, with over 1.8 lakh cases pending for more than thirty years. Fix. Run recruitment cycles on a fixed annual calendar so the eligibility change does not compound the delay in filling posts.
    5. Training capacity has not been sized for the new load: The academy year now required of every recruit assumes faculty and residential capacity that most academies do not have. Eg. Several State judicial academies run induction courses of a few months rather than a full year. Fix. Fund academy expansion under the Centrally Sponsored Scheme for judicial infrastructure before the rule takes effect in 2027.
    6. The reform addresses quality of entrants, not throughput: Better prepared judges do not by themselves raise disposal where procedure, adjournments and clerical load consume court time. Eg. The case clearance rate in subordinate courts stands at about 89 per cent, so pendency accumulates even with sitting judges at work. Fix. Appoint professional court managers at every district court complex to take administrative work off judicial officers.

    Conclusion

    The Court has retained the principle that a judicial officer should reach the bench with courtroom exposure. It conceded at the same time that a three year bar at the Bar was too heavy a filter for a cadre already short of judges. The compromise moves two of the three years inside the system, and defers the whole scheme so it applies in earnest from 1 April 2027. The next step is with the State High Courts and Public Service Commissions, which must align their service rules and academy capacity before that date.

    Subordinate judiciary in India

    1. Where it sits: The subordinate judiciary comprises the district and taluka level civil and criminal courts, and it is where the overwhelming majority of litigation begins and ends.
    2. The staffing position: India has roughly 21 judges per million people, against the Law Commission’s recommended benchmark of 50.
    3. Who controls it: The High Court of each State exercises administrative and disciplinary control over the subordinate courts within its jurisdiction.

    Constitutional framework governing the subordinate judiciary

    1. Article 233: Provides for the appointment of District Judges by the Governor in consultation with the High Court.
    2. Article 234: Governs the recruitment of persons other than District Judges to the judicial service, by the Governor in consultation with the State Public Service Commission and the High Court.
    3. Article 235: Vests administrative and disciplinary control over the subordinate judiciary in the High Court.
    4. Article 236: Defines “district judge” and “judicial service” for the purposes of this Chapter.
    5. Article 312: Empowers Parliament to create an All India Judicial Service on a Rajya Sabha resolution passed by a two thirds majority.

    Government initiatives for the subordinate judiciary

    1. eCourts Mission Mode Project, Phase III: Funds digitisation of case records, virtual courts and paperless court rooms across district judiciary establishments.
    2. Centrally Sponsored Scheme for Development of Infrastructure Facilities for the Judiciary: Finances court halls, residential units, lawyers’ halls and digital computer rooms at the district and subordinate level.
    3. Fast Track Special Courts: Dedicated courts set up to try offences under the Protection of Children from Sexual Offences Act, 2012 and rape cases within statutory timelines.
    4. National Judicial Data Grid: A public dashboard publishing case pendency, disposal and age of cases for every district court, which makes court level performance comparable.

    Back2Basics: Civil Judge (Junior Division)

    1. The entry post: It is the lowest rung of the State judicial service and the post through which most judicial officers enter the district judiciary.
    2. How recruitment happens: Candidates are selected under Article 234 through an examination conducted by the State Public Service Commission or the High Court, in consultation with the High Court.
    3. What the court tries: A Civil Judge (Junior Division) exercises original civil jurisdiction up to a pecuniary limit fixed by State law, and the corresponding criminal post is Judicial Magistrate First Class.
    4. Career path: Promotion runs to Civil Judge (Senior Division) and then to the cadre of District Judge, with a share of District Judge posts filled by direct recruitment from the Bar.

    “[2025, GS2, 15 marks] Discuss the evolution of collegium system in India. Critically examine the advantages and disadvantages of the system on appointment of the Judges of the Supreme Court of India and that of the USA.”

  • FDI policy rejig for border nations spur Rs 5k cr investment: DPIIT

    Why in the News

    A relaxation in India’s rules on investment from land bordering countries has drawn 29 foreign direct investment (FDI) proposals worth ₹4,895.65 crore up to 20 August 2026. The relaxation was notified in March 2026. It permits a foreign entity carrying non controlling beneficial ownership of up to 10 per cent from a land bordering country to invest through the automatic route. Press Note 3 of 2020 had required prior government approval for any such investment, however small that land border shareholding was. What is now tested is whether a shareholding threshold can separate incidental Chinese exposure inside a global fund from Chinese strategic control of an Indian asset.

    What is Press Note 3 of 2020?

    1. The restriction: Imposed in April 2020, it made government approval mandatory for investment from any country sharing a land border with India.
    2. Stated purpose: It was aimed at preventing opportunistic takeovers of Indian firms during the Covid-19 pandemic, and stayed in force amid heightened national security concerns after the Galwan clash later that year.
    3. Country neutral drafting: The framework named no country, and China is the largest source of investment among India’s land neighbours.
    4. Uneven bite: Entities of Bangladesh and Pakistan can invest only through the government route. Flows from Nepal, Myanmar, Bhutan and Afghanistan are very small as a share of India’s total foreign investment.

    What conditions does the relaxed route carry?

    1. Indian control retained: The majority shareholding and control of the investee entity must rest at all times with resident Indian citizens, or with resident Indian entities that are themselves owned and controlled by resident Indian citizens.
    2. Threshold is a ceiling, not a waiver: A land border holding above 10 per cent still routes the investment through government approval, so the automatic route covers only diluted exposure.
    3. Time bound clearance for named goods: A 60 day deadline was approved for clearing proposals from land bordering countries, including China, in capital goods, electronic capital goods, electronic components, polysilicon, and ingot wafer for solar cells.

    Where has the relaxed route drawn money from?

    1. Sectors: The proposals span information technology, artificial intelligence, information and communication, manufacturing, pharmaceuticals, data centres and transport services.
    2. Jurisdictions: They were reported by investors and entities based in Mauritius, the United States, the Republic of Korea, Japan, Singapore, Luxembourg and the Cayman Islands, among others.
    3. Stated gain: The government’s own assessment is that the reform gives investors greater certainty, cuts transaction time and strengthens ease of doing business in India.

    Where has the Centre gone further than the ownership threshold?

    1. A strategic sector joint venture: In July 2026 the Centre cleared a joint venture between Dixon Technologies (India) Limited and Vivo Mobile India Limited for manufacturing electronic devices and smartphones, one of the first major approvals to Chinese investment in a strategic sector.
    2. Entry into power tenders: The Finance Ministry in July allowed four Chinese power equipment manufacturers with factories in India to bid for government tenders on critical power projects.
    3. A procurement exemption: TBEA Energy, Nanjing Electric India, New Northeast Electric India and Taikai Electric (India) were exempted from the public procurement rule requiring entities from land bordering countries to register with the relevant Indian authority before bidding.
    4. What is at stake in that equipment: The four firms make transformers, wires, high voltage switchgear and gas insulated switchgear used in transmission lines. New Northeast Electric India lists at least 11 transmission line projects across India.

    Challenges to the revised land border investment framework

    1. Beneficial ownership is hard to trace through layers: A 10 per cent test presumes the ultimate holder is visible, which layered holding structures defeat. Eg. Several of the reported proposals came through Mauritius and the Cayman Islands. The ultimate holder is not on the local register in either jurisdiction. Fix. Require a declaration of the ultimate beneficial owner at every layer, verified against the significant beneficial ownership register maintained under the Companies Act, 2013.
    2. A shareholding cap does not bound influence: Control travels through contracts as much as through equity. Eg. A minority holder with board nomination rights or a sole technology licence can direct a joint venture without owning a majority. Fix. Test control by board composition and contractual veto rights, not by shareholding percentage alone.
    3. Screening capacity is spread thin: No single body owns the security review of an inbound proposal. Eg. Screening runs across the Department for Promotion of Industry and Internal Trade, the Ministry of Home Affairs and the administrative ministry, each with its own timeline. Fix. Constitute a standing inbound investment security review committee with a statutory disposal deadline.
    4. Technology dependence persists in the sectors being opened: Approval eases entry without changing who owns the process knowledge. Eg. India imports most of its polysilicon and ingot wafer requirement for solar cells. Fix. Tie approval in those goods to a phased technology transfer and a rising domestic sourcing commitment.
    5. The government route stays slow for everyone else: Only the notified goods got a deadline, so other proposals still face open ended review. Eg. Land border proposals outside the notified list have historically taken well over a year to clear. Fix. Extend the 60 day discipline to every proposal on the government route, with reasons recorded for any extension.

    Conclusion

    The relaxed framework has been operative since March 2026 and has produced 29 reported proposals in five months. Press Note 3 itself stays on the books for any land border holding above the threshold, so the restriction has been narrowed rather than withdrawn. The next milestone is disposal of proposals under the 60 day window for the notified goods, and whether the Dixon and Vivo clearance becomes a template for a wider, sector by sector opening.

    Foreign Direct Investment in India

    1. About: Foreign direct investment is cross border investment that establishes a lasting interest in an enterprise abroad, in the definition used by the Organisation for Economic Cooperation and Development.
    2. Routes: Most sectors permit 100 per cent foreign investment through the automatic route, and the remainder require prior government approval.
    3. Cumulative scale: India’s cumulative inflows crossed about $1.14 trillion between April 2000 and December 2025, with nearly 70 per cent of that arriving in the last decade.
    4. Recent flows: Gross inflows reached a three year high of $81 billion in 2024-25, led by services and manufacturing.

    Laws and Rules Governing Foreign Investment

    1. Foreign Exchange Management Act, 1999: The parent statute governing cross border transactions and capital account flows into and out of India.
    2. Foreign Exchange Management (Non-debt Instruments) Rules, 2019: Notified by the Finance Ministry, these fix sectoral caps, entry routes and pricing guidelines for equity investment.
    3. Consolidated FDI Policy Circular: A single compiled statement of sectoral policy, which Press Notes amend between editions.
    4. Competition Act, 2002: Acquisitions above notified thresholds need Competition Commission of India clearance.

    Challenges in Attracting Foreign Direct Investment

    1. Policy unpredictability: Rules that change mid cycle force investors to restructure entities already built. Eg. Repeated shifts in e-commerce foreign investment norms forced marketplace operators to redraw their seller structures. Fix. Publish a standstill period between the notification of a sectoral rule change and its taking effect.
    2. Land acquisition: Site control is the binding constraint on greenfield manufacturing. Eg. POSCO abandoned its Odisha steel project after a decade of unresolved land disputes. Fix. Build titled, pre cleared land banks held by state industrial corporations and offered on long lease.
    3. Geographic concentration: Inflows cluster in services and a few urban states. Eg. A handful of states absorb the bulk of equity inflows reported each year. Fix. Offer differential incentives for greenfield investment in aspirational districts.
    4. Intellectual property enforcement: Weak enforcement raises the risk premium on technology intensive investment. Eg. India remains on the United States Priority Watch List on intellectual property enforcement. Fix. Create dedicated commercial intellectual property benches with fixed disposal timelines.
    5. Clearance friction across governments: A central approval does not deliver the state permissions a project actually needs. Eg. The National Single Window System still does not carry every state level clearance. Fix. Make full state onboarding to the single window a condition for central infrastructure co-funding.

    Back2Basics: Department for Promotion of Industry and Internal Trade

    1. Parent ministry: It sits under the Ministry of Commerce and Industry. It was the Department of Industrial Policy and Promotion until internal trade was added in 2019.
    2. Policy mandate: It frames and administers the Consolidated FDI Policy and issues the Press Notes that amend it.
    3. Programmes run: It runs Startup India and Make in India, and maintains the National Single Window System.

    “[2020] With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

    (a) It is the investment through capital instruments essentially in a listed company.

    (b) It is a largely non-debt creating capital flow.

    (c) It is the investment which involves debt-servicing.

    (d) It is the investment made by foreign institutional investors in the Government securities.