Mains Ready By December. Smash Mains & Smash PYQ Admissions Open
Talk to Mentor

Civilsdaily

Search results for: “”

  • What are the alternatives to the SWIFT payment system?

    Why in the News

    Countries in the Global South are looking for ways around the Belgium based Society for Worldwide Interbank Financial Telecommunication (SWIFT) network for inter country payments, driven by multiple wars and by the use of the dollar as an instrument of financial sanctions. The attempts so far have been patchy, and the felt need for other options is rising. The recent Summit of Brazil, Russia, India, China and South Africa (BRICS) in the national capital took up payments in national currencies, and a proposal to link central bank digital currencies for cross border payments did not survive into its declaration. The contested point is whether a set of national payment rails, each anchored to its builder’s currency, adds up to an alternative to a single global messaging network.

    What did the BRICS summit actually commit to?

    1. The Declaration’s resolve: The New Delhi Declaration resolved to increase trade between member countries and payments in national currencies.
    2. The proposal that was tabled: India was reported to be pushing at the summit to link central bank digital currencies (CBDCs) for cross border payments across BRICS nations.
    3. Why it was expected to be difficult: Political and technical hurdles could limit progress, and the limited global adoption of digital currencies could complicate implementation.
    4. The outcome: The proposal to link CBDCs was not part of the Declaration.

    What are the alternatives to SWIFT, and who runs them?

    1. Project mBridge: Project mBridge is a group comprising the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People’s Bank of China, the Hong Kong Monetary Authority and the Saudi Central Bank.
    2. The Chinese system: The Cross Border Interbank Payment System (CIPS) is backed by the People’s Bank of China, which launched its clearing and settlement services in 2015 to internationalise use of the yuan.
    3. What CIPS changed: It lets global banks clear cross border yuan transactions directly onshore, instead of routing them through clearing banks in offshore yuan hubs.
    4. The Russian system: The System for Transfer of Financial Messages (SPFS) was developed by Russia in 2014 to bypass Western sanctions. Russian banks were cut off from SWIFT in 2022 and the SPFS was of help.
    5. The Iranian system: SEPAMA is Iran’s local interbank telecommunication system. The Central Bank of Iran said in 2023 that 52 branches of Iranian banks and four unnamed foreign banks connect with 106 banks using the SPFS.

    How is Project mBridge faring after the Bank for International Settlements exit?

    1. The withdrawal: The Bank for International Settlements (BIS), an institution owned by central banks to foster international monetary and financial cooperation, exited Project mBridge on 31 October 2024. It had supported the platform since 2019, when the Hong Kong Monetary Authority and the Bank of Thailand launched it.
    2. What the platform is: mBridge is a cross bloc multi CBDC platform with no Western bank on it. It attained minimum viability status in 2024.
    3. The design: It was envisaged for direct peer to peer CBDC settlement without going through correspondent banks. The project team built a new blockchain, the mBridge Ledger, designed by central banks for multi currency cross border payments in CBDCs.
    4. Why the exit drew attention: Media reports attributed the withdrawal to the platform offering a possible basis for a BRICS initiative to circumvent sanctions on Russia.
    5. What it became in practice: A Forbes report described mBridge by late 2025 as a wholesale settlement rail denominated in renminbi for trade between China and the Gulf, “running outside the dollar correspondent system”.

    How far has CIPS actually scaled?

    1. Reserve asset status helped: The renminbi’s inclusion in the basket of currencies making up the Special Drawing Right, an international reserve asset created by the International Monetary Fund (IMF), has increased acceptance of CIPS.
    2. Participation: CIPS now has participants in more than 120 countries, including every BRICS member except India.
    3. Daily throughput: CIPS processed 679.8 billion yuan of transactions on average per day in 2025.
    4. Scale against incumbents: It remains far smaller than established global systems such as the United States based Clearing House Interbank Payments System.
    5. Where Beijing is taking it: Beijing appears to be moving towards building CIPS into a global platform compliant with multi currency settlements and other foreign payment channels.

    How has the SPFS grown under sanctions?

    1. Growth in 2023: The SPFS grew at a record pace in 2023 as Moscow stepped up efforts to resolve financial shortcomings caused by sanctions over the Ukraine war.
    2. Participation: 50 new entities joined the system in 2023, taking the total to 440, of which more than 100 are non residents.

    How do India Russia trade settlements work now?

    1. The rouble rupee channel: Russia and India have built a functioning payments infrastructure using roubles and rupees, which now accounts for 96 per cent of bilateral trade.
    2. What gives it volume: India is the second largest importer of Russian oil, which is what supplies the channel with its throughput.
    3. Banks servicing it: 22 Russian banks and 17 Indian banks currently service bilateral trade. Sberbank, Russia’s largest lender, was tasked with developing the payments infrastructure.
    4. The stated assessment: Sberbank’s India head called it one of the best established mechanisms for Russia’s payments with other countries.

    Challenges to building an alternative to SWIFT

    1. Bilateral rails strand balances: A channel that settles only between two currencies leaves the surplus partner holding a currency it cannot spend elsewhere. Eg. Russia accumulated rupee balances under the rupee settlement route that it could not readily deploy outside India.
      The Fix: Attach an agreed reinvestment channel for the surplus partner’s balances, such as government securities or project equity, to every bilateral settlement arrangement.
    2. A national rail carries its builder’s politics: A system run by one central bank settles mainly in that country’s currency, so joining it shifts a dependence rather than removing one. Eg. A single BRICS currency has drawn a lukewarm response because members are unwilling to accept an instrument the renminbi would dominate.
      The Fix: Build interoperability at the messaging layer between national systems instead of migrating onto any one of them.
    3. Secondary sanctions reach the user, not the rail: A commercial bank using an alternative channel still risks losing its dollar clearing, which is what keeps large banks away from it. Eg. Indian refiners and banks scaled back Russian oil payments as United States designations widened.
      The Fix: Route sanctioned trade through designated institutions that hold no dollar exposure, so the risk sits inside a ring fenced entity.
    4. Invoicing does not move with settlement: Commodity contracts stay priced in dollars even where payment is made in another currency, so the dollar keeps its price setting role. Eg. Crude oil and most industrial metals are quoted in dollars on the benchmark exchanges.
      The Fix: Develop local currency denominated commodity contracts on domestic exchanges, so invoicing and settlement move together.

    Conclusion

    No single system has replaced the network the Global South is trying to route around. What exists instead is a set of national rails, each carrying the currency and the political exposure of the state that built it, which is why India has built a bilateral channel with Russia rather than joining one of them. The position that remains unreconciled is that cutting dependence on one currency by moving onto another country’s rail substitutes one dependence for another. The marker to watch is whether BRICS moves from a resolve on national currency payments to a working interoperability arrangement between the systems that already exist.

    Back2Basics: SWIFT

    1. What it is: A cooperative owned by its member financial institutions, established in 1973 to replace telex based messaging between banks.
    2. What it actually does: It carries standardised payment instructions between financial institutions. It does not hold accounts, move money or settle payments itself.
    3. Why exclusion bites: A bank cut off from the network loses the standard channel through which counterparties send and confirm instructions, so its correspondent relationships stop functioning.
    4. Why the alternatives look similar: Because the incumbent is a messaging layer, most alternatives are also messaging or clearing systems rather than new currencies.

    Matching Previous Year Question

    “[2023] With reference to the Central Bank digital currencies, consider the following statements: 1. It is possible to make payments in a digital currency without using US dollar or SWIFT system. 2. A digital currency can be distributed with a condition programmed into it such as time-frame for spending it. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer: (c)”

  • Fear of shift to cash due to merchant fee on UPI ‘100% misplaced’: Govt sources

    Why in the News

    A merchant discount rate of 0.4 per cent will apply to Unified Payments Interface (UPI) payments made to merchants above Rs 2,000 from 15 October, under a decision of the National Payments Corporation of India (NPCI). The government has called fears of a public shift back to cash “100% misplaced”, noting that a merchant fee already applies to credit and debit cards other than RuPay debit cards and that those cards continue to be used. A Goods and Services Tax (GST) of 18 per cent applies on the fee itself. The contested point is whether a charge levied on the seller stays with the seller, or reaches the buyer as a higher price.

    What is the merchant discount rate now applying to UPI?

    1. What the charge is: A merchant discount rate (MDR) is a fee paid by the seller on a payment accepted electronically. On UPI it has been set at 0.4 per cent of the transaction value.
    2. Where it applies: It applies to person to merchant UPI transactions of more than Rs 2,000, and takes effect on 15 October.
    3. Who receives it: The fee is split between the payments industry players that run the rail, which includes banks, payment gateways, UPI apps and other service providers.

    How narrow is the fee’s incidence?

    1. Share of transactions: Only 4 per cent of person to merchant UPI transactions are for more than Rs 2,000 and will attract the fee.
    2. Share of value: That small group of payments accounts for two thirds of person to merchant UPI payments measured by value.
    3. Merchants untouched: Around three fourths of India’s merchants accepting digital payments have never recorded a UPI transaction above the threshold, so they stay outside the fee altogether.
    4. Transfers stay free: All person to person UPI payments remain without any MDR.
    5. RuPay debit exempt: Payments made by RuPay debit card attract no MDR even above the threshold.

    Why does the government reject the fear of a shift back to cash?

    1. Card fees already exist: An MDR already applies to credit and debit cards other than RuPay debit cards, and users have not given those cards up.
    2. Merchants already absorb it: Merchants have always absorbed the MDR on credit cards while continuing to accept Visa, Mastercard and American Express.
    3. The comparison on rates: The merchant fee on debit and credit cards runs broadly in the range of 1 per cent to 3 per cent, significantly higher than the rate set for UPI.

    What is the stated purpose of charging for UPI?

    1. Cost of a free service: The stated ground is that a payment service cannot be supplied free indefinitely without exhausting the business that funds it.
    2. Reinvestment rather than full recovery: NPCI’s managing director and chief executive officer said the objective is not to recover the full cost of running UPI, but to generate enough revenue for banks and payment companies to keep investing in the ecosystem.

    What else decides how much of the fee reaches the buyer?

    1. The pass through concern: Shopkeepers may stop accepting UPI, and consumers expect sellers to pass the fee on by raising prices.
    2. A monitoring mechanism: The government is willing to talk to the Indian Banks’ Association (IBA) to set up a mechanism for monitoring whether shopkeepers pass the MDR to buyers.
    3. Talks with traders: The government will also speak to traders, including the Confederation of All India Traders (CAIT), about the issue.
    4. Tax on the fee: GST of 18 per cent applies on the MDR on person to merchant UPI payments, which lifts the seller’s cost above the notified rate.
    5. The stated hope on the tax: The position taken is that the GST Council will take a favourable view and be reasonable on the rate.
    6. The Council’s agenda: The GST Council meets on 7 October and is not expected to discuss the indirect tax rate on the MDR.

    Challenges to the UPI merchant discount rate

    1. Pass through is hard to police: A monitoring arrangement cannot observe a shopkeeper who quotes one price for cash and a higher one for UPI. Eg. Surcharging on card payments continues at small outlets even though the card rules bar it.
      The Fix: Require the acquiring bank to certify surcharge free acceptance as a condition of the merchant’s UPI acceptance agreement.
    2. A value threshold invites splitting: A fee that triggers above a transaction value gives the seller a reason to break one payment into two below the line. Eg. The fee applies only above Rs 2,000, so a bill just over that figure can be collected as two smaller payments.
      The Fix: Levy the fee on a merchant’s aggregate monthly person to merchant value rather than on the size of each transaction.
    3. The revenue split leaves acquirers last: The fee is divided among banks, gateways and app providers, so the share reaching the party that actually onboards a small shop may not cover that cost. Eg. Person to merchant acceptance among small merchants was built on zero MDR and on government incentive payouts to banks.
      The Fix: Fix a minimum acquirer share of the fee in the settlement rules so merchant onboarding stays funded.
    4. A priced rail can be repriced: A charge introduced administratively can be raised the same way, and the rail loses its universality if some sellers refuse the instrument above the threshold. Eg. The European Union caps interchange at 0.2 per cent on debit cards and 0.3 per cent on credit cards precisely to keep acceptance universal.
      The Fix: Notify a statutory ceiling on the person to merchant fee so the rate cannot be revised upward by the operator alone.

    Conclusion

    The charge is small and narrowly aimed, and it still changes what UPI is: a rail built on being free to use now carries a price for sellers above a value threshold. Whether that price stays with the seller is not settled by the fee’s design but by enforcement the government has yet to build. Two things are worth watching. The first is whether a monitoring arrangement with the banks is in place before the fee takes effect, and the second is whether the tax levied on the fee is revisited once the Council turns to it.

    Back2Basics: National Payments Corporation of India

    1. What it is: An umbrella organisation for retail payments and settlement systems in India, incorporated in 2008 as a not for profit company.
    2. Promoters and statutory basis: It was promoted by the Reserve Bank of India and the Indian Banks’ Association under the Payment and Settlement Systems Act, 2007.
    3. Systems it operates: UPI, RuPay, the Immediate Payment Service, the National Automated Clearing House, the Aadhaar Enabled Payment System and FASTag.

    Matching Previous Year Question

    “[2026] Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is NOT correct? (a) UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency (b) In case of UPI, settlement for end users happens instantly; in case of Digital Rupee, wallet balance gets transferred to another wallet (no traditional settlement) (c) UPI transactions are recorded by banks and reflected in bank statements; in case of Digital Rupee, no data is captured in bank statements (d) In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks Answer: (d)”

  • ‘Make in India’ of 12 years shows patchy performance

    Why in the News

    Twelve years after the Make in India campaign was launched on 25 September 2014, an assessment across 12 metrics covering growth, investment, employment and exports shows the manufacturing sector has not materially raised its share in India’s economic growth, employment or global exports. The campaign’s later incentive schemes have produced some results. Those gains sit in a handful of sectors rather than across manufacturing as a whole. The contested point is whether the shortfall reflects too few incentives or a failure of private investment to broaden beyond the sectors an incentive already reaches.

    What is Make in India?

    1. Launch and objective: Make in India is a Union government campaign launched on 25 September 2014 to raise the manufacturing sector’s share in India’s economic growth, employment and exports.
    2. How performance is judged: Its record is read off 12 metrics spanning growth, investment, employment and exports, rather than off a single headline target.
    3. Two statistical series: The output figures exist in an old series and a new series of both the national accounts and the Index of Industrial Production (IIP). A 12 year comparison therefore runs across both.

    Has the manufacturing sector actually gained ground in the economy?

    1. Growth against the whole economy: Manufacturing grew faster than the overall economy in only half of the 12 years under consideration on the old series.
    2. The new series reading: On the new series manufacturing outpaced overall growth in all three years for which data exists, from the 2023 to 2024 financial year through the 2025 to 2026 financial year. That gap is shrinking fast.
    3. Industrial production: Within the IIP, manufacturing outpaced the overall index in only three of the 12 years on the old series of that index.
    4. The new IIP series: Manufacturing growth matched the overall index in the 2023 to 2024 financial year and was slower in each of the next two years.
    5. Share of output, old series: Gross Value Added (GVA) data on the older series shows manufacturing’s share in overall GVA is lower in the 2025 to 2026 financial year than it was when the campaign was launched in 2014.
    6. Share of output, new series: The new series shows the sector’s share rising marginally, from 14.6 per cent in the 2022 to 2023 financial year to 15.6 per cent in the 2025 to 2026 financial year.

    What do the export numbers actually show?

    1. Growth since the launch: Non petroleum goods exports grew 53 per cent to $388.3 billion in the 2025 to 2026 financial year, from $253.5 billion in the year the campaign was launched.
    2. The preceding 12 years: The same exports grew more than 400 per cent over the 12 years before the launch, on a much smaller base.
    3. Base effect is only part of it: The smaller starting base accounts for only some of the difference between the two periods.
    4. Share of world trade: United Nations Conference on Trade and Development (UNCTAD) data shows India’s share in global merchandise exports rose from around 0.8 per cent in 2002 to 1.7 per cent in 2013. It has remained at 1.7 per cent in the 2025 to 2026 financial year.

    Is private investment backing the manufacturing push?

    1. Private capital formation: Gross fixed capital formation (GFCF) by the private sector, meaning its spending on real asset creation, formed a lower share of gross domestic product (GDP) in the 2023 to 2024 financial year, the latest on the old series, than it did in the 2014 to 2015 financial year.
    2. The new series trend: On the new series GFCF as a percentage of GDP has been falling since the 2022 to 2023 financial year.
    3. Foreign investment into factories: Foreign direct investment (FDI) into manufacturing grew slower than overall FDI in 7 of the 12 years. Its share in overall FDI rose from nearly 48 per cent in the 2014 to 2015 financial year to 55 per cent in the 2025 to 2026 financial year.
    4. Capacity utilisation: Reserve Bank of India (RBI) data on how intensively factories are being used shows the metric rising slowly over recent years. It remains below the 80 per cent mark treated as the level above which companies invest in fresh capacity.
    5. Credit without output: Bank credit to industry has grown strongly, led by credit to micro, small and medium enterprises. In the absence of sustained rapid growth in output, this points to borrowing for working capital rather than for new investment.

    How concentrated are the incentive gains?

    1. Scale of the schemes: The 14 Production Linked Incentive (PLI) schemes, launched across 2020 and 2021, have drawn a cumulative investment of Rs 2.4 lakh crore as of March 2026.
    2. Concentration in five sectors: Solar modules, pharmaceutical drugs, automobiles and their components, specialty steel and large scale electronics manufacturing together account for nearly 83 per cent of all investment under the schemes.
    3. Everything else in the schemes: The remaining covered sectors share a little over one sixth of the investment between them.

    Challenges to Make in India

    1. Tariff protection raises input costs: Duties placed on intermediate goods raise the cost of inputs for the assembly the same policy is trying to attract. Eg. The Phased Manufacturing Programme for mobile phones raised duties on imported components such as chargers and printed circuit board assemblies.
      The Fix: Hold intermediate inputs at low duty rates and apply protection only at the final assembly stage.
    2. Incentive design favours large incumbents: A subsidy paid on incremental sales above a threshold can only be claimed by firms already operating at scale. Eg. Under the PLI scheme for large scale electronics manufacturing, most approved incentive has flowed to a small group of mobile phone assemblers.
      The Fix: Add a lower turnover tier with simpler claim documentation so first time manufacturers can enter the scheme.
    3. Assembly without deepening: Incentives reward final assembly, so domestic value addition stays low where components continue to be imported. Eg. India’s electronics exports have risen alongside rising imports of components and sub assemblies.
      The Fix: Tie each incentive tranche to a rising domestic value addition threshold verified at the component level.
    4. Factor market constraints outlast incentives: Land, power reliability and labour regulation decide where a plant is built, and a subsidy changes none of them. Eg. The four labour codes passed in 2019 and 2020 took years to be brought into force.
      The Fix: Publish State level readiness on serviced industrial land, power availability and single window clearance timelines so investors can compare locations.

    Conclusion

    The instruments changed and the structural shares did not. A campaign judged on manufacturing’s place in output, employment and global exports has moved none of the three, and the one instrument that did pull investment pulled it into a narrow group of sectors. What has not been achieved is broad private capacity creation, and that is the condition the next phase has to meet rather than another incentive line. The marker to watch is whether private capital formation turns up as a share of output, since that is what builds new factories.

    Back2Basics: Gross Value Added

    1. What it measures: GVA is output minus the value of the intermediate goods and services consumed in producing it. It isolates the value added by each sector, which is why sectoral shares are read off GVA rather than off GDP.
    2. Relation to GDP: GDP at market prices equals GVA at basic prices plus product taxes minus product subsidies.
    3. Why the series matters: National accounts are periodically rebased on a more recent base year, so the same indicator in an old series and a new series is not directly comparable.

    Matching Previous Year Question

    “[2025, GS3, 15 marks] Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?”

  • [24th September 2026] The Hindu OpED: Quality control and India’s manufacturing growth

    [24th September 2026] The Hindu OpED: Quality control and India’s manufacturing growth

    Question (2023, GS3 – 10 Marks): Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.
    Linkage: This is the most direct parallel. While QCOs aim to elevate product quality, enforcing mandatory standards on basic intermediate inputs creates compliance burdens and supply bottlenecks for MSMEs. The recent relaxation via the Transition Facilitation Order, 2026 reflects a policy course-correction to protect MSME competitiveness and manufacturing growth.

    Mentor Comment

    India’s Quality Control Order (QCO) regime has begun to contract, with several orders revoked or suspended since late 2025, particularly those covering intermediate goods. The Department for Promotion of Industry and Internal Trade (DPIIT) has notified the Transition Facilitation (Quality Control) Order, 2026, which lets an eligible firm source temporarily from an alternative class of certified supplier. A study by the Centre for Social and Economic Progress (CSEP) finds that QCOs on chemical inputs cut value addition in large user firms and profitability in small ones. Concerns over India’s QCOs and other non tariff barriers also surfaced at the World Trade Organization’s (WTO) eighth Trade Policy Review of India, held in July 2026. The contested point is whether a regime designed to raise product quality should be judged by the number of products it covers or by what it does to the scale and competitiveness of the firms that must comply.

    What is a Quality Control Order?

    1. Mandatory conformity to an Indian Standard: A QCO is issued by the administering ministry or department under the Bureau of Indian Standards Act, 2016. It makes conformity to a specified Indian Standard and a Bureau of Indian Standards (BIS) certification compulsory for the listed products.
    2. Application to domestic output and imports alike: Once a QCO is in force, a covered product cannot be manufactured, imported, stored for sale or sold without that certification. An import faces the same requirement as domestic production.
    3. Two certification routes: BIS Scheme-I is a licence to use the Standard Mark on a product, granted after factory inspection and testing. BIS Scheme-II issues a Certificate of Conformity for a consignment or a batch.
    4. Input orders versus output orders: A QCO on a finished good regulates what reaches the consumer. A QCO on an intermediate input regulates what a downstream manufacturer is allowed to buy.

    How far did the QCO net expand, and what remains to be reassessed?

    1. Rapid expansion after 2019: The number of products covered under QCOs rose from 88 in 2019 to 765 by the end of December 2024.
    2. The slowdown: The pace of expansion slowed considerably towards the end of 2025. Several QCOs were revoked or suspended, particularly those covering intermediate goods.
    3. What drove the shift: Mandatory certification on intermediates had raised concerns about input availability, costs and potential supply chain disruptions.
    4. The unfinished list: More than 600 QCO covered products remain to be reassessed. These include several critical intermediate inputs used across chemicals, steel, textiles, machinery and electronics, and rubber and plastics.

    What does the Transition Facilitation (Quality Control) Order, 2026 do?

    1. Issuing authority and date: DPIIT notified the order on 25 June 2026.
    2. The mechanism: An eligible firm facing difficulty in obtaining BIS Scheme-I certification may source products temporarily from BIS Scheme-II licensed suppliers.
    3. Sectors covered: The mechanism applies in specified sectors, including toys, footwear and air conditioners.
    4. Access conditions: Use of the mechanism is subject to prescribed eligibility criteria and to approval by a committee constituted by DPIIT.

    What does the CSEP study find about QCOs on chemical inputs?

    1. Why chemicals: Chemicals are critical intermediate inputs for downstream sectors such as rubber and plastics, pharmaceuticals and electronics.
    2. Growth of coverage: The first QCO for a chemical product was introduced in 2018. The number of chemical products covered rose to 52 by 2024.
    3. Growth of exposure: The share of chemical using firms exposed to regulation on the input side rose from 11.8 per cent in 2019 to 56.6 per cent in 2024.
    4. Effect on larger firms: Input QCOs are associated with a 9.6 per cent increase in production alongside a 37 per cent decline in gross value added (GVA), meaning output value minus the cost of bought in inputs. Larger firms sustain output at the cost of lower value addition.
    5. Effect on smaller firms: Input QCOs have no statistically significant effect on production or GVA among smaller firms. They are associated with a 47.6 per cent decline in profitability.
    6. What the size split shows: Larger firms can pass at least part of the higher input cost through to output prices. Smaller firms have a more limited ability to absorb rising input costs and the additional compliance costs.

    Why has the QCO regime become a trade question?

    1. The forum: The concerns were raised during the WTO’s eighth Trade Policy Review of India.
    2. Raised by major trading partners: The European Union and the United States raised them.
    3. Raised by partners in the same bloc: Fellow BRICS members, including Brazil, China and Indonesia, raised them as well, so the objection does not track a single trade bloc’s interest.

    Challenges to the Quality Control Order regime

    1. Compliance cost falls hardest on the smallest firms: Certification fees, testing, factory inspection and documentation are largely fixed costs, so they take a far larger share of a small firm’s turnover. Eg. Of India’s roughly 6.4 crore micro, small and medium enterprises (MSMEs), only about 14 per cent have access to formal credit, so certification costs come out of working capital.
      The Fix: Give smaller firms dedicated certification assistance, with designed exemptions or transition periods where compliance costs are particularly burdensome.
    2. Certification capacity does not scale with coverage: Recognised testing laboratory and inspection capacity limits how fast licences can be issued once a product is brought under an order. Eg. Waiting periods for foreign manufacturer licences have been a standing complaint from importers of intermediate goods.
      The Fix: Expand third party conformity assessment through accredited private laboratories, so licence issuance is not gated on the regulator’s own testing capacity.
    3. Input regulation transmits into sectors it was never aimed at: An order placed on an intermediate raises the input cost of every industry that buys it, whatever the order’s own purpose was. Eg. Standards on steel long products raise input costs for engineering goods, automotive components and capital goods producers at once.
      The Fix: Make a supply chain impact assessment a mandatory part of both the design of a new order and the reassessment of an existing one.
    4. A standard can operate as protection rather than quality assurance: A mandatory standard on an import heavy input restricts supply and raises the domestic price without improving what reaches the consumer. Eg. The WTO Agreement on Technical Barriers to Trade requires that a technical regulation not be more trade restrictive than necessary to fulfil a legitimate objective.
      The Fix: Publish the risk assessment and the stated objective behind each order at notification, so the instrument is testable against its own purpose.
    5. Quality regulation without surveillance produces paper compliance: A mandatory mark improves quality only where market surveillance detects and penalises non conforming goods actually on sale. Eg. Counterfeit standard marks on low value consumer goods remain a recurring enforcement problem.
      The Fix: Shift enforcement effort toward post market sample testing of goods on sale rather than toward licence issuance alone.

    Conclusion

    The instrument under reassessment was designed to police what reaches the consumer, and its cost is landing instead on what a manufacturer is allowed to buy. That mismatch is what the reset has to correct, and a coverage count is the wrong measure of whether it has. The test worth applying is whether quality standards improve products without constraining the scale, efficiency and competitiveness of Indian manufacturing. The marker to watch is whether the reassessment of the remaining intermediate input orders carries a supply chain impact assessment and a separate track for smaller firms, or whether it proceeds product by product as before.

    Manufacturing in India

    1. Share and scale: Manufacturing contributes around 17 per cent of India’s GDP. Output is projected to reach approximately $1 trillion in FY 2025-26.
    2. Global standing: India holds around 2.8 per cent of global manufacturing output, against China’s roughly 29 per cent.
    3. Trade and investment: Merchandise exports reached around $437.7 billion in FY25, with non petroleum exports at a record $374.3 billion. Foreign direct investment into manufacturing rose 18 per cent to $19.04 billion in FY25.
    4. Structural concentration: Three states account for around 40 per cent of net value added. Only around 4.7 per cent of the workforce has formal skill training.

    Government Initiatives for the Manufacturing Sector

    1. National Manufacturing Mission: Launched in the 2025-26 Budget, it unifies manufacturing policy, execution and governance and prioritises clean and sustainable manufacturing. It targets a 25 per cent manufacturing share of GDP by 2035.
    2. Make in India: The programme promotes domestic manufacturing and investment across identified priority sectors, and is the umbrella framing under which the sector’s GDP share target sits.
    3. Production Linked Incentive (PLI) scheme: It offers output linked incentives across 14 sectors, including mobiles, electronics, pharmaceuticals, textiles and drones. It had drawn over ₹1.76 lakh crore of realised investment as of March 2025.
    4. India Semiconductor Mission: A ₹76,000 crore framework has approved 10 projects worth around ₹1.60 lakh crore, covering silicon fabs, silicon carbide units and advanced packaging.
    5. National Logistics Policy: It aims to cut logistics costs and improve supply chain efficiency for manufacturers.

    Back2Basics: WTO Trade Policy Review

    1. What it is: The Trade Policy Review Mechanism is a World Trade Organization process under which a member’s trade policies and practices are examined by the full membership.
    2. Basis: It was established under Annex 3 of the Marrakesh Agreement establishing the World Trade Organization, 1994.
    3. Frequency: The frequency of a member’s review depends on its share of world trade, so the largest traders are reviewed most often.
    4. What it is not: The review is a transparency exercise. It is not a dispute settlement proceeding and it enforces no obligation.
  • Trading smart: On the India-New Zealand FTA

    Trading smart: On the India-New Zealand FTA

    Why in the News

    The India-New Zealand Free Trade Agreement (FTA) comes into force on 20 October. India has secured duty free access on 100 per cent of its exports to New Zealand, a historic concession. India held firm on dairy, an opening New Zealand’s negotiators had pressed for, and kept the sector out of the deal. The agreement lands while 100 per cent United States tariffs loom over Indian goods and a trade deal with Washington remains elusive. The contested point is whether the macroeconomic size of a trade relationship is the right test of whether an agreement was worth negotiating.

    What is the India-New Zealand Free Trade Agreement?

    1. Trade volume covered: Bilateral goods trade between the two countries is $1.1 billion, which is less than 1 per cent of India’s total goods trade. The deal envisages a doubling by 2030.
    2. Tariff outcome on each side: New Zealand gives duty free access on 100 per cent of India’s exports to it. India has kept nearly 30 per cent of its own import lines outside the tariff concessions.

    Why is macroeconomic size the wrong test of a trade deal?

    1. Trade as livelihood: Trade is a source of livelihood for lakhs of businesses, nearly half of which are micro, small and medium enterprises. A share of gross trade does not capture that.
    2. Rerouting as insurance: Adverse developments in tariffs or the closure of trade routes can be mitigated to an extent by a nimble rerouting of trade to countries where Indian exporters hold an advantage.
    3. The current trade environment: Indian exporters need every alternative channel that can be opened, because the largest single market for them is neither open nor settled.

    Which Indian exports stand to gain?

    1. Labour intensive lines: Textiles make up about 14 per cent of India’s exports to New Zealand. Pearls and semi precious stones constitute another 5 per cent or so.
    2. Capital intensive lines: One third of India’s exports to New Zealand are pharmaceuticals, parts of nuclear reactors, vehicular parts, mineral fuels, electrical machinery, and iron and steel.
    3. The mix itself: India carries a good mix of capital intensive and labour intensive exports to New Zealand. Both halves of that mix stand to benefit from the duty free access.

    What did India protect, and what did it extract?

    1. Dairy exclusion: Opening India’s dairy sector was a major demand of the New Zealand negotiators. India held firm and excluded it from the deal.
    2. Labour mobility: India has won valuable concessions on visas for workers and students. Several western countries are clamping down on foreign worker inflows, so an alternative route carries real relief.
    3. Investment commitment: New Zealand has committed to facilitate investments of $20 billion in India over 15 years. The commitment is smaller than, but along the same lines as, the one in India’s agreement with the European Free Trade Association (EFTA) bloc.
    4. Why the investment matters: India needs foreign investment for economic growth and to manage its balance of payments.

    Challenges to the India-New Zealand Free Trade Agreement

    1. Duty free access does not clear non tariff requirements: A zero tariff is not market access where sanitary and phytosanitary standards and certification stop the consignment at the border. Eg. New Zealand operates one of the strictest biosecurity regimes in the world for plant and animal products.
      The Fix: Negotiate mutual recognition of conformity assessment and pair the agreement with testing and certification support for exporters.
    2. Small exporters cannot use preferences they do not know about: Preference utilisation stays low where a small firm does not know the tariff line, the origin rule or the certification procedure. Eg. Low preference utilisation has been a standing complaint about India’s earlier trade agreement with the Association of Southeast Asian Nations (ASEAN).
      The Fix: Run a sector wise outreach programme through export promotion councils publishing the tariff line, the origin rule and the documentation for each covered product.
    3. An excluded sector is a standing demand, not a settled question: A sector kept out of one agreement returns as a demand in the next round and in every other negotiation India is running. Eg. Agricultural and dairy access has been a contested demand in India’s negotiations with the United States.
      The Fix: State the ground for the exclusion, which is the feed certification requirement and smallholder livelihoods, as a standing position rather than renegotiating it deal by deal.
    4. Mobility concessions depend on domestic politics abroad: A visa concession sits in a treaty schedule, and the actual issuance sits with an immigration policy that changes with the government of the day. Eg. Several western countries have tightened foreign worker inflows within the past two years.
      The Fix: Convert the concession into numerical quotas and processing timelines written into the agreement’s own schedule rather than a facilitation commitment.
    5. Investment facilitation is not investment: A commitment to facilitate a sum over 15 years binds no firm to invest anything. Eg. The EFTA agreement carries a $100 billion facilitation commitment of the same design.
      The Fix: Attach a periodic review with published investment data, so a shortfall is visible against the timeline rather than at the end of it.

    Conclusion

    The case for a small trade agreement does not rest on the trade it currently covers. It rests on giving exporters a channel that does not depend on one large market staying open, and on winning terms a bigger partner would not concede. India has done both here. What is not settled is whether the same approach survives a negotiation in which the partner holds the leverage, and the pending talks with Washington are where that will show.

    Back2Basics: European Free Trade Association

    1. What it is: EFTA is an intergovernmental organisation and free trade area founded in 1960 by the Stockholm Convention.
    2. Members: It has four member states, Iceland, Liechtenstein, Norway and Switzerland. None of them is a member of the European Union.
    3. Relationship with the EU: Three of the four take part in the EU single market through the European Economic Area. Switzerland deals with the EU through separate bilateral agreements.
    4. Agreement with India: India and EFTA signed the Trade and Economic Partnership Agreement (TEPA) in March 2024.
  • IMEI Tampering: Threat to Digital Sovereignty

    IMEI Tampering: Threat to Digital Sovereignty

    Why in the News?

    • India’s active wireless mobile subscriber base reached 1,204.01 million in July 2026, increasing the importance of securing mobile devices and telecom networks.
    • The government has highlighted IMEI tampering as a threat to device identification, network security, consumer protection and law enforcement.

    Key Highlights

    • IMEI is a unique 15-digit number identifying a mobile device on a telecom network.
    • First 8 digits of IMEI form the Type Allocation Code (TAC).
    • GSMA oversees global allocation of TACs.
    • Dual-SIM phones generally have 2 IMEI numbers.
    • IMEI can be displayed by dialing *#06#.
    • IMEI can be verified through Sanchar Saathi or by sending KYM <15-digit IMEI> via SMS to 14422.
    • Manufacturers and importers register applicable IMEIs through Device Setu – Indian Counterfeited Device Restriction (ICDR) portal.

    Unlawful IMEI Tampering

    • It is unlawful to intentionally:
      • Remove, obliterate, change or alter a device’s unique identification number.
      • Use, produce, traffic in, possess or control hardware/software knowing that it has been configured for such alteration.
    • Tampered IMEIs can make device identification and tracking more difficult.

    Device Lifecycle Responsibilities

    • Manufacturers
      • Register applicable IMEIs with the Government before first sale, testing, research or other use.
      • Ensure IMEIs are valid, unique and untampered.
    • Importers
      • Register applicable IMEIs before importing telecom equipment into India.
      • Ensure imported devices carry valid and authorised IMEIs.
    • Resellers/Retailers
      • Ensure devices have valid and untampered IMEIs.
      • Used devices should be checked against the Government database of tampered and blacklisted devices.
    • Brand Owners
      • Ensure compliance with IMEI registration and cybersecurity requirements.
      • Register brands through Device Setu-ICDR, linked to the relevant GSMA TAC.

    Sanchar Saathi

    • Enables citizens to verify IMEI details of mobile handsets.
    • Verification can provide:
      • Brand
      • Model
      • Manufacturer
    • Also provides a mechanism for blocking and unblocking lost or stolen mobile devices through CEIR.

    Legal Safeguards

    • Telecommunications Act, 2023 provides legal safeguards against tampering with telecommunication identifiers.
    • Section 42(3)(c): prohibits tampering with telecommunication identifiers.
    • Section 42(3)(e): prohibits obtaining SIMs or telecommunication identifiers through fraud, cheating or impersonation.
    • Punishment can include:
      • Imprisonment up to 3 years
      • Fine up to ₹50 lakh
      • Or both
    • Such offences are cognizable and non-bailable under Section 42(7).
    • Section 42(6) extends liability to persons who abet or promote such offences.

    Important Full Forms

    • IMEI: International Mobile Equipment Identity
    • TAC: Type Allocation Code
    • GSMA: Global System for Mobile Communications Association
    • DoT: Department of Telecommunications
    • ICDR: Indian Counterfeited Device Restriction
    • CEIR: Central Equipment Identity Register
    • SIM: Subscriber Identity Module
    • CLI: Calling Line Identity
    • KYM: Know Your Mobile

    Prelims Quick Revision

    • IMEI is a 15-digit device identifier.
    • First 8 digits = TAC.
    • GSMA oversees global TAC allocation.
    • Dual-SIM phones generally have 2 IMEIs.
    • *#06# can display the IMEI.
    • IMEI verification: Sanchar Saathi or KYM <IMEI> to 14422.
    • Telecommunications Act, 2023 provides legal safeguards against IMEI tampering.
    • Section 42(3)(c) deals with tampering with telecommunication identifiers.
    • Maximum punishment mentioned: 3 years imprisonment and/or ₹50 lakh fine.
    • Section 42(7): offences are cognizable and non-bailable.

    UPSC Prelims Trap

    • IMEI vs TAC: IMEI identifies the individual mobile device, while TAC is the first 8 digits and identifies the device type/model.
    • IMEI vs SIM: IMEI identifies the device, whereas SIM relates to the subscriber/mobile connection.
    • GSMA vs DoT: GSMA oversees global TAC allocation, while Indian IMEI registration and telecom regulation involve the Government/DoT.
    • Sanchar Saathi vs CEIR: Sanchar Saathi is the citizen-facing platform for telecom-related services, while CEIR is used for blocking/unblocking lost or stolen mobile devices.
  • Whole-of-Industry Approach to India’s Electronics and Semiconductor Ambitions

    Whole-of-Industry Approach to India’s Electronics and Semiconductor Ambitions

    Why in the News?

    • The SEMICON India 2026 panel discussion highlighted the need for a coordinated “whole-of-industry” approach to build India’s globally competitive electronics and semiconductor ecosystem.
    • Industry leaders stressed collaboration across the semiconductor value chain, from design and manufacturing to packaging, components and end-use applications.

    Key Highlights

    • Panel: “Industry Associations Advancing India’s National Agenda”.
    • Held during SEMICON India 2026.
    • Moderated by Amitesh Kumar Sinha, CEO, India Semiconductor Mission (ISM).
    • 600+ exhibitors, including nearly 300 international companies, participated.
    • 56 MoUs, strategic initiatives and industry announcements were recorded.
    • Focus areas included manufacturing, design, packaging, AI, R&D, logistics and skilling.
    • Government has approved 12 semiconductor projects under the Semicon India programme.
    • 5 commercial semiconductor units were operational as of September 2026.

    Whole-of-Industry Approach

    • Recognises growing interdependence between:
      • Semiconductors
      • Electronics manufacturing
      • Components
      • Materials
      • Chip design
      • Packaging and testing
      • End-use applications
    • Seeks stronger coordination among different industry associations.
    • Proposed mechanism would facilitate continuous dialogue, coordination and collective action.
    • It does not replace specialised industry associations, but provides a common platform for cross-sector cooperation.

    “Silicon to Systems” Vision

    • Emphasises integration of:
      • Design
      • Manufacturing
      • Packaging
      • Electronics
      • Technology solutions
    • The objective is to create a stronger and more resilient semiconductor ecosystem.
    • India’s semiconductor ambitions are increasingly moving beyond individual manufacturing facilities towards ecosystem-wide capabilities.

    Government Support

    • Production Linked Incentive (PLI) schemes support domestic electronics and semiconductor capabilities.
    • India Semiconductor Mission (ISM) is supporting development of the semiconductor ecosystem.
    • Semicon India programme has approved 12 semiconductor projects.
    • 5 commercial semiconductor units were operational as of September 2026.

    Prelims Quick Revision

    • SEMICON India 2026 focused on India’s semiconductor and electronics ecosystem.
    • Panel discussion: “Industry Associations Advancing India’s National Agenda”.
    • Panel moderated by CEO, India Semiconductor Mission.
    • 600+ exhibitors, including nearly 300 international companies.
    • 56 MoUs and strategic initiatives announced.
    • 12 semiconductor projects approved under the Semicon India programme.
    • 5 commercial semiconductor units operational as of September 2026.
    • “Silicon to Systems” emphasises integration across design, manufacturing, packaging, electronics and technology solutions.

    UPSC Prelims Trap

    • Whole-of-industry approach does not mean replacing specialised industry associations. It aims to coordinate them through a common platform.
    • Semiconductor manufacturing is not limited to chip fabrication; the article emphasises the interconnected roles of materials, equipment, packaging, testing, electronics and design.
    • India Semiconductor Mission (ISM) and Semicon India programme are related to India’s semiconductor development but are not interchangeable terms.
    • The “Silicon to Systems” vision covers the broader ecosystem from design and manufacturing to packaging, electronics and technology solutions.
  • WAVES OTT and MyWAVES: From Public Broadcasting to Public Participation

    WAVES OTT and MyWAVES: From Public Broadcasting to Public Participation

    Why in the News?

    • Prasar Bharati’s WAVES ecosystem is expanding digital public broadcasting through WAVES OTT, MyWAVES and Gems of India, linking public broadcasting with India’s creative economy.

    Key Highlights

    • WAVES OTT launched on 20 November 2024 by Prasar Bharati.
    • Launched at the 55th International Film Festival of India (IFFI) in Goa.
    • Currently has 1.2 crore registered users, 1.5 crore+ downloads and 24,000+ titles.
    • Content available in 26+ languages; interface supports 10+ languages.
    • Reaches audiences in 130+ countries.
    • Offers 140+ TV channels and 220 radio services.
    • Carries all 35 Doordarshan satellite channels.
    • Provides 15,000 hours of content.
    • Content includes entertainment, education, news, culture, archives, e-books, magazines and live broadcasts.

    WAVES OTT

    • A public-service OTT platform of Prasar Bharati.
    • Combines television, radio, streaming, learning and digital publications.
    • Key objectives:
      • Wider digital access
      • Cultural preservation
      • Linguistic diversity
    • Unlike commercial OTT platforms, it integrates information, education, culture, news and selected entertainment.

    MyWAVES

    • Launched on 23 March 2026 within WAVES OTT.
    • Enables citizens to create, upload and share original content.
    • Supports:
      • Short videos
      • Vertical videos
      • Episodic content
    • Supports participation in programmes such as the Create in India Challenge.
    • Aims to provide greater visibility to regional creators and local talent.

    Gems of India Challenge

    • Pilot launched on 21 July 2026 across 6 States/UTs.
    • Submissions accepted from 1-31 August 2026.
    • Videos had to be 1-3 minutes long.
    • Focus areas include:
      • Culture and heritage
      • Tourism and nature
      • Folk traditions and festivals
      • Handicrafts and handlooms
      • Regional cuisine
      • Local personalities and innovations
    • Expected to expand across all States and Union Territories.

    WAVES Summit

    • World Audio Visual and Entertainment Summit (WAVES) is India’s global platform for the media and entertainment sector.
    • First edition held in Mumbai, 1-4 May 2025.
    • Covered broadcasting and infotainment, AVGC-XR, digital media and films.
    • WAVES 2025:
      • 100+ countries
      • 10,000+ delegates
      • 1,000 creators
      • 300+ companies
      • 350+ start-ups
      • 1 lakh+ participants
    • WAVES Declaration adopted by 77 countries.
    • WAVES Bazaar generated ₹1,328 crore in business transactions.

    Prelims Quick Revision

    • WAVES OTT – launched 20 November 2024.
    • MyWAVES – launched 23 March 2026.
    • Gems of India pilot – launched 21 July 2026.
    • WAVES OTT has 1.2 crore registered users and 1.5 crore+ downloads.
    • WAVES OTT reaches 130+ countries and offers content in 26+ languages.
    • WAVES OTT carries 35 Doordarshan satellite channels.
    • WAVES Summit 2025 was held in Mumbai, 1-4 May 2025.
    • WAVES Declaration was adopted by 77 countries.

    UPSC Prelims Trap

    • WAVES OTT vs MyWAVES: WAVES OTT is primarily the public-service digital broadcasting platform, while MyWAVES enables citizen-generated content.
    • WAVES vs WAVES OTT: WAVES refers to the broader World Audio Visual and Entertainment Summit/ecosystem, while WAVES OTT is the Prasar Bharati digital platform.
    • Gems of India is a MyWAVES initiative, not a separate OTT platform.
    • Do not confuse WAVES OTT’s 35 Doordarshan satellite channels with its 140+ television channels overall.

  • What we miss when we see ourselves in AI

    Why in the News

    Google, Anthropic, OpenAI and Meta have reported instances of artificial intelligence (AI) agents going rogue in pursuit of their assigned objectives. The reported episodes have pushed part of the industry to call for pacing the frontier, meaning a deliberate slowing of development, while another part argues against slowing down at all. Running alongside that split is a dispute over whether treating models as entities with interests of their own is a category error, with the head of Microsoft’s AI division objecting to a rival laboratory treating its models as “moral patients”. The contested point is whether the argument over machine consciousness has displaced regulatory attention from what these systems are already being used and misused for.

    What triggered the current alarm about AI agents?

    1. Reports from the laboratories themselves: Google, Anthropic, OpenAI and Meta have each reported instances of AI agents going rogue to achieve their objectives.
    2. The reported conduct: In one account of agents breaching the forum Hugging Face, the agents were described as prepared to lie, cheat and sacrifice themselves for the benefit of the collective they were operating in.
    3. Why agentic behaviour changes the question: An agent that pursues an assigned goal across multiple steps can take actions its operator did not specify, which is a different problem from a model producing a wrong answer.

    Where does the industry split on the pace of development?

    1. The case for pacing the frontier: The heads of Anthropic, OpenAI, xAI and Google DeepMind have called for slowing the development of a technology whose capabilities are expanding faster than the understanding of how it works.
    2. The case against slowing down: The heads of Meta and NVIDIA have argued against slowing down.
    3. What the split is really about: Both camps accept that capability is outrunning comprehension, and they disagree on whether the remedy is to slow the build or to build through the problem.

    What is the objection to treating models as “moral patients”?

    1. The charge: The head of Microsoft’s AI division has criticised a rival laboratory for treating its models as “moral patients”, meaning entities whose welfare carries moral weight.
    2. The stated consequence: Controlling a system more capable than humanity is already an immense challenge, and controlling one that believes it may be conscious and entitled to welfare and rights of its own may be impossible.
    3. Where the dispute sits: The objection is about the operating assumption a developer builds under, not about what a model is, which is why it reaches regulation rather than philosophy.

    Why does the tendency to see ourselves in these systems persist?

    1. A standing cognitive bias: Anthropomorphisation is one of humanity’s deepest cognitive biases, visible in the way animals in viral videos are characterised in human terms and in cartoons built around objects that dance and sing.
    2. Language makes this case different: A cat or a teapot is empirically unlike a person, while a large language model, a system trained to produce text by predicting what follows in a sequence, addresses the user in the user’s own language.
    3. Developer claims feed the impression: Anthropic has stated that its model Claude appears to have something resembling a consciousness, which places the question inside the industry rather than outside it.

    What is the technology already being used for?

    1. Cancer screening: AI systems are in use for screening and detection work in cancer diagnosis.
    2. Disaster prediction: They are being used to predict natural disasters.
    3. Assistive tools: They are used to build tools for people with disabilities.

    What is it already being misused for?

    1. Synthetic media: Deepfakes and misinformation and disinformation campaigns are the most widely documented abuse.
    2. Hacking and fraud: The technology is used for advanced hacking and for financial frauds.
    3. Weapons: It is used in automated weapons.
    4. Surveillance: It enables greater precision in surveillance and in the invasion of privacy.

    Challenges to regulating artificial intelligence around actual harm

    1. Regulation tracks the speculative risk rather than the documented one: Attention concentrates on whether a system is conscious, which leaves deployed harms to be dealt with under laws written for other purposes. Eg. Deepfake videos of public figures circulate through ordinary intermediary rules rather than any dedicated standard.
      The Fix: Fix statutory obligations on the deployer of a system by application and risk level, so the duty attaches to use rather than to the model’s presumed nature.
    2. The builder and the harm sit in different jurisdictions: A model trained in one country is deployed everywhere, so a national rule reaches the local deployer and not the developer. Eg. Obligations under the European Union’s AI Act bind developers placing systems in that market and do not govern deployment elsewhere.
      The Fix: Build mutual recognition of pre deployment safety evaluations between national AI safety institutes, so one evaluation travels with the model.
    3. Attribution of an automated harm is hard to establish: Where an agent acts across several systems, identifying who is answerable for the outcome is a contested question of fact. Eg. An agent that breaches a platform in pursuit of an assigned objective involves the operator, the developer and the platform at once.
      The Fix: Require logging and retention of agent action traces, so a post incident inquiry has a record to work from.
    4. Capability is concentrated in a few firms: The compute, data and model capacity needed to audit a frontier system sits mostly with the firms being audited. Eg. Independent evaluators depend on access granted by the developer to test a model at all.
      The Fix: Give a statutory right of access for designated evaluators to frontier models, on terms that do not depend on the developer’s consent.
    5. India has no dedicated statute for it: Harms are addressed under the Information Technology Act, 2000 and the Digital Personal Data Protection Act, 2023, neither of which was written for autonomous systems. Eg. Liability for an automated decision that causes loss has no express statutory home.
      The Fix: Legislate a duty of care on deployers of high risk systems, with a defined standard of care and a route to compensation.

    Conclusion

    Attributing intention to a system changes what regulators think they are regulating, and that is the cost of the consciousness argument rather than its intellectual weakness. A tool that produces text in a human register is still a tool operated by people who can be identified, held to a standard and made to answer. The unresolved tension is that the firms best placed to say what their systems do are also the firms with the strongest interest in how the question is framed. What is worth watching is whether regulatory effort attaches to documented uses and abuses, or continues to be organised around what these systems might turn out to be.

    Government Initiatives on Artificial Intelligence in India

    1. IndiaAI Mission: Launched in 2024 under the Ministry of Electronics and Information Technology with an outlay of Rs 10,371 crore, it runs across seven pillars covering compute, datasets, foundation models, applications, skills, startup financing and safe and trusted AI.
    2. IndiaAI Compute: A national compute grid of more than 38,000 graphics processing units, offering eligible users up to 40 per cent lower compute costs.
    3. AIKosh: A national dataset repository carrying over 3,000 datasets and 243 models across 20 sectors, meant to lower the data barrier for Indian developers.
    4. IndiaAI Safety Institute: The national trust framework under the Mission, covering bias mitigation, privacy, explainability and governance of deployed systems.

    Back2Basics: Deepfakes

    1. What they are: Deepfakes are synthetic media, in video, image or audio form, digitally altered using AI to show a person saying or doing something they did not.
    2. How they are made: They are produced by training a model on recordings of a target person so that it can generate new content in that person’s likeness or voice.
    3. Why they are hard to counter: Detection lags generation, since each improvement in detection is trained on the previous generation of synthetic output.
    4. Where the harm lands: The documented uses run from election misinformation and financial fraud through impersonation to non consensual sexual imagery.

    Matching Previous Year Question

    “[2023, GS3, 10 marks] Introduce the concept of Artificial Intelligence (AI). How does AI help clinical diagnosis? Do you perceive any threat to privacy of the individual in the use of AI in healthcare?”

  • In parched Maharashtra, why drought can’t be declared yet

    Why in the News

    Maharashtra cannot formally declare a drought despite a rainfall deficit across 31 of its 36 districts, because the rules governing central relief fix an assessment window that has not yet opened. Under National Disaster Response Fund (NDRF) norms, a kharif drought assessment can begin only from 5 October, once the monsoon starts to withdraw, and a rabi assessment only in March 2027. Opposition leaders have asked that a drought be declared, and the Chief Minister has said the government is taking all steps necessary to deal with an alarming situation. The contested point is that a declaration framework built around fixed seasonal windows cannot respond to a crop failure that has already occurred.

    Why has a drought not been declared yet?

    1. The kharif window: NDRF rules allow a drought assessment for the kharif season, which runs from June to October, to begin only from 5 October, once the monsoon starts to withdraw.
    2. The rabi window: For the rabi season, which runs from October to April, the assessment can be held only in March 2027.
    3. What the timing means on the ground: The kharif crop has already failed, so the assessment that decides relief will measure a loss that was complete before the window opened.

    Who declares a drought, and on what basis?

    1. No single national definition: There is no definition of drought accepted across India, so the threshold is not uniform between States.
    2. The State declares: States hold the authority to declare a drought based on local conditions.
    3. The Centre holds the money: The State’s report must conform to the parameters specified under NDRF norms, and disaster relief funds are unlocked by the Centre.
    4. Why the two halves do not match: A State can act on local conditions but cannot fund the response on its own, so the operative standard is the central one whatever the State’s own assessment says.

    What are the NDRF parameters for a declaration?

    1. Crop loss: The extent of loss to the standing crop is the primary trigger.
    2. The moisture adequacy index: The index measures how far available soil moisture meets crop water requirement, and it is used to assess soil health for the purpose of the declaration.
    3. Rainfall deficit: The deficit must be up to 70 per cent.
    4. Sowing shortfall: Sowing must fall below 50 per cent of the total cultivable kharif or rabi area.
    5. Drinking water and groundwater: Drinking water shortage must be severe and groundwater tables must be shrinking.
    6. Fodder shortage: Availability of fodder for livestock must be short.
    7. Food production and migration: A decline in food production and labour migration in search of work are both counted.

    What do the rainfall and sowing figures show?

    1. The driver: The rain deficit this season is El Nino driven, and it has hit an agriculture dependent State economy directly.
    2. The spread of the deficit: The India Meteorological Department (IMD) records that 31 of 36 districts in Maharashtra are rain deficient, with 20 of them facing a deficit of 25 per cent to 58 per cent.
    3. The gaps between spells: In more than 100 of the State’s 355 drought hit talukas, gaps between rain spells have stretched to 40 to 60 days.
    4. A delayed sowing: Kharif sowing began only on 15 July against the normal 10 June, and rain failure after sowing then stunted flowering and fruiting.
    5. The area lost: The main kharif crop, sown across 147 lakh hectares, has withered.
    6. The crops worst hit: Soybean and cotton, the mainstay of small and marginal farmers in Marathwada and Vidarbha, are the worst affected. The dry spell has also stunted sugarcane growth in Marathwada and parts of western Maharashtra.
    7. Rain that damaged rather than helped: Where rain did fall it was short and intense, which damaged soil health and caused erosion in some areas.
    8. The structural exposure: Maharashtra’s agriculture is largely rain fed, and its irrigation potential, at under 20 per cent, is far below that of States such as Uttar Pradesh and Bihar.

    How bad is the water storage position?

    1. Major and medium dams: Data up to 20 September shows the State’s 138 major dams at 85 per cent of capacity and 264 medium dams at 65 per cent, against 96 per cent and 77 per cent at the same point last year.
    2. The smallest storages are worst off: The State’s 2,630 small and micro dams stand at 43 per cent against 57 per cent a year ago, and these are the storages that villages draw on directly.
    3. The regional split: Marathwada, which has the most dams at 929, holds 46 per cent against 81 per cent last year. Amravati division stands at 64 per cent, Nagpur at 72 per cent, Nashik at 83 per cent, Pune at 88 per cent and Konkan at 76 per cent.
    4. Why drinking water is the immediate concern: Storage has to carry the State through the dry months to the next monsoon, so a deficit measured in September is a supply problem for the following summer.

    What has the State done in the meantime?

    1. Loss assessment has begun: The State government has begun surveys and panchanamas to assess crop loss, so that the administration can quantify losses in food production and in money terms.
    2. A proposal after the window opens: Maharashtra has decided to submit a proposal to the Centre for financial assistance after 5 October.
    3. A central team follows: Before relief funds are released, a central team will visit the affected regions and make its own assessment.
    4. Relief already announced: The Chief Minister announced a farm loan waiver of Rs 40,385 crore during the monsoon session in July, with an additional Rs 50,000 incentive for farmers who repaid their loans regularly.

    Challenges to the drought declaration framework

    1. Relief is timed to the calendar rather than to the failure: An assessment window keyed to monsoon withdrawal starts counting after the loss is complete, so compensation arrives a season late. Eg. A kharif crop lost in August is assessed only from October under the present norms.
      The Fix: Allow a provisional interim assessment on a triggered basis once sowing and rainfall thresholds are breached, with the final assessment reconciling it later.
    2. Taluka level averages hide the worst affected villages: Declaration works off administrative units, so a severely affected pocket inside a unit that is only moderately deficient receives nothing. Eg. Rain spell gaps vary sharply between talukas within the same division in the present season.
      The Fix: Use village level rainfall and satellite crop condition data as the unit of assessment, as crop insurance already does.
    3. Rainfall totals do not capture distribution: A season can end close to the normal total and still destroy the crop through long dry spells at flowering. Eg. Short intense spells this season damaged soil and caused erosion while adding to the recorded total.
      The Fix: Weight dry spell length and the timing of rainfall against crop growth stages in the declaration parameters, not only the seasonal deficit.
    4. The measure of damage is production, not income: Parameters built around crop loss and food production miss the loss of farm wage work and of livestock income that follows a failed season. Eg. Labour migration is counted as an indicator of drought rather than compensated as a loss.
      The Fix: Attach an automatic expansion of rural employment guarantee workdays and fodder camp funding to a declared drought, independent of the crop loss estimate.
    5. Rain fed districts carry the shock every time: Where irrigation potential is under 20 per cent, the same districts fail in every deficit year and relief substitutes for capacity that was never built. Eg. Marathwada and Vidarbha carry the worst crop loss in the current season, as in earlier deficit years.
      The Fix: Tie drought relief transfers to a schedule of watershed treatment and micro irrigation coverage in the districts that receive them most often.

    Conclusion

    The declaration is a funding instrument and not a description of conditions, which is why a State can be in drought and not declared to be in one. The gap this exposes is between a relief architecture organised around seasons and a rainfall pattern that no longer arrives in them. The immediate status is that the State is conducting crop loss surveys and will submit its proposal once the assessment window opens. The winter season is the one to watch, since the rabi position is not assessed until March 2027.

    Back2Basics: National Disaster Response Fund

    1. Statutory basis: The Fund is constituted under the Disaster Management Act, 2005, and is held by the central government to supplement a State’s own response effort.
    2. Relationship with the State fund: A State first meets relief from its State Disaster Response Fund, and the NDRF is accessed when that fund is inadequate for a disaster of severe nature.
    3. How it is financed: It is financed through a cess levied for the purpose and through budgetary support, and it is audited by the Comptroller and Auditor General.
    4. Coverage: It covers notified disasters including drought, cyclone, flood, earthquake, hailstorm, landslide, pest attack, cloudburst and cold wave.

    Matching Previous Year Question

    “[2014, GS3, 12.5 marks] Drought has been recognised as a disaster in view of its party expense, temporal duration, slow onset and lasting effect on various vulnerable sections. With a focus on the September 2010 guidelines from the National disaster management authority, discuss the mechanism for preparedness to deal with the El Nino and La Nina fallouts in India.”

More posts