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  • Manipur’s demand for a 1951 baseline for NRC: Why the date is contentious

    Why in the News

    The State’s Home Minister has told the Manipur Assembly that 1951 will be the base year for updating the National Register of Citizens (NRC) in the State, a register of residents against which claims to belonging are tested. The State cannot implement an NRC without the Centre’s approval, and officials are tracing the records of the register prepared in 1951. The choice of year is not an administrative detail. Manipur’s own permit system controlling entry from outside lapsed in 1950, which is why valley based organisations treat 1951 as the point from which outsiders must be identified. The Kuki Zo Council has challenged the reliability of that baseline, since the hill districts were barely enumerated in that year. A baseline that one set of claimants treats as the earliest honest record is the same baseline another treats as a record of its own absence.

    Why does 1951 have a claim as Manipur’s baseline?

    1. The permit system lapsed just before it: The erstwhile princely State ran a permit system regulating the entry of people from outside, and that system was abolished in 1950.
    2. 1951 produced both a count and a register: The first Census of independent India was conducted in 1951, and an NRC was prepared alongside it carrying names, parentage and residence.
    3. The earliest available demographic baseline: The Joint Committee on Inner Line Permit System (JCILPS), the umbrella body that led the agitation for an Inner Line Permit, argues that 1951 is the earliest point against which later migration and population change can be measured.
    4. The growth figure it relies on: The same body cites recorded decadal population growth rising from 12.80% in 1951 to 35.04% in 1961. A rise of that size does not by itself establish illegal immigration as its cause.

    What earlier settlements already named 1951?

    1. The 1980 understanding: The “Proceedings of Understanding” between the State government and student organisations named 1951 as the baseline.
    2. The 1994 agreement: A further agreement between the Lieutenant Governor and student organisations, concluded under President’s Rule in the State, carried the same year.
    3. The 2018 Bill: The Manipur People’s Protection Bill, 2018 named 1951 and classified as “non Manipuris” those who were not Meitei, not Meitei Pangal, not members of the Scheduled Tribes, and not resident in Manipur before 1951.
    4. Passed but never law: The Assembly passed that Bill unanimously and it did not become law.

    Why did Assam settle on a 1971 cut off instead?

    1. A longer agitation produced it: Assam had a far longer and more intense history of agitation over illegal immigration, culminating in the Assam Movement of 1979 to 1985.
    2. The Accord fixed a base date: Under the Assam Accord, 1 January 1966 was fixed as the base date. Those who entered before it were to be regularised.
    3. Two further brackets followed: Entrants between 1 January 1966 and 24 March 1971 were to be detected and registered under the law. Those entering on or after 25 March 1971 were to be detected and expelled.
    4. The date came from a settlement, not a survey: The 1971 date emerged from that specific political settlement, shaped by migration from East Pakistan and the creation of Bangladesh.
    5. Manipur’s proponents distinguish their case: They argue their problem arises from the abolition of the permit system and later demographic change rather than from partition era migration.

    Why has the demand gained urgency now?

    1. It predates the current conflict: The demand existed before the ethnic violence that began in May 2023.
    2. A cross border influx added a security dimension: The movement of people from Myanmar after the 2021 military coup gave the demand a security framing it did not previously carry.
    3. Representation is the new stake: The 2027 Census and the prospect of delimitation have made the sequence of the two exercises politically significant.
    4. Valley organisations want the register first: Meitei and Naga organisations want the NRC completed before the Census, arguing that population figures should not influence future political representation until illegal immigration has been addressed.

    Why do the hill based organisations reject a 1951 baseline?

    1. The 1951 enumeration was incomplete in the hills: The Kuki Zo Council says most hill areas of Manipur had virtually no road connectivity in 1951, which made comprehensive population enumeration difficult.
    2. An incomplete record excludes rather than verifies: On that reading, a 1951 benchmark could exclude indigenous communities who were never fully counted in the first place.
    3. A community older than the boundary: Kuki, Zomi and Chin communities have historically lived on both sides of the India Myanmar border, so organisations representing them fear that a 75 year old baseline would fall hardest on them.

    Challenges to a 1951 baseline for the Manipur NRC

    1. The State has already reversed itself on the year: A shift in the proposed base year from 1971 to 1951 in 2018 triggered protests. Eg. In Jiribam, people from communities with longstanding links to neighbouring Assam feared exclusion, and the Bill was never brought into force.
      The Fix: Settle the base year through a published inquiry into record availability district by district before it is announced as policy.
    2. Its own operational choice was a different year: When the government had to operationalise the Inner Line Permit system, the Cabinet chose 1961 as the base year in 2022. Eg. The then Chief Minister said the choice followed consideration of the interests of the State’s 34 recognised tribes, and the 2024 recommendation of an NRC to the Centre also proposed 1961.
      The Fix: Align the NRC base year with the year already in force for the permit system, so one State does not operate two definitions of residence.
    3. Proof falls on those least able to furnish it: A baseline that old cannot distinguish a recent migrant from a long settled resident who simply cannot produce records. Eg. Assam’s own exercise left over 19 lakh applicants out of the final register published in 2019, largely on documentary grounds.
      The Fix: Accept a defined ladder of alternative proof, including school, land and ration records and village level certification, rather than a single documentary standard.
    4. The legal consequence of exclusion is undefined: The Centre would have to prescribe the evidentiary and appeals framework and clarify what exclusion means in law. Eg. Applicants excluded in Assam were left to Foreigners Tribunals, a forum whose orders have been criticised for inconsistent standards.
      The Fix: Publish the appeal forum, the time limit and the legal status of an excluded person before any enumeration begins.
    5. Displacement compounds verification: In a State where conflict has displaced thousands, documentary verification becomes harder still. Eg. Households moved into relief camps after the violence left property and identity records behind.
      The Fix: Treat a State certified displacement record as admissible proof of prior residence.

    Conclusion

    A base year is a political settlement presented as a date. Manipur’s valley and hill organisations both accept a register in principle and cannot agree on the year that defines belonging, because each candidate year redistributes the burden of proof. What to watch is the order of steps. If a base year is announced before the rules of evidence and appeal are written, the exercise will start producing exclusions before it has defined what exclusion means.

    Back2Basics: Inner Line Permit

    1. What it is: A travel document that an Indian citizen from another State must obtain to enter a protected State, valid for a limited period and purpose.
    2. Its legal source: It operates under the Bengal Eastern Frontier Regulation, 1873, which empowered the authorities to restrict entry into designated frontier areas.
    3. Where it applies: Arunachal Pradesh, Nagaland and Mizoram have long required it, and Manipur was brought under the regime in 2019.
    4. What it does not decide: It regulates entry and stay by citizens of other States and does not by itself determine citizenship or residence for any other purpose.

    Matching Previous Year Question

    “[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 ANSWER: (a)”

  • Court protects space for protest, it needs to

    Why in the News

    The Chief Justice of India has rebuked a Greater Noida executive magistrate for issuing a notice to a student over his alleged participation in the Cockroach Janta Party led protests over examination paper leaks. The notice went out after the Supreme Court had already quashed cases against student protesters, other than those carrying a criminal history. It was revoked afterwards, and the Court has demanded accountability for its having been issued at all. Days earlier the Allahabad High Court quashed charges under the National Security Act, 1980 against another student arising from workers’ protests in Noida. Both orders grant relief to students and both uphold the right to protest. The space for protest is being preserved case by case through judicial relief, rather than by the state defining the limits on protest narrowly in the first place.

    What did the two court interventions actually decide?

    1. The earlier Supreme Court order: An order of 1 September quashed cases against student protesters, with an exception carved out for those carrying a criminal history.
    2. Accountability for a notice already withdrawn: Withdrawal of the magistrate’s notice was not treated as closing the matter, and an explanation for its issue was sought.
    3. The High Court’s characterisation: Invocation of the National Security Act, 1980 was described as “arbitrary and vague”, and the decision to invoke it as “worthy of derision”.
    4. Officials named in a chain: Responsibility was fixed on officials from the District Magistrate down to the Station House Officer.
    5. Compensation as the remedy: The student was ordered to be paid compensation for the “casual and cavalier exercise of authority by the state”.
    6. Why the wording matters: The order locates the failure in the application of an extraordinary law to ordinary protest, not in any dispute about the facts.

    Why does the right to protest need active protection?

    1. Protest is the channel for those outside institutions: In a democracy with a young population, the ability to speak and to talk back to power has to be protected and widened rather than merely tolerated.
    2. The protests produced a response: Student agitations at Jantar Mantar and beyond forced those in authority to listen, which is the function protest performs.
    3. Amplification changes the stakes on both sides: A young population with a voice and a phone to carry it makes suppression both more visible and more tempting.
    4. The record the courts are drawing on: Judicial review has been used to widen the constitutional promise of civil liberties, including the scope of the freedom of speech and expression.

    Where should the limits on protest be drawn?

    1. Limits exist and are not in dispute: Protest cannot extend to violence, vandalism or incitement to violence.
    2. The burden of definition sits with the state: Those restrictions must be framed reasonably, precisely and narrowly rather than at large.
    3. Overbreadth is the mechanism of abuse: Loose and wide definitions allow ordinary protest to be recast as an offence, which the use of a preventive detention law against a student illustrates.
    4. The stated risk: Abuse of power on that scale risks reducing a state to an “Orwellian dystopia”, a landscape denuded of freedom and marked by severe government control.

    Why is relief in individual cases not a sufficient answer?

    1. Relief arrives after the cost has been imposed: A notice or a detention order does its work in the interval before a court reaches it, through legal expense, interrupted study and the deterrent it sets for others.
    2. The incentive facing the official is unchanged: Where an overbroad order is set aside without consequence for the officer who signed it, the calculation that produced it survives intact.
    3. The guarantee has to travel downward: A constitutional promise is worth what it is worth at the police station and in the office of the local politician, not only in a constitutional court.
    4. Judicial capacity is finite: Intervention one case at a time cannot match the volume of orders a wide statute permits, so the remedy has to sit in the definition of the offence.

    Challenges to protecting the freedom to protest

    1. Preventive detention is constitutionally permitted: Detention without trial for a limited period is contemplated by the Constitution itself, so its use is a question of proportionality rather than of legality. Eg. Article 22 expressly provides for preventive detention laws and regulates only the procedure around them.
      The Fix: Require a written and reasoned satisfaction naming the specific apprehended act before a detention order takes effect, and make that record reviewable.
    2. Prohibitory orders substitute for a ban on protest: Standing orders against assembly convert a gathering into an offence without any judgment on what it is about. Eg. Orders under Section 163 of the Bharatiya Nagarik Suraksha Sanhita, 2023, which replaced Section 144 of the Code of Criminal Procedure, 1973, are renewed for long stretches in parts of the capital.
      The Fix: Cap the duration and the geographic extent of such orders and require publication of the reasons for every renewal.
    3. The process itself is the punishment: Bail applications, hearings and travel impose a cost that does not depend on any conviction. Eg. Undertrials make up the large majority of India’s prison population.
      The Fix: Provide for compensatory costs against the state as the default where a case against a protester is quashed for overbreadth.
    4. Space to assemble is shrinking: Where a city permits assembly at a single notified site, the state controls the audience a protest can reach. Eg. Ramlila Maidan and the Boat Club lawns in Delhi have progressively been closed to routine demonstrations.
      The Fix: Notify several protest sites in every city with a transparent and time bound permission process.
    5. Communication restrictions accompany protest policing: Suspension of mobile data around a protest site limits coordination and documentation together. Eg. India has recorded among the highest numbers of internet shutdowns of any country over the past decade.
      The Fix: Require every suspension order to be published with its duration and reasons, and to lapse automatically unless a review committee renews it.

    Conclusion

    The pattern in both orders is the same. An extraordinary power was turned on an ordinary protest, and a court had to say so. That is a working check and a poor system, because it places the burden of defending a constitutional guarantee on the person who was first denied it. The durable answer is a narrower statutory definition of what the state may prohibit, so that the question stops arriving in court at all.

    Back2Basics: National Security Act, 1980

    1. What it allows: It permits preventive detention of a person in order to stop an anticipated act, without charge or trial.
    2. Who may order it: The Central Government, a State Government, and a District Magistrate or Commissioner of Police so empowered may issue a detention order.
    3. Grounds: Detention may be ordered on grounds including the security of the State, the maintenance of public order, and the maintenance of supplies and services essential to the community.
    4. Duration and review: Detention may extend up to twelve months, and an advisory board must examine the order within a fixed period for it to continue.

    Matching Previous Year Question

    “[2025, GS2, 15 marks] “Constitutional morality is the fulcrum which acts as an essential check upon the high functionaries and citizens alike…” In view of the above observation of the Supreme Court, explain the concept of constitutional morality and its application to ensure balance between judicial independence and judicial accountability in India.”

  • How should RUPPs be regulated?

    Why in the News

    Six Registered Unrecognised Political Parties (RUPP) based in Gujarat received donations of about Rs 1,700 crore in the 2023 to 2024 financial year. A RUPP is a party registered with the Election Commission of India (EC) that has not met the vote and seat tests for recognition as a State or a national party. That single figure exceeds the Rs 1,480 crore received in the same period by five nationally recognised parties other than the Bharatiya Janata Party. The six remain on the list of active parties because they fielded candidates in the last general election. Registration brings tax exemption and a common symbol, and the law gives the Election Commission almost no power to remove a party that does nothing else.

    What is a Registered Unrecognised Political Party?

    1. The registering provision: Section 29A of the Representation of the People Act, 1951 (RP Act) sets out the requirements for registering a political party with the Election Commission.
    2. How registration happens: The Commission registers a party as a RUPP after satisfactory scrutiny of the documents submitted to it.
    3. Tax exemption on donations: Donations received are exempt under Section 12 of the Income Tax Act, 2025.
    4. Electoral privileges: A RUPP gets a common symbol for contesting general elections to the Lok Sabha and the State Assemblies, and is allowed 20 star campaigners during a campaign.

    What must a RUPP disclose, and what follows if it does not?

    1. Donor records above a threshold: Details of individual donors giving more than twenty thousand rupees in a financial year must be maintained and submitted to the Election Commission every year.
    2. The penalty for non disclosure: Under Section 29C of the RP Act, failure to furnish those details results in loss of income tax exemption.
    3. A cap on cash: Donations above two thousand rupees may be accepted only by cheque or bank transfer under the Income Tax Act, 2025.

    Why do parties that never seriously contest stay on the register?

    1. The gap between registration and contest: India had more than 2,800 RUPPs as of July, and only around 750 contested the 2024 general elections.
    2. The label that followed: The remainder are described as “letter pad parties”, since registration is all they maintain.
    3. No power to deregister: The RP Act confers no explicit power on the Election Commission to remove a party from the register for failing to contest elections, hold internal elections or lodge required returns.
    4. The position in law: In Indian National Congress v. Institute of Social Welfare and Others (2002) the Supreme Court held that the Commission has no power to deregister a political party under the RP Act.
    5. The narrow exceptions: Removal is available only where registration was obtained by fraud, where the party ceases to have allegiance to the Constitution, or where it is declared unlawful by the government.
    6. Delisting is not removal from the register: The Commission periodically publishes a list of delisted RUPPs, and its notification of October 2025 carried over 800 such parties.
    7. A minimal contest keeps a party active: The six Gujarat based parties stayed on the active list by fielding a total of 15 candidates in the 2024 Lok Sabha elections. Eg. They are the Aam Janmat Party, Bharatiya National Janata Dal, Garib Kalyan Party, New India United Party, Satyawadi Rakshak Party and Swatantrata Abhivyakti Party.

    What does the compliance record show?

    1. Most annual reports never reach the public: A July 2025 report of the Association for Democratic Reforms (ADR), analysing annual reports for 2022 to 2023, found reports of only 26% of RUPPs available in the public domain.
    2. What weak compliance enables: Poor compliance with statutory requirements together with low transparency lets these parties serve as an opaque channel for tax evasion and money laundering.
    3. The scale problem: A register of thousands of entities, most of which never contest, cannot be policed through annual return scrutiny alone.

    What reforms have been proposed?

    1. The Law Commission’s recommendation: The 255th report of the Law Commission recommended amendments allowing removal from the register of a party that fails to contest elections for ten consecutive years.
    2. The Election Commission’s own proposal: Its memorandum on electoral reforms of 2016 sought an amendment to the RP Act empowering it to deregister a party.
    3. Enforcement rather than registration alone: Transaction level monitoring by the Income Tax Department and other enforcement agencies is feasible with digital records and would act as a deterrent against misuse of exemptions.
    4. Linking exemption to electoral success: The Election Commission has suggested that tax exemption be confined to parties that win seats in the Lok Sabha or a Legislative Assembly.
    5. Why that proposal is contested: Confining exemption to winners is open to the objection that it is undemocratic and extreme, since parties contest consistently without electoral success.
    6. A vote share threshold instead: A vote percentage threshold fixed by law could govern eligibility for tax exemption, on the model of the 1% vote threshold already used for allotting common symbols to RUPPs.

    Challenges to regulating Registered Unrecognised Political Parties

    1. Entry is easy and exit is absent: The statute sets a documentary threshold for entry and provides almost no route out, so the register only grows. Eg. The number of registered parties has risen steadily across successive general elections.
      The Fix: Provide for statutory lapse of registration where a party files no return and contests no election within a fixed period.
    2. Token candidature defeats a contest based test: A party that fields a handful of candidates satisfies any rule keyed to mere participation while doing nothing else. Eg. A large share of candidates in a general election forfeit their security deposit for polling below one sixth of valid votes.
      The Fix: Key the test to a minimum vote share rather than to the act of contesting.
    3. Tax exemption is the actual prize: Exemption on donations makes registration valuable to entities with no electoral purpose at all. Eg. Tax investigations into registered unrecognised parties have found arrangements in which most of a donation was returned to the donor in cash against a commission.
      The Fix: Make exemption conditional on an audited annual return filed on time, rather than automatic on registration.
    4. Disclosure thresholds leave most money invisible: Only contributions above the reporting threshold must be itemised, so funds can be split into smaller amounts. Eg. Parties routinely report large sums under the head of voluntary contributions from unnamed donors.
      The Fix: Require itemised reporting of every contribution above the cash limit, aligning the disclosure threshold with the banking channel threshold.
    5. Enforcement is split across agencies with different mandates: The Election Commission holds the register and the Income Tax Department holds the financial trail, and neither can act on the other’s finding. Eg. Delisting by the Commission does not by itself withdraw an exemption already claimed.
      The Fix: Provide for automatic reference from the Commission to the tax authority on default, with a statutory timeline for action.

    Conclusion

    Regulation here has been treated as a records problem when it is a design problem. The register was built to be easy to enter, because a democracy should not gate the formation of parties, and nothing was built to remove an entity that stops behaving like one. Every measure repeatedly proposed shifts the test from whether a party exists on paper to whether it seeks votes. Whether Parliament is willing to give the Election Commission that power, having left the position untouched since the Court described the gap, is what decides the outcome.

    Back2Basics: Recognition of political parties in India

    1. Who decides: The Election Commission recognises a party as a State party or a national party under the Election Symbols (Reservation and Allotment) Order, 1968.
    2. State party test: Recognition in a State requires a fixed share of valid votes together with seats in the Assembly or the Lok Sabha from that State, or a minimum number of Lok Sabha seats from it.
    3. National party test: Recognition as a national party requires recognition as a State party in at least four States, or a fixed vote share along with Lok Sabha seats from several States.
    4. What recognition brings: A recognised party gets a reserved symbol, free broadcast time on public service media, a larger number of star campaigners and copies of the electoral roll.

    Matching Previous Year Question

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

  • No Statehood, Ladakh to get unique elected body, says Chief Secretary

    Why in the News

    The Ladakh Chief Secretary has stated that neither Statehood nor a Union Territory with a legislature is on offer for Ladakh. What is being offered instead is a *sui generis* body under the Constitution, carrying legislative, executive and financial powers. The proposal follows the reorganisation that made Ladakh a Union Territory without a legislature, and the sustained agitation since then for an elected tier with real powers. The Union Home Ministry has discussed the structure of the proposed Union Territory level body under Article 371 of the Constitution with the Leh Apex Body (LAB) and the Kargil Democratic Alliance (KDA). Both called the discussion disappointing and said the Union Territory administration and the Home Ministry are not on the same page. The nomenclature of the new body has not been settled, which is the immediate reason the talks remain open.

    What is the body being offered to Ladakh?

    1. Not Statehood: Ladakh was never a State, having been part of Jammu and Kashmir before becoming a Union Territory, so the proposal is not framed as a restoration.
    2. Not a Union Territory with a legislature: The model is stated to be neither Statehood nor the Union Territory with legislature form that already exists elsewhere in the country.
    3. What it is to carry: The body is to hold legislative, executive and financial powers, which the Centre describes as the aspiration it is answering.
    4. Direct election through constituencies: Members of the two Ladakh bodies recorded their consensus that the Union Territory level body should be filled by direct election through constituencies.

    Why is Article 371 the route being used?

    1. Special provisions as the vehicle: Article 371 carries special provisions for particular States and regions, and the proposed structure is being discussed under it.
    2. A constitutional amendment is required: Constitutional safeguards of this kind require a detailed and established legal and parliamentary process rather than an executive order.
    3. The stated preconditions: Any such amendment needs broad political consensus, consultation and parliamentary consideration.
    4. No imposition: The Centre’s stated position is that no framework will be imposed on Ladakh without due consultation with stakeholders.

    What is still unresolved between the new body and the existing councils?

    1. A list of questions to answer: The Ladakh representatives have been handed eight to nine questions to examine.
    2. The substance of those questions: They cover the structural relationship and the distribution of powers between the existing hill councils and the proposed Union Territory level body.
    3. The designation is undecided: Whether the head of the elected body will be called a Chief Minister has not been settled, and discussions continue for that reason.
    4. The next step: The next round of discussions is expected in October.

    Why do the Ladakh bodies call the process unsatisfactory?

    1. Two arms of government reading it differently: Both bodies said the Union Territory administration under the Lieutenant Governor and the Union Home Ministry were not on the same page.
    2. No agenda circulated in advance: A Leh Apex Body representative said the questions involve legal issues and cannot be answered on the spot, and that the agenda should have been shared beforehand.
    3. No concrete progress on core demands: A member of the delegation that met Ministry officials said no concrete progress has been made on the key demands.
    4. A threat to resume agitation: The same delegation cautioned that protests would resume if assurances were not provided within a week.
    5. A charge of divide and rule: The delegation also said efforts have been made to drive wedges between communities and regions and to tire the leadership out.

    Challenges to the proposed Ladakh elected body

    1. A body with no precedent has no settled template: A structure that exists nowhere else must define its relationship with Parliament, the Lieutenant Governor and the courts from the beginning. Eg. The Union Territory of Delhi has spent decades litigating the division of executive power between its elected government and the Centre.
      The Fix: Write the division of legislative and executive subjects into the enabling amendment itself rather than leaving it to rules framed later.
    2. Three tiers competing for the same functions: An elected Union Territory level body layered above the existing hill councils risks duplicating their subjects and their budgets. Eg. The councils already administer land allotment, local development planning and village level works in Leh and Kargil.
      The Fix: Fix a clear subject list for each tier, with the councils retaining village level administration and the new body taking Union Territory wide legislation.
    3. Financial powers without an assured revenue base: A legislature that cannot raise its own revenue depends on central allocation for every decision it takes. Eg. Ladakh has a small population, a short working season and almost no industrial tax base.
      The Fix: Attach a formula linked share of central transfers to the new body, so its budget is not an annual negotiation.
    4. Leh and Kargil press different core demands: A single settlement has to satisfy two regions that differ on representation and on the weight given to religious and ethnic composition. Eg. The two have separately pressed for reserved seats and for safeguards on land and employment.
      The Fix: Provide for guaranteed regional representation inside the new body rather than leaving the balance to constituency delimitation alone.
    5. An elected tier is not a land and jobs safeguard: Representation does not by itself restrict outside purchase of land or reserve employment for residents. Eg. Sixth Schedule status, which the Ladakh bodies have demanded, carries land and forest protections that an ordinary legislature does not.
      The Fix: Pair the new body with a statutory domicile rule and a restriction on land transfer, so representation and protection arrive together.

    Conclusion

    The offer settles one question and leaves the harder one open. The Centre has accepted that Ladakh will get an elected tier with real powers, and has ruled out both of the forms that already exist in the constitutional scheme. What has not been agreed is how much power that tier holds against the administration currently exercising it, and how it sits alongside the councils already in place. Those are the questions the next round has to answer, and the Ladakh leadership has tied its restraint to visible progress on them.

    Back2Basics: Ladakh Autonomous Hill Development Councils

    1. Statutory basis: They were created under the Ladakh Autonomous Hill Development Council Act, 1995, enacted by the Jammu and Kashmir legislature.
    2. Two councils: One functions for Leh, set up in 1995, and a second for Kargil, set up in 2003.
    3. What they do: Each council handles local development planning, allotment of land and execution of village level works within its district.
    4. Composition: Members are directly elected from territorial constituencies alongside a few nominated members, and the council is headed by a Chief Executive Councillor.

    Matching Previous Year Question

    “[2025, GS2, 10 marks] Discuss the nature of Jammu and Kashmir Legislative Assembly after the Jammu and Kashmir Reorganization Act, 2019. Briefly describe the powers and functions of the Assembly of the Union Territory of Jammu and Kashmir.”

  • Mining, money & federalism: Why a new law is at the centre of a political tussle in Odisha

    Why in the News

    Parliament has passed the Mines and Minerals (Development and Regulation) Amendment Act, 2026. It sets a uniform national tax framework for major minerals and limits the power of States to levy taxes on mining lands. The step overrides the financial effect of Mineral Area Development Authority v. Steel Authority of India (2024). A nine judge Constitution Bench had held there, by a majority of 8 to 1, that States hold the power to tax mineral rights and mineral bearing lands. The contest is over who collects the revenue that mining generates, and Odisha is where it is sharpest. Three States have taken the amendment to the Supreme Court, so a question the largest Bench to hear it had settled is open again.

    What does the 2026 amendment change about who can tax mining?

    1. A bar on State levies: The new Section 9D provides that no tax, cess or other levy shall be imposed by a State on mineral rights or on mineral bearing lands, whether computed on mineral quantity, mineral value, royalty payable or otherwise.
    2. A conditional exception only: A State may levy only in accordance with such conditions or restrictions as the Central Government prescribes.
    3. Wider central reach: Amendments to Section 2 and Section 13 extend the Centre’s control to mineral bearing lands.
    4. Rule making is centralised: The Centre is given sole authority to frame the rules that restrict the taxing power of States over minerals.

    What did the Supreme Court hold in 2024?

    1. Royalty on extraction: States were held competent to levy royalty on the extraction of minerals from land within the State.
    2. Tax on mineral bearing land: The same ruling held that States may tax the lands which comprise mines and quarries.
    3. The central law was read as no bar: The Bench held that the parent mining statute did not take away the taxing competence of the States in this field.
    4. Past dues were opened up: Recovery of dues for earlier years was permitted in staggered instalments, which is the origin of the arrears claims now in dispute.

    Why is Odisha the sharpest site of the dispute?

    1. The stakes as the Opposition states them: The Biju Janata Dal (BJD) puts the cost to Odisha at Rs 12,000 crore a year in foregone revenue and Rs 1 lakh crore in arrears.
    2. The procedural objection: A letter from the former Chief Minister of Odisha to the State’s ruling party Members of Parliament records that the Bill was passed with less than 10 minutes of discussion in the Lok Sabha.
    3. The framing of the contest: The Opposition presents the law as an attack on federalism and on the financial rights of the State rather than as a technical tax measure.
    4. Street level escalation: The Congress and the Left have announced a gherao of the Odisha Assembly on 29 September.
    5. The legal challenge is already under way: Karnataka, Kerala and Telangana have moved the Supreme Court against the amendment, and the Odisha unit of the Congress has said it will do the same.
    6. Why the State is so exposed: The economy and the politics of Odisha are closely tied to mining, so a change in mineral taxation reaches its budget directly.

    What is the case made for a uniform national framework?

    1. Multiple levies deter industry: On the State government’s own argument, arbitrary and multi level levies on mineral bearing land would cause extensive damage to the industrial ecosystem of the State.
    2. Mining revenue has already risen sharply: The State’s Steel and Mines Minister puts earnings from the mining sector at about Rs 50,000 crore, against about Rs 5,000 crore before 2014.
    3. A second channel already reaches States: States continue to receive money for mining affected areas through the District Mineral Foundation (DMF), a non profit trust set up by the State government.
    4. The earlier reform is offered as the cause: That rise in receipts is attributed to the last amendment of the parent Act in 2015, which moved major mineral concessions to competitive auction.

    Challenges to the MMDR Amendment Act, 2026

    1. A statute answering a constitutional finding invites a second round: Where a Bench locates a taxing power in the State List, an ordinary central law restricting its exercise raises the question of legislative competence rather than settling it. Eg. Royalty and cess on minerals has been litigated repeatedly since the India Cement judgment of 1990.
      The Fix: Route the change through a constitutional amendment or a Finance Commission mediated compensation formula rather than through a bar inserted by ordinary law.
    2. Producing districts carry the costs of mining and lose the levy: Land degradation, displacement and water stress sit in the mining district, with the taxing power moving upward. Eg. The iron ore districts of Keonjhar and Sundargarh in Odisha carry heavy overburden dumping and haulage traffic.
      The Fix: Make a fixed share of central mineral receipts a statutory entitlement of the producing district rather than a discretionary allocation.
    3. Revenue predictability for States falls: A levy that can be permitted or withdrawn through prescribed central conditions cannot be budgeted for with confidence. Eg. Mineral rich States had already built projected receipts into their medium term fiscal statements.
      The Fix: Fix the permitted State levy in the Act itself with a floor, so it is not alterable by executive prescription.
    4. Uniformity ignores unequal mineral endowment: A single national framework treats a State with large reserves and a State with none as comparable for taxation purposes. Eg. Odisha, Jharkhand and Chhattisgarh together account for the bulk of India’s iron ore and coal output.
      The Fix: Build an endowment weighted transfer into the framework so producing States are not equalised downward.
    5. Litigation freezes investment decisions: A pending challenge to the taxing framework leaves both States and lessees uncertain about liability for the interim period. Eg. The 2024 ruling itself came at the end of litigation running over three decades on the same question.
      The Fix: Seek an early and time bound hearing along with an interim arrangement on collection, so liability does not accumulate unresolved.

    Conclusion

    The dispute is no longer about the rate at which minerals are taxed. It is about whether a fiscal power the Court located with the States can be narrowed by ordinary central legislation. Until the challenge is decided, mineral rich States must budget for revenue they may not be permitted to collect. The marker to watch is whether the Court treats the new bar as a permissible exercise of the Union’s mining power or as an encroachment on a State legislative field.

    Back2Basics: Mines and Minerals (Development and Regulation) Act, 1957

    1. What it governs: It is India’s principal law for the development and regulation of mines and minerals.
    2. The Union’s declared control: The Act declares that the Union should take control of mining and mineral development to the extent provided by the Act.
    3. Major and minor minerals: Major minerals are regulated centrally under this Act, and minor minerals such as sand, building stone and ordinary clay are governed by State rules.
    4. The 2015 overhaul: That amendment moved allocation of major mineral concessions to auction, created the District Mineral Foundation and the National Mineral Exploration Trust (NMET), and strengthened penalties for illegal mining.

    Matching Previous Year Question

    “[2025] Consider the following statements: I. India has joined the Minerals Security Partnership as a member. II. India is a resource-rich country in all the 30 critical minerals that it has identified. III. The Parliament in 2023 has amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite license for certain critical minerals. Which of the statements given above are correct? (a) I and II only (b) II and III only (c) I and III only (d) I, II and III ANSWER: (c)”

  • Why India must rethink the way it values skills, jobs and productive work

    Why in the News

    India has become the world’s fourth largest economy and is treated as the next engine of global growth. The assessment now placed against that record is that the country is drifting toward the middle income trap, where an economy exhausts its gains from cheap labour and rapid catch up and fails to move to productivity led growth. Weak job creation, stagnant wages, sluggish private investment and low productivity are named as reinforcing one another. Youth protests across the country are read as the visible sign of that distress. The two standard explanations, another round of market reform and a larger public spending push, both treat this as a supply or a demand problem. The argument placed against both is that the binding constraint is institutional, meaning social norms that decide how the market prices skills and how the State allocates resources.

    Why do the standard explanations of the slowdown fall short?

    1. The pro market reading: Economists trained in market orthodoxy call for a second round of reform on the scale of 1991, covering labour flexibility, agricultural reform, deregulation and infrastructure investment.
    2. The Keynesian reading: Economists in the Keynesian tradition locate the problem in weak aggregate demand and prescribe higher public spending, redistribution and social protection.
    3. What both miss: Each treats the constraint as one of supply or of demand. Institutions shaped by social norms decide both how markets set incentives and prices and how the State allocates resources and supplies public goods.

    What does the present pattern of growth look like?

    1. Jobless growth: Productivity gains stay concentrated in narrow capital intensive and skill intensive enclaves that generate little employment.
    2. Weak domestic demand: Private investment remains sluggish, wage growth is stagnant and household consumption is weak.
    3. Manufacturing has not absorbed labour: The sector has failed to generate enough jobs for the workforce moving out of agriculture.
    4. An uneven recovery: Growth after the pandemic favoured large corporations and the digital economy and left the informal sector barely touched.
    5. Inequality and low productivity together: Rising inequality alongside low productivity is the specific combination that makes the trap dangerous, since neither corrects the other.

    How do social norms distort what the market and the State each do?

    1. Competitiveness through cost cutting: Private capital, freer from regulation than at any earlier point, competes by cutting costs rather than by innovating.
    2. Knowledge does not travel: Firms have failed to absorb the knowledge that arrives with foreign direct investment (FDI). Productivity has risen neither through movement between sectors nor through innovation inside them.
    3. Capital is priced below labour: Heavy subsidy to capital lowers its price relative to labour in an economy with surplus labour, which pushes firms toward machines over workers.
    4. Innovation is thin: Research and development spending stands at 0.65% of GDP, and technology adoption remains weak rather than spontaneous.
    5. State capacity is low despite size: Government has grown in size, and the ability to deliver basic services such as health centres and schooling remains among the lowest anywhere.
    6. Spending is tilted toward the privileged: Mass education has been historically underfunded. Higher education for elites was subsidised.
    7. The elite bias carried into the growth pattern: That same bias produced service sector heavy growth after the reforms, letting upper castes monopolise better occupations and relegating low productivity work to others.

    What does India’s vocational training record show?

    1. Almost no formal skilling: Fewer than 3% of the workforce has any formal vocational education.
    2. Seats go unfilled: Roughly 14,000 Industrial Training Institutes (ITI) offer about 25 lakh seats, and actual intake is only about 48%.
    3. Placement is weak even for those who finish: The employment rate among graduates is 63%, against over 90% in many other countries.
    4. The system is badly run: Vocational training remains poorly managed and chronically underfunded, which follows from the long neglect of mass education.

    Why does the social valuation of skills decide productivity?

    1. Useful knowledge drives modern growth: Sustained growth rests on the coevolution of science, technology and the spread of “useful knowledge”, meaning the practical skills that let a society innovate, adapt and raise productivity. Eg. The economic historian Joel Mokyr, a Nobel laureate in economics, treats the diffusion of such knowledge as the taproot of entrepreneurial success.
    2. India privileged the abstract: University degrees command prestige. Courses training electricians, welders, machinists and carpenters do not.
    3. The hierarchy has a source: That ranking reflects centuries of caste based occupational stratification in which manual and artisanal work was systematically undervalued despite its role in industrial development.
    4. The visible result: Skilled manufacturing workers are chronically short even as millions of educated young people fail to find decent work.
    5. Valuation shapes choices before markets do: Social premiums attached to some occupations, visible in the marriage market, shape educational choices and occupational aspirations and therefore the allocation of labour.
    6. Official advice runs against the norm: The Chief Economic Adviser has urged young people to take up trades such as welding and plumbing rather than software jobs or management degrees.
    7. Labour intensity is falling: Data show a persistent decline in the labour intensity of production technology across sectors, including traditionally labour intensive ones, and artificial intelligence is expected to accelerate the trend.

    What separates the countries that escaped the trap from those that did not?

    1. South Korea: Escape came from building institutions capable of creating and diffusing useful knowledge across domains, not from building factories alone.
    2. China: Early state led industrialisation was paired with large investment in technical education, local manufacturing capability and technological learning, and earlier interventions in education and health laid the productive base.
    3. Brazil, Argentina, Thailand and the Philippines: All four failed to build or sustain such institutions and remain stuck in the middle income trap.
    4. The shared symptom of failure: In those four, as in India, large sections of the population depend on public transfers and handouts for the basic requirements of a decent living.

    What does productivism propose instead?

    1. The core shift: Productivism, proposed by the economist Dani Rodrik, moves policy attention from redistribution after the fact to the creation of productive employment.
    2. Where it parts from market orthodoxy: It gives government a leading role over markets in shaping economic opportunity rather than leaving that to prices alone.
    3. Its stated priorities: It places the real economy above finance, jobs above redistribution and production above consumption.
    4. Dignity as an economic output: An inclusive economy on this reading gives people social recognition as productive members of society, which requires changing the norms underpinning institutions rather than only the policy framework.

    Challenges to escaping the middle income trap

    1. Industrial policy without skilled labour stalls: Incentives for manufacturing cannot be used if the plants receiving them cannot staff skilled lines. Eg. Electronics units in India remain concentrated in final assembly rather than component fabrication.
      The Fix: Tie incentive disbursement to verified apprenticeship and skilling numbers at the receiving plant.
    2. Training is disconnected from employers: Curricula and equipment in public training institutes lag the technology used on the shop floor, so a certificate does not signal usable skill. Eg. Many public institutes still train on machine tools several generations behind those in contract manufacturing plants.
      The Fix: Give industry associations a decisive voice in course content and equipment upgrades at each institute, with annual revision.
    3. Skilling is measured as enrolment, not as employment: Targets reward seats filled and certificates issued rather than wages earned afterwards. Eg. Short duration certification under national skilling programmes has repeatedly recorded low conversion into formal jobs.
      The Fix: Shift reporting to wage outcomes after training, tracked through provident fund records.
    4. Cheap capital keeps displacing labour: Accelerated depreciation, concessional credit and duty exemptions lower the effective price of machinery against workers, so firms automate ahead of demand. Eg. Garment units have moved to automated cutting and spreading, with employment in the sector staying flat.
      The Fix: Rebalance the incentive structure toward employment linked support rather than capital linked support.
    5. State capacity limits the very services the strategy needs: Schooling and primary health are the inputs into a productive workforce and are delivered most thinly where they are needed most. Eg. Teacher and doctor vacancies persist across the districts with the youngest populations.
      The Fix: Fill sanctioned posts in the lowest performing districts first rather than distributing recruitment evenly.

    Conclusion

    The diagnosis places the binding constraint outside the familiar argument about how much the State should spend and how far markets should be freed. What follows from it is that a skilling target or a manufacturing incentive will not move productivity for as long as the social ranking of occupations stays where it is. The difficulty is that a norm of that kind is not amenable to a budget line or a notification. Whether policy can change the standing of skilled manual work, and not only its supply, is what decides where the economy settles.

    Back2Basics: Industrial Training Institutes

    1. What they are: Post school vocational institutions that train candidates in designated trades such as fitter, electrician, welder and machinist.
    2. Who runs them: They function under the Directorate General of Training in the Ministry of Skill Development and Entrepreneurship, and are set up by State governments and by private promoters.
    3. The qualification awarded: Trainees who clear the All India Trade Test receive the National Trade Certificate.
    4. Statutory anchor: Trade training and apprenticeship in these institutes operate within the framework of the Apprentices Act, 1961.

    Matching Previous Year Question

    “[2022, GS3, 15 marks] “Economic growth in the recent past has been led by increase in labour productivity.”Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.”

  • Rude lessons

    Why in the News

    Trade relations between the United States (US) and Canada have fallen to a new low despite decades of deep integration. Canada pulled out of negotiations over a new tariff deal, citing last minute insertions by the US side, and the US has made the same allegation in return. Statements by the US President have not been conciliatory. The breakdown raises the question of what a signed trade agreement is actually worth to a partner such as India.

    How deep was the integration that has now broken down?

    1. Automobile trade: Free trade in automobiles and their parts was established between the two countries in 1965.
    2. Free Trade Agreement: A comprehensive free trade agreement followed in 1989.
    3. NAFTA: That agreement was expanded into the North American Free Trade Agreement (NAFTA) about five years later.
    4. Mutual benefit: Integration continued steadily and by most accounts served both economies well.
    5. Economies of scale: Canada’s aim was to achieve economies of scale by producing very large volumes of a few products.

    What does Canada’s place in US supply chains show about the stakes?

    1. Crude oil supply: Canada accounts for 70% of the oil refined in the American Midwest, on an estimate by the Nobel laureate economist Paul Krugman.
    2. Aluminium supply: Canada supplies 60% of American aluminium requirements.
    3. Lumber supply: Canada supplies nearly all the types of lumber used in American residential construction.

    How far has the relationship actually been rolled back?

    1. Reciprocal tariffs: Canada levied reciprocal tariffs of up to 50% in answer to the 50% tariffs the US imposed on imports from Canada.
    2. Outright import bans: From 29 September the US will ban certain Canadian alcoholic spirits, some dairy goods and motorcycles.

    What are the three lessons the episode holds for India?

    1. No assured preference: The country being treated this way is a neighbour, an alliance member and a trade partner of long standing, so India has no stronger claim to preferential handling.
    2. Speed of negotiation: Malaysia backed out of an agreement it had already signed with the US, arguing that once the reciprocal tariff system was held illegal, the gains no longer covered the cost of opening its market.
    3. Reversal after signature: A concession is only as durable as the other side’s continuing willingness to honour it.

    Why is an agreed tariff number not the end of the pressure?

    1. The February 2026 agreement: The February 2026 agreement set tariffs of 18% on imports from India, and the US has pressed on with forced labour and excess capacity investigations that could take the effective level past it.
    2. India’s negotiating condition: India’s stated position is that no deal will be struck until its advantage over competing suppliers is clear.
    3. Record of other pacts: India’s recent trade pacts have worked, and the same weighing of gains against costs still has to be applied to this partner.

    Challenges to India’s bilateral trade strategy with the United States

    1. Trade remedy investigations sit outside the deal: A negotiated tariff line does not restrain separate inquiries that can raise the effective duty on the same goods. Eg. Antidumping and countervailing duty cases against Indian steel and shrimp exports have run independently of tariff talks.
      The Fix: Insist on a standstill clause covering fresh investigations for the life of any agreed tariff schedule.
    2. Agriculture and dairy access is the concession India cannot give: Opening those markets touches a very large number of small producers, so what the other side wants most is the hardest thing to offer. Eg. Dairy market access was the sticking point that kept India out of the Regional Comprehensive Economic Partnership in 2019.
      The Fix: Offer tariff rate quotas on a narrow list of products instead of broad access, so the exposure stays bounded and measurable.
    3. No working appellate remedy: A bilateral dispute has nowhere binding to go for as long as the multilateral appeal mechanism stays non functional. Eg. The World Trade Organization’s Appellate Body has been unable to hear appeals since 2019 for want of members.
      The Fix: Write a standing bilateral arbitration panel with fixed timelines into the text of every new agreement.
    4. Concentration in one market magnifies a reversal: A large share of exports going to a single destination turns one tariff decision there into an economy wide shock. Eg. The US is India’s largest single destination for merchandise exports.
      The Fix: Front load market access negotiations with other large blocs, so the export base is not hostage to one partner’s politics.

    Conclusion

    The durability of a trade agreement rests on the other party’s continuing interest in it rather than on its text. For India that argues for negotiating slowly, keeping concessions reversible, and measuring any offer against what a competing supplier is being given. The tension stays unresolved, because a deal is the only route to predictable access and the deal itself has become the least predictable part of the arrangement. The thing to watch is whether the investigations still running against Indian goods close within the tariff level already conceded.

    Back2Basics: North American Free Trade Agreement

    1. Formation: NAFTA came into force in 1994 among the United States, Canada and Mexico.
    2. Mandate: It removed trade barriers and eased the cross border movement of goods and services among the three.
    3. No institutional seat: It is a trade agreement rather than an organisation, so it has no permanent headquarters.
    4. Successor: It was replaced by the United States Mexico Canada Agreement (USMCA) in 2020.

    Matching Previous Year Question

    “[2025, GS3, 10 marks] What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism? How can these challenges be met?”

  • Elephant in the room in meetings with Xi, Putin: India’s manufacturing challenges

    Why in the News

    India’s manufacturing base, and not its diplomacy, is the binding constraint on the economic agenda of this weekend’s BRICS summit in New Delhi. The Prime Minister meets the Russian President ahead of the summit and the Chinese President over the weekend, and the consequential part of both conversations is bilateral and economic. India’s difficulty in each case is not the size of its trade deficit. It is the narrowness of what India is able to sell.

    What does the trade profile with Russia reveal about what India can sell?

    1. Exports are a fraction of imports: India’s exports to Russia remain below $5 billion against imports of $63.8 billion in the year to March 2025.
    2. The gap and its composition: The deficit is nearly $59 billion, and Russian oil and other natural resources dominate what India buys.
    3. The market is not the limitation: Russia is a substantial market for manufactured goods, so the shortfall lies on the supply side.
    4. Industrial promotion is under way: The first India Russia international industrial trade fair was held in Delhi this week, and both leaders are to visit it.

    What does China’s export record to Russia show about the size of the gap?

    1. The scale of the comparison: China exported about $103 billion of goods to Russia in 2025.
    2. The composition is the real point: Those exports run from cars and machinery to electronics and industrial equipment, which are exactly the categories India cannot supply at comparable scale.

    How does the same weakness appear in the trade with China?

    1. A larger deficit on a larger base: Bilateral trade reached about $151 billion in the year to March 2026, and India’s deficit rose to roughly $112 billion.
    2. The asymmetry is reversed: China sells manufactured goods, and increasingly the intermediate and capital goods that Indian manufacturers themselves need.
    3. The policy response so far: Delhi is responding to Beijing’s demand that India end its restrictions on commerce with China.

    Why does the goal of economic security collide with what Indian industry needs?

    1. Chinese inputs are embedded in Indian production: They run through electronics, machinery, chemicals, auto components and pharmaceutical inputs, and they feed India’s own exports of manufactured goods.
    2. The two objectives pull apart: The political aim of cutting dependence runs against the commercial need for cheap and increasingly sophisticated inputs at scale.
    3. One weakness, two symptoms: Limited manufacturing strength shows up as an inability to export to a large market in one relationship, and as import dependence in the other.

    Can diplomacy compensate for weak manufacturing?

    1. What negotiation can actually deliver: Payment mechanisms, investment targets and trade agreements are all negotiable, and political warmth cannot substitute for competitive products.
    2. The older ambition against the present agenda: India’s call to democratise the global economic order dates to the Cold War years. The immediate bilateral ask is that Russia and China buy more, invest more and help build Indian productive capacity.
    3. What closing the gap requires: Sustained economic reform, simpler regulation, greater competitiveness, less corruption, deeper domestic supply chains and a stronger manufacturing ecosystem.
    4. Investment follows attractiveness, not persuasion: The world is not short of capital or technology, and India is not near the top of the destinations they go to.
    5. Why the bilateral overshadows the multilateral: BRICS, like the Shanghai Cooperation Organisation (SCO), has become a venue for high level political engagement and bilateral problem solving.

    Challenges to widening India’s manufacturing base

    1. Firms stay small, and stay small for long: A size distribution dominated by tiny units leaves few producers able to take on a large export order. Eg. Most registered manufacturing units in India employ fewer than ten workers.
      The Fix: Make support conditional on growth in employment and turnover rather than on staying below a small unit threshold.
    2. Duties on inputs tax the exporter: Tariffs on intermediate goods raise the cost of the components a finished goods exporter has to buy. Eg. Duties on electronic components have been cut in successive Budgets precisely because they raised assembly costs.
      The Fix: Move to a single low duty band on intermediate and capital goods, and reserve protection for finished goods alone.
    3. Logistics cost eats the margin: Dependence on road freight and long dwell time at ports raise the delivered price of Indian goods. Eg. The National Logistics Policy of 2022 was framed around bringing logistics cost as a share of output closer to competitor levels.
      The Fix: Tie port and freight corridor funding to published turnaround and transit time targets.
    4. Assembly has grown faster than component making: Incentives have drawn in final assembly without a domestic base in parts, so import content stays high. Eg. Mobile phone exports have risen sharply, with display panels and battery cells still largely imported.
      The Fix: Condition incentive payouts on a rising schedule of domestic value addition rather than on output value alone.

    Conclusion

    The agenda for this week is bilateral, and the constraint on it is domestic. Persuasion can open a market, and it cannot supply the goods that would fill one. What India’s economic diplomacy is worth therefore turns on decisions taken by its own economic policymakers rather than on commitments extracted from partners. The test worth watching is whether the industrial reform agenda moves at all once the summit season ends.

    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?”

  • At 78%, Telangana district Nirmal on top in women’s share in informal workers

    Why in the News

    The Ministry of Statistics and Programme Implementation (MoSPI) has released the first district level estimates of India’s informal sector drawn from a large scale national survey. They come from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) of 2025, which covers enterprises outside the corporate sector and outside agriculture. Women are 78% of all informal workers in Nirmal district of northern Telangana, the highest share recorded for any district. Female participation in informal work turns out to vary far more between districts than any national figure suggests. The districts where women dominate this workforce are also among the lowest paying, which is the tension the new granularity exposes.

    What does the Annual Survey of Unincorporated Sector Enterprises cover?

    1. The universe surveyed: It covers unincorporated establishments in manufacturing, trade and other services, which is the part of the economy usually described as the informal sector.
    2. What it leaves out: Agriculture is outside its scope, as are enterprises incorporated as companies.
    3. Coverage of this round: The report carries estimates for 757 districts.
    4. A caveat on district identity: MoSPI notes that the districts covered may not match the present administrative map, because boundaries, names and new districts have changed since.

    How wide is the spread between districts?

    1. The national benchmark: Across India women are 29% of informal workers.
    2. The bottom of the list: In Rudraprayag in Uttarakhand women are 6.7% of informal workers.
    3. A state boundary makes the difference: Nanded in Maharashtra, immediately across the border from the top ranked district, sits 288th with women at 31%.

    What regional pattern do the district numbers reveal?

    1. The top ten are regionally clustered: All ten districts with the highest female share lie in south India or the north east, in Telangana, Manipur, Meghalaya and Mizoram.
    2. Parity is rare: Women are at least half the informal workforce in only 25 districts, 22 of them in the south or the north east, with three in the east including Pakur in Jharkhand and Deogarh in Odisha.
    3. A third is a wider club: Women account for at least 33% of the informal workforce in 237 districts.

    Does a high female share come with better pay?

    1. The best payer among high share districts is modest: South West Khasi Hills in Meghalaya pays Rs 1.7 lakh per hired worker, about 35% above the national average of around Rs 1.3 lakh.
    2. The top paying district has few women: Dehradun pays Rs 4.6 lakh per hired worker, and women are 19% of its informal workforce.
    3. The pattern that follows: High female participation coincides with low earnings per worker rather than with better paid work.

    What do the ownership and concentration numbers add?

    1. Participation tracks ownership: Districts with the greatest female participation also carry the highest share of female owned proprietary establishments, and the leading district reaches almost 80% on that measure.
    2. Scale sits elsewhere: North 24 Parganas in West Bengal has the most informal workers, at 21.3 lakh, and the most establishments, at 16.6 lakh.
    3. Output is concentrated: The ten districts with the most establishments account for around 11% of total Gross Value Added (the value of output less the cost of inputs bought in, which is how a sector’s contribution is measured), and the top fifty for almost a third of it.
    4. The stated purpose of the release: MoSPI’s position is that the diversity of activity and local conditions makes granular statistics necessary for evidence based policymaking.

    Challenges to district level informal sector measurement

    1. Boundary churn breaks comparability: A district measured once cannot be tracked over time once it is split, merged or renamed before the next round. Eg. Telangana raised its district count from 10 to 33 in 2016.
      The Fix: Publish every round against a frozen reference map alongside the current one, so a district series survives reorganisation.
    2. Excluding agriculture removes most rural informal work: The survey frame leaves out the sector that still employs the largest number of informal workers. Eg. Agriculture remains the single largest employer in the Periodic Labour Force Survey’s distribution of workers.
      The Fix: Release the unincorporated estimates together with the labour force survey’s agricultural numbers as one district profile.
    3. A high female share can record distress rather than progress: Unpaid family labour and home based piece work enter the count as participation with no wage attached to it. Eg. Beedi rolling and garment stitching in home units are recorded as enterprise work paid at piece rates.
      The Fix: Report unpaid family helpers separately from hired workers for every district.
    4. Enterprise surveys miss the smallest and most mobile units: Vendors and units without fixed premises are hard to list, so they are undercounted at source. Eg. The survey and registration of street vendors required by the Street Vendors Act, 2014 remains incomplete in many towns.
      The Fix: Use municipal vending registers and welfare board rolls as a supplementary listing frame for mobile units.

    Conclusion

    The release turns a state level statistic into a district one, and that changes what an administrator can act on. The pattern it exposes is that where women work most in the informal economy, that work pays least, which is a question about the kind of enterprise available locally rather than about willingness to work. The milestone to watch is whether these estimates are repeated on the same frame, because a single snapshot cannot show whether participation and earnings are moving together or apart.

    Back2Basics: MoSPI and the National Sample Survey

    1. The ministry: MoSPI is the nodal body for India’s official statistical system and releases the national income and price statistics.
    2. The survey arm: The National Statistical Office conducts large sample surveys through the National Sample Survey, which began in 1950.
    3. The companion employment survey: The Periodic Labour Force Survey supplies employment and unemployment estimates, and it counts workers rather than enterprises.
    4. The advisory body: The National Statistical Commission, set up in 2005 on the Rangarajan Commission’s recommendation, advises on statistical priorities and standards.

    Matching Previous Year Question

    “[2023, GS3, 15 marks] Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements.”

  • FCNR(B) deposits: Understanding who finally bears the foreign exchange risk

    Why in the News

    The Reserve Bank of India (RBI) opened a special swap facility in June to draw money from non resident Indians into FCNR(B) deposits. The full name is Foreign Currency Non Resident (Bank), and such a deposit is held and repaid in foreign currency rather than in rupees. The step answered pressure on the rupee from high oil prices and an aim of building up foreign exchange reserves. The facility protects banks against exchange rate loss on the principal. It does not cover the interest, which is owed in dollars and has to be arranged by the banks themselves. That split is what decides who finally carries the currency risk.

    What is an FCNR(B) deposit and what did the special swap facility offer?

    1. A deposit denominated in foreign currency: A non resident places dollars or another permitted currency with an Indian bank, and the bank repays in that same currency, so the depositor carries no rupee risk.
    2. The term of the money: These deposits typically run for three to five years, which is when the principal and the accumulated interest fall due.
    3. What the swap added: The bank passes the foreign currency to the central bank for rupees and receives a commitment to reverse the exchange at an agreed rate on maturity.
    4. The window is shut: Fresh deposits under the facility stopped on 31 August 2026.

    Why was the window opened, and what did it actually raise?

    1. The response overshot the target: Banks mobilised more than $127 billion through these deposits against an initial target of about $50 billion.
    2. Funding turned cheap: The scheme gave banks foreign currency at a lower cost than borrowing abroad on their own credit would have carried.
    3. Reserves rose with it: The foreign currency handed to the central bank added substantially to India’s reserve stock.

    What does protecting the principal cost the central bank?

    1. The hedging bill sits with the central bank: It bears the cost of covering the currency exposure on the principal, put at up to 3% a year by BofA Securities Research and taken at about 3% a year by SBI Research.
    2. The annual and cumulative numbers: On an assumed mobilisation of $65 billion to $70 billion at that rate, SBI Research calculated a notional cost of about $2.1 billion a year and about $10.5 billion over five years.
    3. Measured against the reserve stock: Against reserves of around $700 billion, the five year cost works out to 1.45% of the stock.

    What offsets that cost?

    1. The reserves themselves earn a return: BofA Securities Research estimated a yield of around 4.5% to 5% on the reserves generated, enough to more than cover the hedging cost across a five year holding.
    2. Placement is chosen for yield: Part of the money may be invested in United States government securities because those yields are higher.
    3. Part of the outgo is already recovered: SBI Research said the central bank had rebuilt $31.2 billion of its foreign currency assets by 7 August 2026, equal to 55% of the amount mobilised to that point.

    Why have most banks left the interest leg unhedged?

    1. The swap stops at the principal: Banks have to source the dollars for interest payments and manage that exposure on their own books.
    2. The split runs by ownership type: Foreign banks are largely hedging this exposure. Most state run banks and several private sector Indian lenders have left it open.
    3. Cost is the stated reason: Bankers cite the price of cover on a three to five year exposure, which is of the same order as the cost the central bank carries on the principal.
    4. The payment timing invites the gamble: Interest on these deposits is paid only at maturity, so some banks plan to buy dollars in the spot market when the payment actually falls due.

    What happens to an unhedged bank if the rupee weakens?

    1. The arithmetic of one payment: Interest of $1 million costs Rs 9.5 crore at Rs 95 to the dollar, and Rs 10 crore if the dollar reaches Rs 100 at maturity.
    2. Cover decides who absorbs it: A hedged bank is protected against that movement, and a lender that left the exposure open bears the higher rupee cost.
    3. The risk is correlated across lenders: A sharp fall in the rupee would push many banks to buy dollars at the same time, adding to dollar demand and to pressure on the currency.
    4. The exposure has not gone away: The scheme moved currency risk between parties rather than removing it from the system.

    Challenges to the FCNR(B) swap route to reserve building

    1. Reserves built this way are borrowed reserves: Non resident deposits count within India’s external debt, so the reserve stock rises with a matching liability against it. Eg. Non resident deposits are among the largest components in the Finance Ministry’s quarterly external debt statement.
      The Fix: Publish the debt creating share of any reserve addition alongside the headline reserve figure.
    2. Maturities bunch at one point in time: A window opened over a single quarter falls due over a single quarter, which concentrates the outflow. Eg. The concessional swap window of 2013 raised about $34 billion and came up for redemption together in late 2016.
      The Fix: Stagger the maturities permitted under a window across quarters rather than letting the market settle on one tenor.
    3. The open exposure sits with the thinnest buffers: Public sector lenders hold less capital against a valuation loss than the foreign banks that are covering the same risk. Eg. Several public sector banks required recapitalisation from the Union Budget through the second half of the 2010s.
      The Fix: Set a supervisory ceiling on the share of foreign currency interest liability a bank may leave uncovered.
    4. The facility substitutes for adjustment: Attracting deposits to steady the currency postpones the correction that a persistent current account gap eventually forces. Eg. The rupee continued to depreciate through the years after the 2013 defence of the currency ended.
      The Fix: Tie any such window to a stated reserve adequacy target, so it closes as a one time step instead of becoming a standing instrument.

    Conclusion

    The swap changed the address of the currency risk without retiring it. The central bank now holds an exposure that depositors were unwilling to take, and lenders hold the portion the central bank declined. Whether that is prudent rests on a rupee path nobody can commit to. The supervisory question to watch is whether banks will be required to cover the foreign currency leg they have chosen to leave open.

    Back2Basics: Non resident deposit accounts

    1. NRE account: A Non Resident External account is held in rupees, and both principal and interest are freely repatriable.
    2. NRO account: A Non Resident Ordinary account is held in rupees for income earned in India, and repatriation out of it is capped.
    3. Where the currency risk sits: In a rupee denominated non resident account the depositor bears the exchange risk, which is the reverse of a foreign currency denominated account.

    Matching Previous Year Question

    “[2019] Consider the following statements: 1. Most of India’s external debt is owed by governmental entities. 2. All of India’s external debt is denominated in US dollars. 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: (d)”

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