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  • UGC equity rules being reconsidered: Centre to SC

    Why in the News

    The Centre told the Supreme Court on 20 August 2026 that it is reconsidering the University Grants Commission regulations framed to prevent caste discrimination in higher education institutions. The regulations name the Scheduled Castes, the Scheduled Tribes and the Other Backward Classes as the protected groups, and that naming is what general category petitioners have challenged as exclusion.

    What are the UGC (Promotion of Equity in Higher Education Institutions) Regulations, 2026?

    1. What they do: The University Grants Commission (UGC) (Promotion of Equity in Higher Education Institutions) Regulations, 2026 impose a compliance framework on higher education institutions to prevent and redress discrimination against students and faculty.
    2. Notification and stay: They were notified on 13 January 2026 and stayed by the Supreme Court on 29 January 2026, which revived the 2012 framework until further orders.
    3. Two definitions inside them: Regulation 3(1)(c) defines caste based discrimination as discrimination on the basis of caste or tribe against members of the Scheduled Castes, Scheduled Tribes and Other Backward Classes. Clause 3(e) defines discrimination more broadly, covering unfair or differential treatment on the ground of caste against any stakeholder.
    4. Present position: The Centre has told the Court that the regulations are being reconsidered, so they stand stayed and unenforced.

    What is a "separate yet equal" classification?

    1. Separate yet equal: A "separate yet equal" classification permits separate facilities for different groups on the argument that the facilities provided are of equal quality. Constitutional courts treat the act of separation as the injury, since equality of facilities does not cure the stigma of being set apart.

    How far are students currently protected against caste discrimination on campus?

    1. Governing regulations restored: The UGC (Promotion of Equity in Higher Educational Institutions) Regulations, 2012 are back in force, requiring institutions to constitute an Equal Opportunity Cell and to publish an anti discrimination policy.
    2. Criminal protection: The Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 covers caste based insult, intimidation and social boycott, including inside educational institutions, and is tried by Special Courts. Its 2015 Amendment added new offences and mandated Exclusive Special Courts and time bound trial.
    3. Separate ragging machinery: The UGC (Curbing the Menace of Ragging in Higher Educational Institutions) Regulations, 2009 mandate an Anti Ragging Committee and an Anti Ragging Squad in every institution, alongside an anti ragging affidavit from every student and parent.
    4. Reservation in admission: The Central Educational Institutions (Reservation in Admission) Act, 2006 reserves 15 per cent of seats for the Scheduled Castes, 7.5 per cent for the Scheduled Tribes and 27 per cent for the Other Backward Classes, alongside 10 per cent for the Economically Weaker Sections.
    5. Reservation in teaching posts: The Central Educational Institutions (Reservation in Teachers' Cadre) Act, 2019 restored the institution rather than the department as the unit for computing reservation in faculty recruitment.
    6. No standalone statute: India has no dedicated anti discrimination Act for education, so protection is assembled from regulations, criminal law and reservation statutes.

    Constitutional Provisions Related to Equality and Non-Discrimination

    1. Preamble: Declares equality of status and of opportunity, and fraternity assuring the dignity of the individual.
    2. Article 14: Guarantees equality before the law and the equal protection of the laws to every person.
    3. Article 15(1): Prohibits the State from discriminating against any citizen on grounds of religion, race, caste, sex or place of birth.
    4. Article 15(4): Enables special provisions for socially and educationally backward classes and for the Scheduled Castes and Scheduled Tribes.
    5. Article 15(5): Enables reservation in admission to educational institutions, including private unaided institutions, other than minority institutions.
    6. Article 15(6): Enables reservation of up to 10 per cent of seats for the Economically Weaker Sections.
    7. Article 16(4): Enables reservation in public employment for any backward class not adequately represented in State services.
    8. Article 17: Abolishes untouchability and forbids its practice in any form.
    9. Article 21: Guarantees the right to life and personal liberty, read to include the right to live with dignity.
    10. Article 29(2): Bars denial of admission to a State maintained or State aided educational institution on grounds of religion, race, caste or language.
    11. Article 46: Directs the State to promote the educational and economic interests of the weaker sections, particularly the Scheduled Castes and Scheduled Tribes.
    12. Article 338 and Article 338A: Establish the National Commission for Scheduled Castes and the National Commission for Scheduled Tribes to investigate and monitor constitutional safeguards.

    Why were the 2026 Regulations framed?

    1. Origin in litigation: The regulations stem from a 2019 petition filed in the Supreme Court by the mothers of Payal Tadvi and Rohith Vemula.
    2. The two deaths: Payal Tadvi and Rohith Vemula died by suicide over alleged caste based discrimination in 2019 and 2016 respectively.
    3. Relief sought: The petition asked for enforcement of robust anti discrimination mechanisms across higher education institutions.
    4. Gap in the earlier framework: The 2012 regulations relied on Equal Opportunity Cells without naming caste based discrimination as a distinct wrong.
    5. Regulatory answer: The 2026 regulations responded by carving out caste based discrimination as a separate defined category rather than leaving it inside general discrimination.

    Why did the Supreme Court stay the regulations rather than let them operate?

    1. Sweeping consequences: The bench said the issue raised important questions that, if left unexamined, could have very sweeping consequences and could divide society.
    2. Prima facie ambiguity: The order recorded that on a prima facie consideration some provisions of the impugned regulations suffer from certain ambiguities, and that the possibility of their misuse cannot be ruled out.
    3. Status quo preserved: The Court directed that the 2012 Regulations will continue in force till further orders, so institutions were not left without an equity framework.
    4. Notices issued: Notices were issued to the Centre and to the University Grants Commission, so the challenge proceeds on merits rather than by administrative withdrawal.
    5. Narrow target of challenge: The petitions, filed by Mritunjay Tiwari, Vineet Jindal and Rahul Dewan, primarily challenge Regulation 3(1)(c) and not the regulations as a whole.

    Why has an anti-discrimination rule drawn objections from protected and general categories alike?

    1. General category objection: Naming the Scheduled Castes, Scheduled Tribes and Other Backward Classes in Regulation 3(1)(c) is read as excluding general category students and faculty from specific protection against caste based discrimination.
    2. The broader clause cuts against the narrower: Clause 3(e) already covers unfair or differential treatment on the ground of caste against any stakeholder, so the narrower clause adds a group specific label without adding a group specific remedy.
    3. Dalit and Other Backward Class objection: Sections of Dalit and Other Backward Class opinion oppose the stay and any rollback, since deleting the named categories would dissolve the recognition the regulation created.
    4. Division within the protected groups: Some Dalit opinion opposes bringing the Other Backward Classes under the same protective umbrella, treating caste discrimination against the Scheduled Castes as a distinct harm.
    5. Absent machinery: The regulations create a named category of caste based discrimination without prescribing a distinct complaint, inquiry or penalty procedure for it.

    What questions has the Supreme Court framed for examination?

    1. Nexus of Regulation 3(1)(c): Whether Clause 3(1)(c) bears a reasonable and rational nexus to subserve the object and purpose of the 2026 Regulations, particularly since no distinct or special procedural mechanism has been prescribed to address caste based discrimination as against the exhaustive and inclusive definition of discrimination in Clause 3(e).
    2. Effect on sub classification: Whether introducing the term caste based discrimination has any bearing on the existing constitutional and statutory sub classification of the Most Backward Castes within the Scheduled Castes, Scheduled Tribes and Other Backward Classes, and whether the new rules provide adequate and effective safeguards to such Extremely Backward Castes against discrimination and structural disadvantage.
    3. Segregation and the equality guarantees: Whether including the expression segregation in the context of allocation of hostels, classrooms, mentorship groups or similar academic or residential arrangements, albeit on transparent and non discriminatory criteria, would amount to a separate yet equal classification infringing the guarantees of equality and fraternity under Articles 14 and 15 and the Preamble.
    4. Omission of ragging: Whether omitting the term ragging as a specific form of discrimination is a regressive and exclusionary legislative omission, and whether that omission creates an asymmetry in access to justice for victims of discrimination and so falls foul of Articles 14 and 21.

    Why has the issue become an electoral question in Uttar Pradesh and Bihar?

    1. Upper caste protest: The rules triggered protests among sections of the upper castes, who argued that the explicit reference to the Scheduled Castes, Scheduled Tribes and Other Backward Classes amounted to exclusion of general category students.
    2. Dalit disquiet over rollback: There is concern within the ruling party that the stay and any rollback may cause disquiet among Dalit communities.
    3. Election calendar: Uttar Pradesh Assembly elections are due next year, which places the dispute inside an active campaign in the largest State.
    4. Bypoll reading: One reason attributed within the ruling party for its defeat in the recent Bankipur Assembly bypoll in Bihar was upper caste dissatisfaction over the University Grants Commission issue.
    5. Cost in both directions: Retaining the clause loses general category support and withdrawing it loses Dalit and Other Backward Class support, which is why reconsideration rather than defence is the chosen route.

    Major debates surrounding caste discrimination in higher education

    1. Group specific against universal protection: Whether an anti discrimination rule should name the historically excluded groups, or state a caste neutral prohibition that any student can invoke, is the live legal fault line.
    2. Sub classification within the Scheduled Castes: The Supreme Court's 2024 ruling in State of Punjab v Davinder Singh permitted States to sub classify the Scheduled Castes for reservation, and the debate now extends to whether protection against discrimination can be similarly graded.
    3. Creamy layer for the Scheduled Castes: Judicial opinion is divided on extending the creamy layer exclusion, applied to the Other Backward Classes since Indra Sawhney (1992), to the Scheduled Castes and Scheduled Tribes.
    4. Merit against representation: The framing of open competition as merit and reservation as compensation is contested by the argument that access to coaching, language and schooling already prices the entry test.
    5. Institutional autonomy against central regulation: Whether a central regulator can prescribe internal grievance machinery binding on State and private universities is disputed by State governments.
    6. Empirical gap: Caste wise data on discrimination complaints and on student suicides in higher education institutions is not published in consolidated form, so the scale the dispute turns on is itself contested.

    Challenges to enforcing the UGC Equity Regulations

    1. Grievance machinery controlled by the respondent: Equal Opportunity Cells are constituted by the same administration that a complaint is frequently directed against. Eg. In the Rohith Vemula case, the suspension from the hostel that preceded his death in January 2016 came from the University of Hyderabad's own disciplinary machinery.
    2. Retaliation risk suppresses reporting: A complaint against senior faculty or residents is made inside a hierarchy that controls the complainant's evaluation. Eg. Payal Tadvi's complaint at BYL Nair Hospital in Mumbai in 2019 named senior residents in her own department.
    3. Regulatory reach ends at grant conditionality: University Grants Commission regulations bind institutions that seek its recognition and grants, and enforcement over State universities is weak. Eg. The 2012 regulations required every institution to publish an anti discrimination policy, and publication was never made a condition for release of grants.
    4. A stayed regulation does not operate: A judicial stay leaves the earlier and weaker framework in charge for the entire period of litigation. Eg. The 2026 regulations have been suspended since 29 January 2026, so the 2012 framework they were written to replace still governs every campus.
    5. Faculty representation shortfall: A grievance system staffed almost entirely by unreserved category faculty carries limited confidence among complainants. Eg. Central universities have reported persistent backlogs of unfilled reserved category professor and associate professor posts in successive parliamentary replies.
    6. Definitional contest displaces the remedy: Litigation on who is covered has consumed the entire period in which the compliance machinery was to be built. Eg. Seven months after notification the regulations have produced no Equal Opportunity Cell restructuring, no complaint procedure and no penalty.

    Conclusion

    A regulation written to give caste discrimination a name has become unworkable because targeted protection and formally neutral protection are being demanded of the same clause. The Centre has told the Supreme Court that the University Grants Commission (Promotion of Equity in Higher Education Institutions) Regulations, 2026 are being reconsidered, so the measure stands stayed and the 2012 framework continues in force until further orders. What remains unresolved is the defect the Court itself identified, that the regulations create a distinct category of caste based discrimination without prescribing any distinct procedure to act on it.

    What is Substantive Equality?

    1. About: Substantive equality treats equality as an outcome the law must produce, so it permits differential treatment where identical treatment would preserve entrenched disadvantage.
    2. Rationale: Formal equality applies the same rule to unequally placed persons, which reproduces the existing distribution of advantage; substantive equality asks what the rule does to those on whom the disadvantage already falls.
    3. Redressing disadvantage: The first dimension asks whether a measure removes the material and social disadvantage a group carries, rather than whether it treats everyone alike.
    4. Countering stigma, prejudice and violence: The second dimension asks whether a measure reduces the humiliation, stereotype and hostility attached to group membership.
    5. Enhancing voice and participation: The third dimension asks whether the affected group has a say in the institutions that decide for it, since exclusion from decision making sustains the disadvantage.
    6. Accommodating difference through structural change: The fourth dimension asks whether the institution itself is altered to fit the group, rather than requiring the group to conform to an existing design.

    Key Concerns Regarding Substantive Equality

    1. Ceiling on affirmative action: The 50 per cent limit set in Indra Sawhney (1992) restricts how far redistribution can go, and the 10 per cent Economically Weaker Sections quota upheld in Janhit Abhiyan (2022) breached it for a non caste category.
    2. Benefit capture within the beneficiary group: Reservation gains concentrate among the better placed sections of a reserved category, which is the argument behind creamy layer and sub classification demands.
    3. Absence of enumeration: Caste wise socio economic data has not been published since 1931 in a full Census, so the extent of disadvantage the doctrine seeks to redress is inferred rather than measured.
    4. Reach limited to the public sector: Reservation binds the State and State aided institutions, and the bulk of new employment and higher education capacity has grown in the private sector.
    5. Conflict with efficiency claims: Article 335 requires that claims of the Scheduled Castes and Scheduled Tribes be considered consistently with the maintenance of efficiency of administration, which is repeatedly invoked against extending measures.
    6. Enforcement gap in horizontal relations: Constitutional equality guarantees bind the State, and discrimination between private individuals on a campus or in housing has no general statutory remedy.

    Laws and Rules Governing Anti-Discrimination in Higher Education

    1. University Grants Commission Act, 1956: Establishes the Commission and empowers it to coordinate and determine standards in universities.
    2. Section 26 gives the Commission power to make regulations, which is the source of both the 2012 and the 2026 equity regulations.
    3. Protection of Civil Rights Act, 1955: Penalises the enforcement of any disability arising out of untouchability, including in educational institutions.
    4. Rights of Persons with Disabilities Act, 2016: Section 16 requires educational institutions to provide inclusive education and reasonable accommodation.

    Government Initiatives for Equity in Higher Education

    1. Post Matric Scholarship for Scheduled Caste students: Meets tuition and maintenance costs of Scheduled Caste students pursuing post matriculation courses, targeted at students below a stated family income ceiling.
    2. National Fellowship for Scheduled Caste and Scheduled Tribe students: Funds Master of Philosophy and Doctor of Philosophy research by students of these categories in recognised universities.
    3. PM Young Achievers Scholarship Award Scheme for Vibrant India (PM YASASVI): Supports school and higher secondary education of Other Backward Class, Economically Backward Class and De notified Tribe students, feeding the higher education pipeline.
    4. National Overseas Scholarship: Funds postgraduate and doctoral study abroad for Scheduled Caste, De notified Tribe, landless agricultural labourer and traditional artisan category students.
    5. Dr Ambedkar Centres of Excellence: Provide free civil services examination coaching to Scheduled Caste students in selected universities.
    6. Remedial Coaching and Equal Opportunity Cells: University Grants Commission supported cells run bridge and remedial courses for students from reserved categories in colleges and universities.

    Challenges in Ensuring Equity in Higher Education

    1. Enrolment gap by category: Gross Enrolment Ratio in higher education remains below the national average for the Scheduled Tribes and Scheduled Castes. Eg. The All India Survey on Higher Education for 2021-22 recorded an overall Gross Enrolment Ratio of 28.4 per cent, against 25.9 per cent for the Scheduled Castes and 21.2 per cent for the Scheduled Tribes.
    2. Language of instruction: Professional and postgraduate programmes are taught almost entirely in English, which disadvantages students from State board schooling in regional languages. Eg. Engineering and medical curricula translated into Indian languages under the National Education Policy, 2020 cover a small share of programmes and enrolment.
    3. Financial barriers and delayed disbursal: Scholarship money arrives after fees fall due, forcing students into private borrowing. Eg. Post Matric Scholarship disbursal depends on release of the State share, and delays in that release have stalled payments across academic years.
    4. Residential segregation on campus: Hostel allotment and mess arrangements reproduce caste separation informally even where no rule prescribes it. Eg. The Supreme Court has framed the allocation of hostels, classrooms and mentorship groups as a separate yet equal question in the present case.
    5. Mental health and support systems: Counselling capacity in most institutions is not staffed to the size of the student body, and first generation learners carry the heaviest adjustment burden. Eg. Successive parliamentary replies have recorded student suicides in central institutions, with a disproportionate share from reserved categories.
    6. Growth outside the reservation perimeter: Capacity expansion has been largest in private unaided institutions, where implementation of Article 15(5) reservation is uneven. Eg. The provision was upheld for private unaided institutions in Ashoka Kumar Thakur (2008) and again in Pramati Educational Trust (2014), and compliance is not centrally monitored.

    Back2Basics: University Grants Commission (UGC)

    1. Formation: Set up in 1953 and given statutory status by the University Grants Commission Act, 1956, which came into force on 3 November 1956.
    2. Parent ministry: Functions under the Ministry of Education, with its headquarters in New Delhi and six regional offices.
    3. Constitutional basis: Draws from Article 246 read with Entry 66 of the Union List, which covers coordination and determination of standards in institutions for higher education.
    4. Composition: Consists of a Chairman, a Vice Chairman and ten members appointed by the Central Government.
    5. Mandate: Coordinates and determines standards in universities, disburses grants, frames regulations and advises the Union and State governments on higher education.
    6. Recognition function: Recognises institutions under Sections 2(f) and 12(B) of the Act, which determines their eligibility for central grants.
    7. Proposed replacement: A Higher Education Commission of India has been proposed to subsume its regulatory functions, with grant disbursal moved to a separate body.

    Way Forward

    1. Prescribe a distinct procedure: Attach a dedicated complaint, inquiry and penalty procedure to caste based discrimination, since the absence of one is the core defect the Court has framed.
    2. Independent grievance forum: Place the inquiry authority outside the institution's own administration, with an external member drawn from a Scheduled Caste or Scheduled Tribe commission panel.
    3. Keep the broad clause as the residual protection: Retain the wide definition in Clause 3(e) as the universal guarantee, so no category of student is left without a remedy. The group specific recognition created by Regulation 3(1)(c) is retained alongside it.
    4. Make compliance a grant condition: Tie release of central grants and continuation of Section 12(B) status to the constitution and reporting of a functioning equity mechanism.
    5. Publish disaggregated data: Require every institution to report complaints, outcomes, dropouts and student deaths by category in an annual public return.
    6. Fill reserved faculty posts in mission mode: Run a time bound special recruitment drive for the backlog of reserved category teaching posts, since representation among decision makers is what makes a grievance forum credible.

    Matching Previous Year Question

    “[2018, GS2, 10] Whether National Commission for Scheduled Castes (NCSC) can enforce the implementation of constitutional reservation for the Scheduled Castes in the religious minority institutions? Examine.”

  • Centre’s fiscal outlook faces geopolitical, revenue risks

    Question (2025, GS2): “Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India?”
    Linkage: The Centre’s reliance on new cesses and duties to meet its budget goals, rather than expanding the core tax base itself, directly impacts fiscal federalism. Cesses and surcharges do not go into the divisible pool shared with states, altering Centre-State financial dynamics.

    Mentor comment

    Controller General of Accounts data show the Centre’s gross tax revenues growing only 3.7% in the first quarter of 2026-27, with Goods and Services Tax collections contracting and Union excise duties falling more than a fifth. The fiscal arithmetic is being held near its budgeted position by a larger nominal Gross Domestic Product denominator, by non-tax receipts led by the Reserve Bank of India dividend, and by new cesses and duties, rather than by the tax base itself.

    What is the divisible pool of central taxes?

    1. About: The divisible pool is that part of the Centre’s gross tax revenue which is shared with the States, arrived at after deducting collection costs, cesses and surcharges.
    2. The States’ share: The Sixteenth Finance Commission retained the share of States in the divisible pool of central taxes at 41%.
    3. From gross to net: The Centre’s net tax revenue is what remains after devolution, and a factor of 65% of gross tax revenue reflects the ratio of net to gross tax revenues in 2025-26 and in the 2026-27 Budget Estimates.
    4. Why cesses matter to it: A cess levied for a specified purpose sits outside the divisible pool, so the same rupee raised through a cess rather than a tax does not reach the States as devolution.

    What is tax buoyancy?

    1. About: Tax buoyancy measures how far tax revenue grows for each unit of growth in nominal Gross Domestic Product, capturing both the natural response of the tax base and the effect of policy changes.
    2. What zero buoyancy means: Personal income tax revenue growth in 2025-26 was only 0.037%, which implies a buoyancy of zero, so the tax raised nothing extra despite the economy expanding.

    What is the Implicit Price Deflator?

    1. About: The Implicit Price Deflator is the ratio of nominal to real Gross Domestic Product, and it captures the average price change across everything the economy produces rather than a fixed consumption basket.
    2. How it is used here: An Implicit Price Deflator based inflation of 5% to 5.5% is what converts an expected real growth of about 7% into nominal Gross Domestic Product growth of 12.5% to 13% in 2026-27.

    What is a cess?

    1. About: A cess is a levy imposed for a specified purpose, collected over and above the base tax, and its proceeds are meant to be applied only to that stated purpose.
    2. Its fiscal effect: Cess proceeds are not shareable with the States, so a shift from taxes to cesses reduces the shareable pool while leaving gross collections unchanged.

    Why did the Centre’s gross tax revenues grow only 3.7%?

    1. Two large taxes were rationalised: Personal income tax and Goods and Services Tax were both subjected to substantive modifications in 2025-26, with extensive rate rationalisation in both cases and a substantive rate reduction in the case of the Goods and Services Tax.
    2. The stated expectation: Those reforms were expected to entail an initial revenue sacrifice, with subsequent expansion of the tax base offsetting the loss over time.
    3. The carry-forward into this year: Personal income tax showed growth of 6.8% in the first quarter of 2026-27, and Goods and Services Tax revenues contracted 11%.
    4. The 2025-26 baseline: Goods and Services Tax revenue growth for the second half of 2025-26 was 4.67%, and personal income tax growth over the same year was effectively nil.
    5. The excise duty cut: As retail fuel prices rose on the West Asian crisis, the government reduced excise duties to ease the burden on consumers, and revenue from Union excise duties contracted 22.4% in the first quarter of 2026-27.

    What three remedial measures has the government taken?

    1. A new cess replacing a discontinued one: A Health Security and National Security Cess was introduced with effect from 1 February 2026, even as the Goods and Services Tax Compensation Cess was discontinued.
    2. A higher windfall tax on fuel exports: The windfall tax on exports of diesel, petrol and aviation turbine fuel was increased with effect from 3 August 2026.
    3. Higher import duties on precious metals: Import duty rates were raised on gold and silver bullion and on other specific precious metal articles, sweepings and clad metals.

    How does a higher nominal GDP change the fiscal picture?

    1. The budgeted assumption is being exceeded: The Budget assumed nominal Gross Domestic Product growth of 10.04%, well short of the growth now expected for the year.
    2. The consistency check: That deflator range is consistent with Consumer Price Index inflation at 3.9% and Wholesale Price Index inflation at 9.3% in the first quarter of 2026-27.
    3. The level, not the growth rate, is lower: On the 2022-23 base series, nominal Gross Domestic Product is estimated at Rs 391 lakh crore, below the budgeted level of Rs 393 lakh crore.
    4. The net effect on revenue: Taken together, estimated gross tax revenue would be realised or fall short by a small margin.

    What has happened to transfers to the States?

    1. A sharp contraction in the first quarter: Tax devolution to the States contracted 19.5% in the first quarter of 2026-27, with an expectation of higher assignment of central tax revenues in subsequent months.
    2. The shareable pool narrows at the margin: The introduction of the non-shareable Health Security and National Security Cess produces a marginal reduction in the shareable pool, though some part of its revenues may reach the States as grants outside the Finance Commission route.
    3. Finance Commission grants are budgeted lower: Based on the Sixteenth Finance Commission’s recommendation, Finance Commission grants for the States are budgeted to contract by Rs 23,556 crore in 2026-27.
    4. The devolution share itself is unchanged: The contraction is in the amounts flowing, not in the entitlement, since the States’ share in the divisible pool stays at 41%.

    What is holding the revenue account together?

    1. The central bank dividend: The Reserve Bank of India transferred dividends to the Centre in May 2026, so 77% of the budgeted dividends and profits for the full year were already covered in the first three months.
    2. Weight of non-tax revenue: The Centre’s non-tax revenues contributed 37% of its net revenue receipts in the first quarter of 2026-27.
    3. Other receipts on track: The budgeted amounts for non-tax and non-debt capital receipts are expected to be realised.
    4. Subsidy pressure on the other side: Major subsidies had to be increased 37.4% in the quarter because of the unexpected rise in global crude oil prices.
    5. Revenue expenditure held down: Growth in revenue expenditure was contained at 7.4% over the same quarter.
    6. Capital expenditure front-loaded: Capital expenditure grew 23.7% in the first quarter of 2026-27, against a contraction of 23.3% in the fourth quarter of 2025-26.
    7. The full-year subsidy overshoot: Extrapolating first-quarter subsidies to the year, realised subsidies are expected to exceed the budgeted amount by about Rs 50,000 crore.

    Where do the deficit numbers stand, and what could push them off track?

    1. First-quarter deficit position: The fiscal deficit accounted for 18.2% of the annual budgeted magnitude in the first quarter, and the corresponding share of the revenue deficit was 0.4%.
    2. Why the revenue account looks strong: The revenue account balance is held up mainly by the contribution of non-debt receipts, not by tax collections.
    3. The full-year estimates: Fiscal deficit calculated as the increment in debt is estimated at Rs 18.16 lakh crore, giving a fiscal deficit-to-Gross Domestic Product ratio of 4.6% on the new series, with the debt-to-Gross Domestic Product ratio at 55.8%.
    4. Three named slippage risks: A shortfall in tax revenues, an unbudgeted increase in revenue expenditure arising from additional subsidies, and a slightly higher external debt amid sustained pressure on the Indian rupee.
    5. The overriding risk: An escalation of the war in West Asia would deliver a major jolt to the economy and to central finances.
    6. The unwound measure: The reduction in excise duty on fuel must be restored at some suitable time, since it is a temporary relief carried at a permanent revenue cost.

    What challenges does the Centre’s fiscal consolidation path face?

    1. Rate rationalisation without base expansion: A tax cut delivers the revenue sacrifice immediately and the base expansion only over an uncertain horizon. Eg. Personal income tax delivered a buoyancy of zero in 2025-26, the year its rationalisation took effect.
    2. Subsidy exposure to imported energy prices: Subsidy outgo is set by global crude prices rather than by a domestic policy decision. Eg. Major subsidies rose 37.4% in the first quarter of 2026-27, putting the full year on course to overshoot its budgeted provision.
    3. Reliance on a single large non-tax transfer: A dividend from the central bank is a discretionary, year-specific receipt that cannot be assumed to repeat. Eg. 77% of the full year’s budgeted dividends and profits were covered in the first three months of 2026-27.
    4. Revenue relief that is politically hard to withdraw: An excise duty cut given when fuel prices rise is difficult to reverse when they fall. Eg. Union excise duties contracted 22.4% in the first quarter of 2026-27 following the cut.
    5. Deficit ratios improved by a denominator effect: A higher nominal Gross Domestic Product lowers the deficit ratio without any change in borrowing. Eg. Nominal growth running ahead of the budgeted 10.04% flatters the 4.6% fiscal deficit ratio.
    6. Interest burden crowding out capital spending: A debt-to-Gross Domestic Product ratio near 56% commits a large share of revenue receipts to interest before any programme is funded. Eg. Capital expenditure was front-loaded 23.7% in the first quarter after contracting 23.3% in the preceding quarter, a pattern that shifts rather than raises the annual total.
    7. Exchange rate pressure raising external liabilities: A weaker rupee raises the rupee cost of external debt service without any new borrowing. Eg. Sustained pressure on the rupee is named as one of the three sources of possible slippage from budgeted outcomes.

    Conclusion

    The Centre’s 2026-27 outcomes are likely to stay close to budgeted levels, and the reasons are a larger nominal Gross Domestic Product, front-loaded non-tax receipts and three new revenue measures, not a tax base that is delivering. Gross tax revenue growing at barely a third of the pace of nominal output is the number that has to change, since the rate rationalisations of 2025-26 were justified on the promise of base expansion that has not yet appeared. The immediate unresolved decisions are when the excise duty cut on fuel is restored and how far an escalation in West Asia pushes subsidies beyond the overshoot already projected.

    What is Fiscal Federalism?

    1. About: Fiscal federalism is the division of taxation powers, expenditure responsibilities and transfer arrangements between the Union and the States in a federal system.
    2. Rationale: Revenue-raising powers concentrate at the Centre because major tax bases are mobile, while expenditure responsibilities concentrate at the States because services are delivered locally. Transfers exist to close that gap.
    3. Vertical fiscal imbalance: The mismatch between the Union’s revenue capacity and the States’ expenditure responsibilities, addressed through devolution of a share of central taxes.
    4. Horizontal fiscal imbalance: The mismatch across States in revenue capacity and expenditure need, addressed through the Finance Commission’s distribution formula among States.
    5. Third tier imbalance: The mismatch between the functions devolved to panchayats and municipalities and the revenue sources available to them, addressed through State Finance Commissions and grants.
    6. The transfer instruments: Tax devolution from the divisible pool, Finance Commission grants, and centrally sponsored schemes with a matching State contribution.

    Key Concerns Regarding Fiscal Federalism

    1. Shrinking divisible pool through cesses and surcharges: Levies outside the divisible pool raise Union revenue without expanding what is shared, so the effective transfer falls below the headline share.
    2. Erosion of State taxation autonomy under the Goods and Services Tax: States surrendered independent rate-setting on most indirect taxes, and rate decisions now require a collective decision in a council.
    3. Weak third tier finances: Local bodies depend on transfers rather than own revenue, and State Finance Commissions are constituted irregularly in several States.
    4. Contested horizontal distribution criteria: Weighting population, income distance and demographic performance sets States that have controlled population growth against those with larger populations.
    5. Conditionality attached to central transfers: Centrally sponsored schemes tie State spending to Union priorities, reducing the discretion that devolution is meant to confer.
    6. Off-budget and contingent liabilities: Borrowing routed through State-owned entities and guarantees sits outside the headline deficit at both levels, obscuring the true fiscal position.

    Constitutional Framework Governing Union Finances

    1. Article 265: No tax shall be levied or collected except by authority of law.
    2. Article 266: Establishes the Consolidated Fund and the Public Account of India and of each State.
    3. Article 267: Provides for the Contingency Fund of India, placed at the disposal of the President for unforeseen expenditure.
    4. Article 112: Requires the annual financial statement of estimated receipts and expenditure to be laid before Parliament.
    5. Article 246 and the Seventh Schedule: Distribute legislative and taxation powers between the Union and the States through the Union, State and Concurrent Lists.
    6. Article 246A: Confers concurrent power on Parliament and State legislatures to make laws on the Goods and Services Tax.
    7. Article 269A: Provides for the levy and collection of the Goods and Services Tax on inter-State supply and its apportionment between the Union and the States.
    8. Article 270: Provides for the distribution of taxes levied and collected by the Union between the Union and the States, and excludes cesses and surcharges from that distribution.
    9. Article 271: Empowers Parliament to levy a surcharge on specified taxes for the purposes of the Union, the proceeds of which accrue wholly to the Union.
    10. Article 275: Provides for grants-in-aid from the Union to States in need of assistance.
    11. Article 279A: Provides for the constitution of the Goods and Services Tax Council.
    12. Article 280: Provides for the constitution of a Finance Commission every fifth year to recommend the distribution of taxes and the principles governing grants-in-aid.
    13. Article 282: Permits the Union or a State to make any grant for any public purpose, the provision under which centrally sponsored schemes are funded.
    14. Article 292 and Article 293: Govern borrowing by the Union and by the States, with State borrowing subject to Union consent where the State is indebted to the Union.
    15. Article 360: Provides for a proclamation of financial emergency.

    Laws Governing Government Budgeting in India

    1. Fiscal Responsibility and Budget Management Act, 2003: Requires the Centre to limit the fiscal deficit and to lay medium-term fiscal policy statements before Parliament.
    2. Amended in 2018 to shift the primary anchor from the revenue deficit to a debt-to-Gross Domestic Product target, with an escape clause for specified circumstances.
    3. Fiscal Responsibility and Budget Management Rules, 2004: Prescribe the form of the disclosure statements and the quarterly review requirement.
    4. Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971: Provides the basis for audit of Union and State accounts and for the reports laid before the legislatures.
    5. State fiscal responsibility legislation: Every State has enacted its own fiscal responsibility law setting deficit and debt limits, complementing the Union statute.
    6. Appropriation and Finance Acts: The Appropriation Act authorises withdrawal from the Consolidated Fund, and the Finance Act gives effect to the taxation proposals for the year.

    Government Initiatives in Public Financial Management

    1. Public Financial Management System: An end-to-end platform tracking fund release and utilisation from the Union to the last implementing agency, reducing float in the system.
    2. Direct Benefit Transfer: Routes subsidy and benefit payments to bank accounts directly, cutting duplication and leakage in the transfer chain.
    3. Single Nodal Agency mechanism: Requires each centrally sponsored scheme in a State to operate through one designated account, so unspent balances are visible.
    4. Special Assistance to States for Capital Investment: Provides fifty-year interest free loans to States tied to capital expenditure and to specified reforms.
    5. National Monetisation Pipeline: Raises resources by leasing operating public assets while retaining ownership, supplementing tax revenue for capital spending.
    6. Goods and Services Tax Network: The common technology platform for registration, return filing and invoice matching that generates the data underlying indirect tax collections.

    Back2Basics: Sixteenth Finance Commission

    1. What it is: A constitutional body constituted under Article 280 to recommend the distribution of net tax proceeds between the Union and the States, the allocation among States, and the principles governing grants-in-aid.
    2. Constitution: Constituted in December 2023, chaired by a former Vice Chairman of NITI Aayog.
    3. Award period: Its recommendations cover the five years beginning 2026-27.
    4. Advisory Council: The Commission is assisted by an Advisory Council of economists and public finance specialists.
    5. Status of recommendations: Its report is laid before Parliament along with an explanatory memorandum on the action taken, and the recommendations are advisory rather than binding.
    6. Additional terms of reference: Beyond devolution, the Commission examines disaster management financing and the review of State fiscal positions.

    Challenges in India’s Public Finances

    1. A low tax-to-Gross Domestic Product ratio: India’s combined tax collection relative to output remains below that of comparable middle-income economies, which caps what can be spent without borrowing. Eg. Gross tax revenue in the first quarter of 2026-27 grew at less than a third of the nominal output growth expected for the year.
    2. Narrow direct tax base: A small share of the population files and pays income tax, so any rate change transmits through a thin base. Eg. Personal income tax raised no more in 2025-26 than in the year before, despite nominal output expanding through that year.
    3. Rigidity of committed expenditure: Interest, salaries, pensions and statutory transfers consume most revenue receipts before discretionary spending begins. Eg. The debt-to-Gross Domestic Product ratio is estimated at 55.8% for 2026-27.
    4. Exposure to imported commodity prices: Fuel and fertiliser subsidies move with global prices rather than with domestic policy. Eg. Major subsidies rose 37.4% in the first quarter of 2026-27 on the unexpected rise in global crude oil prices.
    5. Volatility of non-tax receipts: Dividends, disinvestment proceeds and spectrum receipts are lumpy and cannot be relied on across years. Eg. Non-tax revenues contributed 37% of net revenue receipts in the first quarter of 2026-27.
    6. State-level fiscal stress and guarantees: Contingent liabilities from State-owned distribution companies and guaranteed borrowings sit outside headline deficits. Eg. Tax devolution to the States contracted 19.5% in the first quarter, tightening State cash positions in the same period.
    7. Weak link between capital spending and outcomes: Front-loading capital expenditure raises the quarterly number without ensuring project completion. Eg. Capital expenditure grew 23.7% in the first quarter of 2026-27 after contracting 23.3% in the preceding quarter.

    Way Forward

    1. Restore the excise duty on fuel on a stated schedule: Announcing the timing in advance converts a politically difficult reversal into a pre-committed step, as the analysis itself recommends.
    2. Publish base expansion metrics alongside rate rationalisation: Reporting the change in the number of filers and in registered taxpayers would test the premise on which the 2025-26 rationalisation was justified.
    3. Cap the share of revenue raised through cesses and surcharges: A ceiling would stop the divisible pool narrowing through instruments that bypass Article 270.
    4. Insulate subsidy budgeting from a single price assumption: Building a price band and a contingency provision into the subsidy estimate would prevent an overshoot of this size appearing mid-year.
    5. Treat central bank dividends as a windfall, not a base receipt: Directing above-trend transfers to debt reduction rather than to recurring expenditure would stop a one-off receipt becoming a structural assumption.
    6. Smooth capital expenditure across quarters: Front-loading followed by contraction disrupts contractor payment cycles and project execution, so a steady release profile serves outcomes better than a strong first quarter.
    7. Bring off-budget and guaranteed borrowing into the disclosure statements: Consolidated reporting at both Union and State levels is the precondition for the debt path to mean what it states.

    “[2019, GS3, 10] The public expenditure management is a challenge to the Government of India in context of budget making during the post liberalization period. Clarify it.”

  • CRPF forms core group to review self-harm cases after a spate of suicides

    Why in the News

    The Central Reserve Police Force (CRPF) has constituted a high level core group to conduct monthly reviews of self harm cases among its personnel. Deaths by suicide in the force touched a five year high of 59 in 2025, which moves the response from unit level handling of individual incidents to a standing headquarters mechanism.

    What is the Central Reserve Police Force?

    1. Mandate: The Central Reserve Police Force is the Union’s principal internal security force, deployed on requisition to States for counter insurgency, anti Left Wing Extremism operations, law and order duty and election security.
    2. Command: It functions under the Ministry of Home Affairs and is headed by a Director General, with operations organised through executive battalions and specialised wings.
    3. Scale: It is the largest of the Central Armed Police Forces, with a sanctioned strength above three lakh personnel spread across every State and Union Territory.

    What do the suicide figures in the force since 2021 show?

    1. Five year peak in 2025: Fifty nine CRPF personnel died by suicide in 2025, the highest figure in the five year series and the trigger for the present review mechanism.
    2. The full series: The force recorded 57 such deaths in 2021, 43 in 2022, 57 in 2023, 46 in 2024 and 59 in 2025.
    3. The current year: Nineteen such deaths were reported till 30 May 2026.
    4. No downward trend: The numbers oscillate within a narrow band rather than falling, which indicates that existing unit level welfare measures have not shifted the underlying pattern.
    5. Deaths on duty: The figures from 2021 to May 2026 show that several of these deaths took place while the personnel were on duty, not while on leave or at home.

    Why has a headquarters level core group been created rather than leaving reviews to individual units?

    1. A structured mechanism: Senior officers at a meeting in the CRPF headquarters earlier this month identified the absence of a structured mechanism to examine such incidents as the gap to be closed.
    2. Recurring risk factors: A unit examining a single death cannot detect a factor that repeats across battalions, so pattern identification requires a body sitting above the unit.
    3. Command level ownership: The core group is headed by the Director General of the force, which places accountability for prevention at the apex of the command chain rather than with the battalion commandant.
    4. Fixed periodicity: The group is to meet every month, converting review from an event triggered by a death into a standing calendar obligation.
    5. Four review heads: Each monthly meeting is to cover the self harm incidents reported, the causes and circumstances behind them, the availability and use of welfare or psychological support, and the preventive steps taken by the unit concerned.

    What drives self harm among central armed police force personnel?

    1. Prolonged separation from family: Personnel serve long tenures in field formations away from their home States, with leave frequently curtailed during active operations.
    2. Operational stress in insurgency theatres: Extended deployment in Left Wing Extremism affected districts and in Jammu and Kashmir combines physical risk with an absence of privacy and rest.
    3. Domestic and financial distress: Land disputes, family illness and debt at the home station cannot be attended to from a field posting, and the inability to act is itself a stressor.
    4. Grievance and leave denial: Perceived unfairness in leave sanction, posting and promotion converts an administrative decision into a personal grievance with no accessible appeal.
    5. Stigma around psychological help: Seeking counselling is read within the force as an admission of unfitness for armed duty, which suppresses the demand for the support that does exist.

    What does the National Human Rights Commission’s intervention add to the response?

    1. External scrutiny: The National Human Rights Commission took note of the rising figures last week and sought reports from the Ministry of Home Affairs and the Director General of the force.
    2. Reframing the issue as a rights question: The Commission’s entry treats deaths in service as a question of the State’s obligation to its own personnel rather than as an internal personnel matter.
    3. A reporting obligation: A requisition from the Commission compels a written response from both the administrative ministry and the force, creating a record that survives changes in command.
    4. Timing: The core group’s formation and the Commission’s notice fall in the same month, so the force’s internal mechanism now operates under an external deadline.

    Challenges to the CRPF’s self harm prevention mechanism

    1. A review body without a treatment capacity: A monthly review can classify causes but cannot supply the clinical care the classification points to, and psychiatrist and counsellor strength in the central armed police forces remains far below the deployed strength. Eg. Composite hospitals of the central armed police forces routinely operate with a single mental health specialist serving several battalions spread across districts.
    2. Under reporting of distress: Personnel avoid recording psychological symptoms because a medical entry can affect weapon issue, posting and promotion prospects. Eg. Screening drives in armed forces and central police organisations consistently record self reported distress far below the levels found in anonymous surveys of the same units.
    3. Housing and family accommodation deficit: Family accommodation available to central armed police force personnel falls well short of the authorised requirement, which keeps families separated even at peace stations. Eg. The Parliamentary Standing Committee on Home Affairs has repeatedly recorded a housing satisfaction ratio below half the sanctioned entitlement across the central armed police forces.
    4. Leave and rotation practice: Announced entitlements are overridden by operational exigency in the very theatres where the stress is highest. Eg. The force’s initiative to give personnel around 100 days with their families each year has proved hardest to implement in the Left Wing Extremism theatre where deployment density is greatest.
    5. Weapon access at the point of crisis: Personnel on duty carry service weapons continuously, which removes the interval between intent and act that prevention depends on. Eg. Several of the deaths recorded between 2021 and May 2026 occurred while the personnel were on duty, when the service weapon was in hand.
    6. Fratricide and grievance escalation: Unresolved interpersonal grievance within a small deployed unit escalates into violence against colleagues as well as self harm. Eg. Fratricide incidents in central armed police force camps have prompted the Bureau of Police Research and Development to study stress and grievance handling in deployed units.

    Conclusion

    The Central Reserve Police Force has moved suicide prevention from ad hoc unit level handling to a monthly review chaired by its Director General, after 2025 recorded the highest figure in five years. The immediate status is that the core group stands constituted and the National Human Rights Commission has sought reports from the Ministry of Home Affairs and the force. The next expected step is the submission of those reports and the first monthly review sitting of the core group.

  • Union Cabinet clears HC bench for Ladakh

    Why in the News

    The Union Cabinet has decided to establish a bench of the Jammu and Kashmir High Court in Ladakh, aimed at improving access to justice in the Union Territory. The decision answers a long-standing demand on judicial access at a point when the agitation in Ladakh is pressing a different set of demands on statehood, Sixth Schedule protection and an empowered legislature.

    What is a High Court bench?

    1. About: A High Court bench is a permanent sitting of a High Court at a place other than its principal seat, where judges hear cases arising from a defined territory.
    2. Purpose: A bench reduces the distance and cost of approaching the higher judiciary for litigants living far from the principal seat, without creating a separate High Court.
    3. How it is established: The place of the principal seat and of any other place of sitting is fixed by the President by notification, and the establishment of a bench ordinarily follows a proposal from the State or Union Territory government with the concurrence of the High Court’s Chief Justice and the Union Law Ministry.
    4. The court concerned: The Jammu and Kashmir High Court, renamed the High Court of Jammu and Kashmir and Ladakh, is the common High Court for the Union Territory of Jammu and Kashmir and the Union Territory of Ladakh under the Jammu and Kashmir Reorganisation Act, 2019.

    What is the Leh Apex Body?

    1. About: The Leh Apex Body is the umbrella platform of political, religious and social organisations from Leh district, formed to press Ladakh’s demands for constitutional safeguards.
    2. Role: It leads the Ladakh agitation jointly with the Kargil Democratic Alliance and negotiates with the Ministry of Home Affairs.

    What is the Kargil Democratic Alliance?

    1. About: The Kargil Democratic Alliance is the corresponding umbrella platform of political, religious and social organisations from Kargil district.
    2. Role: It negotiates alongside the Leh Apex Body, so the two districts present a single set of demands to the Centre.

    What does the decision do?

    1. The decision: The Union Cabinet decided to establish a bench of the Jammu and Kashmir High Court in Ladakh, announced by the Union Home Minister on 20 August 2026.
    2. Stated effect: The bench will enhance access to justice for citizens living in remote areas of Ladakh by reducing the time required to avail the legal services they are entitled to.
    3. Framing by the Centre: The announcement reaffirmed the Centre’s commitment to ensuring constitutional safeguards and the all-round development of the region.
    4. Response from the Union Territory: The Lieutenant Governor of Ladakh welcomed it as a historic decision and said it would ensure speedy justice and reaffirm commitment to the region’s development.
    5. The demand it answers: Officials said the bench is expected to address a long-standing demand for easier and faster access to the higher judiciary for people in Ladakh.

    Does a High Court bench answer what the Ladakh agitation is asking for?

    1. What the agitation seeks: Local stakeholders are seeking stronger safeguards in four areas: land, employment, culture and political representation.
    2. The non-negotiable demands: The Leh Apex Body and the Kargil Democratic Alliance submitted a memorandum listing three non-negotiable demands: financial powers for the proposed elected Ladakh Legislative Assembly, a separate Public Service Commission for jobs in the Union Territory, and unconditional withdrawal of all cases against those affected by the violence of 24 September last year.
    3. The gap: A judicial bench addresses the distance to the higher judiciary and does not touch legislative powers, recruitment autonomy or constitutional protection of land and culture.
    4. Why the timing matters: The announcement comes against the backdrop of continuing discussions over the political, administrative and constitutional future of Ladakh.
    5. What the Centre is offering instead: The Centre is exploring a Union Territory level legislative body under certain provisions of Article 371, rather than the Sixth Schedule extension the agitation has demanded.

    What happened in Leh on 24 September last year and what has followed?

    1. The incident: Four persons were killed and at least 50 injured in Leh when a protest demanding statehood and extension of Sixth Schedule protections turned violent and police opened fire on protesters.
    2. Cases registered: About 87 people were booked following the violence, of whom about nine were chargesheeted.
    3. Withdrawal of cases: The Ladakh administration announced that cases against 25 people will be withdrawn, with closure reports to be filed in court in due course.
    4. Further review: The Chief Secretary said the Director General of Police has been directed to review the cases of the remaining persons still under investigation, to identify others who did not have an active role.
    5. Official characterisation: The Chief Secretary termed the incident a blot on the pages of India’s history.
    6. Detention of the activist: Climate activist Sonam Wangchuk, who was on a hunger strike for nearly 35 days in support of Ladakh’s demands, called off his fast, and was booked under the National Security Act, 1980 and lodged in Jodhpur jail for six months.

    What is the Article 371 route being explored?

    1. The proposal: A Union Territory level legislative body is being envisaged for Ladakh under certain provisions of Article 371.
    2. Work in progress: The Ministry of Home Affairs is working with the Law Ministry to prepare a framework for the arrangement.
    3. Questions the framework must settle: The framework has to decide how the body will be elected, what powers it will hold and the shape of the executive.
    4. Next step: The discussions will be taken further in a formal structured meeting of the sub-committee, expected in the first week of September.
    5. The stated horizon: The Chief Secretary said these things will not happen overnight and that a new model will be established for Ladakh.

    Challenges to Ladakh’s Demand for Constitutional Safeguards

    1. Sixth Schedule applicability: The Sixth Schedule as it stands applies to tribal areas in Assam, Meghalaya, Tripura and Mizoram, so extending it to a Union Territory requires a constitutional amendment. Eg. The National Commission for Scheduled Tribes recommended Sixth Schedule inclusion for Ladakh in 2019, and the recommendation has not been acted upon.
    2. Union Territory without a legislature: Ladakh was constituted as a Union Territory without a legislature on 31 October 2019, so all law-making for it rests with Parliament and the administrator. Eg. The Jammu and Kashmir Reorganisation Act, 2019 gave a legislature to the Union Territory of Jammu and Kashmir and none to Ladakh.
    3. Employment and recruitment: Without a separate Public Service Commission, recruitment for Ladakh runs through arrangements that local stakeholders say do not reserve posts for residents. Eg. The demand for a dedicated Ladakh Public Service Commission is one of the three non-negotiable demands submitted to the Chief Secretary.
    4. Land and demographic protection: Absence of domicile-linked land restrictions is the core anxiety behind the safeguards demand. Eg. Leh and Kargil bodies have sought protection of land and culture alongside political representation in every round of talks.
    5. Trust deficit after the firing: Criminal proceedings against protesters continue during the talks, which constrains negotiation. Eg. Of about 87 people booked after the 24 September violence, cases against 25 are being withdrawn and the rest remain under review.
    6. Ecological limits on development: Ladakh is a cold desert with acute water stress, so development promises collide with carrying capacity. Eg. Leh town’s groundwater and spring-fed supply has come under strain from tourism growth and construction.
    7. Continuity of dialogue: Negotiations depend on periodic meetings without a statutory framework or timeline. Eg. The next round of talks with the Ministry of Home Affairs team is scheduled for the following month, with a sub-committee meeting expected in the first week of September.

    Conclusion

    The Union Cabinet has cleared a bench of the Jammu and Kashmir High Court for Ladakh, and the Lieutenant Governor has welcomed it as answering a long-standing demand on judicial access. The demands driving the agitation, statehood, Sixth Schedule protection, financial powers for an elected assembly and a separate Public Service Commission, remain unresolved. The Centre is preparing a framework for a Union Territory level legislative body under provisions of Article 371, with the Ministry of Home Affairs and the Law Ministry deciding its election method, powers and executive structure. The next milestone is a formal structured sub-committee meeting expected in the first week of September, ahead of the next round of talks with the Ministry of Home Affairs team.

    “[2025, GS2, 10] 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.”

  • J&K Census enumerators raise tech concerns

    Why in the News

    A readiness review for the Population Enumeration phase in Doda district recorded that Census enumerators and supervisors in the snow bound areas of Jammu and Kashmir (J&K) hold mobile devices below the configuration the Census application requires. Census 2027 is India’s first digital headcount, and it runs on personal phones owned by school teachers and government employees rather than on equipment the state issues.

    What is the Digital Census 2027?

    1. First digital enumeration: Census 2027 is the first Census in India to be conducted digitally, with field data captured through a mobile application instead of printed schedules.
    2. Field workforce: Enumerators and supervisors are drawn mostly from school teachers and government employees, who record entries on their own handsets.
    3. Device specification: The application requires a minimum of 8 GB of RAM and Android 13 or above on the device used for Population Enumeration.
    4. Phased design: A self enumeration portal opens before field work, after which enumerators conduct door to door visits within a fixed window.

    What is self enumeration?

    1. Self enumeration: Self enumeration lets a household fill its own Census entries on an online portal instead of waiting for an enumerator to visit. The entry is verified later by the field functionary during the enumeration window.

    Why has device configuration become an enumeration problem?

    1. Hardware shifted to the enumerator: The Census application runs on the enumerator’s personal phone, so the capacity to count depends on assets the state neither owns nor issues.
    2. Specification threshold breached: Functionaries in the snow bound areas of Jammu and Kashmir were found holding phones below the 8 GB RAM and Android 13 requirement.
    3. Cost borne privately: The field workforce is composed of school teachers and government employees, so meeting the specification is a private expense rather than a budgeted input.
    4. Terrain compounds the gap: The affected districts are enumerated ahead of the rest of the country, which leaves the least time to replace or upgrade equipment.
    5. Resolution left open: The review recorded the shortfall for appropriate resolution without naming a procurement or substitution route.

    Why are Ladakh and the snow bound areas enumerated ahead of the rest of the country?

    1. Second phase advanced: The second phase of the Census in Ladakh and the snow bound areas of Jammu and Kashmir, Uttarakhand and Himachal Pradesh is being conducted ahead of the rest of the country.
    2. Weather window: Snowfall closes road access to these habitations, so the field round has to be completed before winter sets in.
    3. Self enumeration first: The self enumeration portal for these regions remains available from 17 August to 31 August.
    4. Field window: Door to door enumeration starts on 1 September and concludes by 30 September 2026.
    5. District level review: Doda district’s readiness for that window was reviewed at the Deputy Commissioner’s Office Complex under the Chief Principal Census Officer.

    How is the exercise being prepared for hard to count populations?

    1. Migratory populations: Special attention was directed to the enumeration of migratory populations, whose movement across the enumeration window produces both omission and double counting.
    2. Tribal communities: Tribal communities were named as a category requiring focused enumeration effort.
    3. Remote forest residents: Residents of remote forest areas were named alongside them, since habitations there fall outside routine administrative contact.
    4. Verification discipline: Enumerators and supervisors were directed to ensure that all entries are properly recorded, verified and cross checked.
    5. Field inspection: Charge officers and supervisors were instructed to conduct regular field inspections and quality checks.
    6. Awareness campaigns: District authorities were asked to intensify awareness campaigns through newspapers, pamphlets, social media and local outreach programmes ahead of enumeration.

    Why is the postponement of the Census in Manipur being demanded?

    1. Deferral sought: The principal Opposition party has sought postponement of the Census exercise in Manipur, citing continuing violence and the displacement of thousands of people.
    2. Displacement scale: Nearly 60,000 people have remained homeless since violence in the State began on 3 May 2023, with many still living in relief camps.
    3. Housing stock destroyed: Over 10,000 houses have been destroyed in the State.
    4. House listing defeated: Accurate house listing of thousands of homeless people living in relief camps is not practicable, so the record would capture a household structure that no longer exists.
    5. Postponement, not cancellation: The demand is for deferral until conditions become conducive, and not for cancellation of the exercise in the State.
    6. Raised in Parliament: The Inner Manipur Lok Sabha member said he had raised the matter in Parliament.

    Does a digital Census widen or narrow the count?

    1. Speed against reach: Digital capture shortens the gap between field entry and tabulation, and it makes the count conditional on device capability in the districts hardest to reach.
    2. Uniform standard on an uneven base: A single minimum specification treats a school teacher in Doda and one in a metropolitan district as equally equipped.
    3. Self enumeration favours the connected: An online portal transfers effort to the household, which advantages literate and connected households and leaves the rest dependent on a field visit.
    4. Displacement defeats the frame: A Census counts people at a usual place of residence, and conflict displacement breaks that anchor before any technology is applied.
    5. Errors travel further: A digital schedule locks an entry into a database at the point of capture, so an unverified record propagates instead of being caught at manual tabulation.

    “[2009] Consider the following statements:

    1. Between Census 1951 and Census 2001, the density of the population of India has increased more than three times.

    2. Between Census 1951 and Census 2001, the annual growth rate (exponential) of the population of India has doubled.

    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

  • Derivatives trader base falls for first time in four years in FY26

    Why in the News

    The number of individual traders participating in the equity derivatives market fell 19% to 78.6 lakh in 2025-26 from 98.1 lakh a year earlier, according to data released by the Securities and Exchange Board of India (SEBI) on 20 August 2026. A smaller market has not turned into a safer one, since the average loss carried by each loss-making trader rose to its highest level since the analysis began.

    What are equity derivatives?

    1. About: Equity derivatives are contracts whose value is derived from an underlying share or share index, settled at or before a stated expiry date rather than by delivery of the underlying at the time of trade.
    2. Futures and options: A futures contract obliges both sides to transact at an agreed price on expiry. An option gives the buyer the right without the obligation, in exchange for a premium paid upfront.
    3. Why losses concentrate here: A small premium controls a large notional exposure, so a modest adverse price move can erase the entire amount committed.
    4. Contract value: Each contract carries a minimum notional value fixed by the regulator, which sets the smallest position an individual can take.

    What is the extreme loss margin?

    1. About: The extreme loss margin is an additional margin collected over and above the standard margin, calibrated to cover losses outside the range that normal margining assumes.
    2. How it was used here: SEBI increased the extreme loss margin for expiry-day trading by 2%, raising the cost of holding a position on the day price movement is sharpest.

    What is a weekly expiry?

    1. About: A weekly expiry is a contract that settles at the end of a given week rather than at the end of a month, which multiplies the number of short-dated, low-premium contracts available to trade.
    2. How it was restricted: SEBI limited weekly expiries to one index per exchange, cutting the number of high-turnover expiry events in a week.

    What do SEBI’s two studies show about participation and losses?

    1. Participation: The individual trader base fell 19% to 78.6 lakh in 2025-26 from 98.1 lakh in 2024-25, the first fall in four years, against 42.74 lakh in 2021-22 when the analysis began.
    2. Share of losing traders: The proportion of traders who incurred losses declined marginally to 87.7% in 2025-26 from 90.9% in 2024-25, the lowest level recorded since 2021-22.
    3. Aggregate losses: Aggregate losses fell 18% year-on-year to Rs 91,685 crore in 2025-26, and still remained higher than the levels recorded between 2021-22 and 2023-24.
    4. Loss per trader: The average loss per loss-making trader rose to Rs 1.16 lakh from Rs 1.13 lakh in 2024-25, the highest average loss recorded since 2021-22.
    5. Who remains the largest cohort: Individual traders continued to account for the largest cohort in the derivatives market despite the decline in participation.
    6. What the studies are: The two studies cover the profitability and the trading behaviour of individual derivatives traders, and were released on 20 August 2026 by SEBI’s Department of Economic and Policy Analysis II.

    Why does a smaller trader base not amount to a safer market?

    1. The averages moved in opposite directions: Aggregate losses fell 18% while the average loss per loss-making trader rose to a five-year high, so the burden concentrated rather than eased.
    2. The improvement in the loss ratio is marginal: A fall from 90.9% to 87.7% still leaves close to nine in ten participants losing money.
    3. The remaining participants are the more exposed ones: Those who stayed after the curbs are the traders willing to meet a higher minimum contract value and a higher expiry-day margin.
    4. Aggregate losses are still above the pre-boom level: Even after an 18% decline, losses in 2025-26 exceeded the levels recorded between 2021-22 and 2023-24.

    What explains the fall in participation?

    1. Fewer weekly expiry events: SEBI limited weekly expiries to one index per exchange, removing several of the short-dated contracts that carried the highest retail turnover.
    2. A higher entry ticket: The minimum contract value was raised to Rs 15 lakh to Rs 20 lakh, which prices out the smallest participants.
    3. A costlier expiry day: The extreme loss margin for expiry-day trading was increased by 2%, raising the capital required to hold the most volatile positions.
    4. The regulator’s own caveat: SEBI cautioned against attributing the decline entirely to the regulatory measures, stating that participation had already begun moderating before their implementation.

    What does the persistence data reveal about trader behaviour?

    1. Losses do not by themselves deter continuation: The second study found that incurring losses did not necessarily discourage traders from continuing to participate in derivatives.
    2. Persistence weakened this year: Only about 57% of the traders who formed the 2024-25 cohort continued trading in 2025-26, against a long-term average of around 65%.
    3. Nearly half stopped: 43% of that cohort stopped trading during the year.
    4. Experience does not improve outcomes: In 2023-24, 91.6% of traders who had reported losses in both 2021-22 and 2022-23 also reported losses in 2023-24.
    5. The probability holds across the experience range: The probability of making losses remained above 90% across traders with one to five years of experience.

    What challenges does retail investor protection in the derivatives market face?

    1. Curbs raise the entry price without changing the odds: A higher minimum contract value screens out small participants rather than improving the outcomes of those who remain. Eg. The probability of making losses stayed above 90% across traders with one to five years of experience.
    2. Losses do not teach: Repeated loss-making does not reliably drive exit, so a behavioural remedy cannot be assumed. Eg. 91.6% of traders who lost money in both 2021-22 and 2022-23 lost money again in 2023-24.
    3. Unregistered advisers and finfluencers: Trading advice reaches retail participants through channels outside the registered investment adviser framework. Eg. SEBI has issued repeated orders against unregistered persons offering stock recommendations on social media platforms.
    4. Migration to unregulated venues: Tightening a regulated segment can push activity to opaque alternatives rather than out of speculation altogether. Eg. SEBI and the Reserve Bank of India have repeatedly warned against unauthorised electronic trading platforms offering leveraged contracts.
    5. Exchange revenue tied to the volumes being curbed: Transaction charges and the derivatives segment are a significant part of exchange income, which creates a tension with tighter product rules. Eg. Weekly index expiries generated the highest turnover days on Indian exchanges before being limited to one index per exchange.
    6. Investor grievance redress capacity: Losses from a legitimate but unsuitable product are not a grievance, so the redress machinery does not reach the harm being measured. Eg. Aggregate losses of Rs 91,685 crore in 2025-26 arose from lawful transactions on regulated exchanges.
    7. Measurement lag on a fast-moving market: Behaviour is analysed a full financial year after it occurs, so remedies address a market that has already changed. Eg. The studies released in August 2026 report on the year ended March 2026.

    “[2025] Consider the following statements:

    I. India accounts for a very large portion of all equity option contracts traded globally, thus exhibiting a great boom.

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

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

    Which of the statements given above are correct?

    (a) I and II only

    (b) II and III only

    (c) I and III only

    (d) I, II and III

  • BNP’s Alamgir elected new President of Bangladesh

    Why in the News

    Mirza Fakhrul Islam Alamgir, long time secretary general of the ruling Bangladesh Nationalist Party, was elected President of Bangladesh on 20 August 2026 in the first contested poll for the office in 35 years. He secured 255 of the 343 votes cast in Parliament against 88 for the nominee of the Jamaat-e-Islami led opposition alliance. The contest itself is the significant fact, since the office has been filled by consensus and uncontested polls for decades.

    How is the President of Bangladesh elected?

    1. Who votes: The President is elected indirectly by the members of Parliament, so the outcome reflects the composition of the House rather than a popular vote.
    2. Who conducts it: The Chief Election Commissioner acts as the Election Returning Officer and declares the result after counting.
    3. The vacancy rule: Under the Constitution, a new President is required to be elected within 90 days of the office falling vacant.
    4. What the office holds: The presidency is largely ceremonial, with executive authority resting with the Prime Minister and the Cabinet.

    What is the Jatiya Sangsad?

    1. What it is: The Jatiya Sangsad is Bangladesh’s unicameral Parliament, which both elects the President and provides the Prime Minister and Cabinet. Its composition therefore determines the presidential outcome in advance of the vote.

    What is Bangabhaban?

    1. What it is: Bangabhaban in Dhaka is the official residence and workplace of the President of Bangladesh. Its Darbar Hall is the venue at which the President takes the oath of office.

    What did the vote actually show about the balance in Parliament?

    1. The electorate: Of the total 349 registered voters, 343 voted in the election, and six lawmakers did not vote.
    2. The result: Mirza Fakhrul Islam Alamgir secured 255 votes and Oli Ahmed secured 88 votes.
    3. The losing candidate: Oli Ahmed, aged 84, is a retired Colonel and chairman of the Liberal Democratic Party, and was the nominee of the Jamaat-e-Islami led eleven party opposition alliance.
    4. The winning candidate’s standing: Alamgir, aged 78, is a long time secretary general of the Bangladesh Nationalist Party and a close ally of former Prime Minister Khaleda Zia.
    5. What the margin reflects: The ruling party and its allies hold a two thirds majority in Parliament following the general election that returned them to power.
    6. The break with recent practice: It was the first contested presidential election in Bangladesh since 1991, the office having largely been filled through consensus and uncontested polls in recent decades.

    Why did the presidency fall vacant?

    1. The resignation: Mohammed Shahabuddin resigned last month on health grounds before completing his five year tenure.
    2. His political association: He was a close aide of the deposed Prime Minister Sheikh Hasina, whose government fell in 2024.
    3. The constitutional consequence: The vacancy triggered the 90 day requirement for electing a successor.
    4. Why it became contested: With a changed parliamentary composition following the transition, the consensus mechanism that had filled the office in recent decades no longer held.

    What does a ceremonial presidency mean in Bangladesh’s system?

    1. Head of state, not head of government: The President is the head of state, while executive authority is exercised by the Prime Minister and the Cabinet.
    2. The formal military role: The President is designated supreme commander of the defence services, a title exercised on the advice of the government.
    3. Where discretion survives: The President’s independent discretion is confined to the appointment of the Prime Minister and the Chief Justice, and otherwise the office acts on advice.
    4. The order of succession: The Speaker of Parliament acts as President when the office falls vacant, until a successor is elected.
    5. The oath: The President elect will take the oath as Bangladesh’s 23rd President on Friday evening at the Darbar Hall of Bangabhaban.

    Why does the return of contested presidential politics matter?

    1. What consensus polls concealed: Uncontested elections meant the office was allocated by the ruling party rather than won, which removed any parliamentary test of the nominee.
    2. What a contest introduces: A recorded vote of 255 to 88 registers the size and composition of the opposition bloc inside Parliament.
    3. The opposition’s new configuration: The Jamaat-e-Islami led eleven party alliance fielded a joint candidate, which formalises an opposition grouping that had previously been fragmented.
    4. The signal of the abstentions: Six lawmakers declined to vote, which records dissent that a consensus procedure would have absorbed silently.
    5. The continuity of the office: The presidency remains ceremonial, so the contest changes the politics of the office without changing its powers.

    What does the change in Dhaka alter for India’s neighbourhood policy?

    1. A new majority to work with: The Bangladesh Nationalist Party and its allies hold a two thirds majority, which gives India a single interlocutor with the parliamentary strength to conclude agreements.
    2. A pending water file: The India Bangladesh Ganga Water Treaty of 1996 expires on 31 December, and its renewal must be negotiated with the new dispensation.
    3. The unresolved Teesta question: The Teesta water sharing agreement drafted in 2011 remains unsigned and has been Dhaka’s standing demand across governments.
    4. Connectivity projects in progress: Rail, road and port links built over the previous decade, including the Akhaura Agartala rail link and the Maitri Setu bridge, require continuity of commitment on both sides.
    5. The security file: Border management, insurgent sanctuaries in the northeast and the safety of minority communities are the standing items on which India seeks assurances from any government in Dhaka.

    Challenges to Bangladesh’s political transition

    1. A ceremonial head of state elected on party lines: A partisan presidency strains the office’s role as a neutral arbiter in disputes over government formation. Eg. The outgoing President was a close aide of the deposed Prime Minister and resigned before completing his tenure.
    2. Consolidation of power under a two thirds majority: A supermajority removes the parliamentary check on constitutional amendment. Eg. The ruling party and its allies hold a two thirds majority in the Jatiya Sangsad after the general election.
    3. An opposition organised around a religious party alliance: The main opposition bloc is led by a party with a contested constitutional history. Eg. The eleven party opposition alliance that fielded the losing presidential candidate is led by Jamaat-e-Islami.
    4. Institutional damage from the previous transition: Administrative and judicial appointments made under the earlier government remain politically contested. Eg. The presidency itself fell vacant through the resignation of an appointee of the deposed government.
    5. Economic pressure on a garment dependent economy: External demand shocks translate directly into employment and foreign exchange stress. Eg. Bangladesh’s export earnings are concentrated in ready made garments, which leaves the current account exposed to a single sector.
    6. Security of minority communities: Political transitions in Bangladesh have historically been followed by attacks on minorities. Eg. The period following the fall of the previous government in 2024 saw reported attacks on Hindu households and temples.
    7. Restoring routine electoral practice: A single contested election does not by itself re-establish competitive norms. Eg. It took 35 years for a contested presidential poll to recur after 1991.

    Conclusion

    Bangladesh has elected a new head of state through its first contested presidential poll in 35 years, with the ruling party’s nominee securing 255 votes against 88 for the opposition alliance’s candidate, from 343 of 349 registered voters. The office remains ceremonial, so the outcome registers the parliamentary balance after the political transition rather than shifting executive power. The next milestone is the oath of office as Bangladesh’s 23rd President on Friday evening at the Darbar Hall of Bangabhaban.

    About India Bangladesh Relations

    1. The border: India and Bangladesh share a land boundary of 4,096.7 km, India’s longest with any neighbour, running along West Bengal, Assam, Meghalaya, Tripura and Mizoram.
    2. The rivers: The two countries share 54 common rivers, and water sharing is the most persistent item on the bilateral agenda.
    3. Trade: Bangladesh is India’s largest trade partner in South Asia, and India is among the largest sources of Bangladesh’s imports.
    4. Connectivity: Rail links, inland waterway protocol routes, bus services and port access arrangements have been progressively restored since 2015 after decades of disuse.
    5. Energy: India supplies electricity to Bangladesh across the interconnection at Bheramara and through cross border transmission links, and the two countries operate a diesel pipeline between them.
    6. Development partnership: India has extended three Lines of Credit to Bangladesh totalling about $7.862 billion, its largest such commitment to any single country.

    Constitutional Framework Governing the Presidency in Bangladesh

    1. Article 48: Provides for a President elected by the members of Parliament, and requires the President to act on the advice of the Prime Minister except in appointing the Prime Minister and the Chief Justice.
    2. Article 50: Fixes the President’s term at five years from the date of entering office, and bars any person from holding the office for more than two terms.
    3. Article 54: Provides that the Speaker of Parliament shall act as President when the office is vacant or the President is unable to discharge functions.
    4. Article 55: Vests the executive power of the Republic in the Prime Minister and the Cabinet, which is the provision that makes the presidency ceremonial.
    5. Article 123: Governs the timing of elections to the office, including the requirement that a vacancy be filled within a fixed period of its occurrence.
    6. Presidential Election Act, 1991: Provides the procedure for nomination, polling and declaration of the result, with the Chief Election Commissioner acting as Returning Officer.

    India Bangladesh Cooperation Initiatives

    1. Maitri Setu: A bridge over the Feni river connecting Sabroom in Tripura with Ramgarh in Bangladesh, inaugurated in March 2021, giving the northeast access to Chattogram port.
    2. Akhaura Agartala rail link: A cross border rail connection commissioned in November 2023 that shortens the route between Agartala and Kolkata through Bangladeshi territory.
    3. Port access agreement: An arrangement permitting the use of Chattogram and Mongla ports for the movement of Indian goods to and from the northeastern States.
    4. India Bangladesh Friendship Pipeline: A cross border diesel pipeline from Siliguri to Parbatipur, inaugurated in March 2023, supplying high speed diesel to northern Bangladesh.
    5. Maitree Super Thermal Power Project: A joint venture coal fired power project at Rampal in Bangladesh, developed by an Indian and Bangladeshi partnership.
    6. Border Haats: Designated markets along the boundary allowing residents of nearby villages on both sides to trade specified local goods without formal customs procedures.

    Key Facts about Bangladesh and its Relations with India

    1. Independence: Bangladesh became independent in 1971, and India was among the first countries to recognise it.
    2. Land Boundary Agreement: The 1974 agreement was operationalised through the 100th Constitutional Amendment Act, 2015, under which India transferred 111 enclaves to Bangladesh and received 51.
    3. Maritime boundary: A Permanent Court of Arbitration tribunal delivered its award on the maritime boundary between the two countries in July 2014, which both accepted.
    4. Kushiyara agreement: The withdrawal of water from the Kushiyara river was agreed in September 2022, the second water sharing instrument after the Ganga treaty.
    5. Population: Bangladesh has a population of about 173 million people.
    6. Presidential history: The office being filled on 21 August 2026 is that of Bangladesh’s 23rd President.
    7. Joint river institution: The Joint Rivers Commission has functioned since 1972 as the standing bilateral mechanism on shared rivers.

    Back2Basics: Bangladesh Nationalist Party

    1. Founded: The party was founded in 1978 by Ziaur Rahman, then the country’s military ruler and later President.
    2. Ideology: It is built around Bangladeshi nationalism, which defines national identity by territory and religion rather than by the language based Bengali nationalism of its principal rival.
    3. Leadership: It has been led since 1984 by Khaleda Zia, widow of the founder, who served as Prime Minister on three occasions.
    4. Principal rival: Its long standing opponent is the Awami League, and the two parties have alternated in power for most of the country’s competitive electoral history.
    5. Electoral boycotts: The party boycotted the general elections of 2014 and 2024, which kept it out of Parliament for extended periods.
    6. Current position: It returned to power in the general election held in February 2026, and holds a two thirds majority in Parliament with its allies.

    Challenges in India Bangladesh Relations

    1. The unresolved Teesta agreement: The most contested river sharing file has remained unsigned for over a decade. Eg. The Teesta draft agreed in 2011 was not signed after West Bengal withheld support.
    2. Border killings: Fatalities along the boundary remain the most publicly damaging irritant in the relationship. Eg. Incidents involving the Border Security Force and Bangladeshi nationals along the fenced boundary recur and draw formal protests from Dhaka.
    3. Illegal migration and its domestic politics: Migration questions feed into Indian State level politics and produce friction with Dhaka. Eg. The National Register of Citizens exercise in Assam produced sustained diplomatic concern in Bangladesh.
    4. Trade imbalance: Bangladesh runs a large deficit with India, which sustains a domestic constituency against closer economic integration. Eg. Indian exports to Bangladesh far exceed Bangladeshi exports to India despite duty free access under the South Asian Free Trade Area.
    5. Competition from external partners: Infrastructure and defence offers from other powers reduce India’s relative weight. Eg. Chinese financing has funded major Bangladeshi infrastructure including bridges, power plants and port projects.
    6. The Rohingya caseload: More than a million refugees in Cox’s Bazar constrain Bangladesh’s policy space and create a shared security concern. Eg. Repatriation attempts to Myanmar have repeatedly failed since the influx of 2017.
    7. Security of minority communities: Attacks on minorities during political transitions generate pressure on Indian policy. Eg. The 2024 transition was followed by reported attacks on Hindu households and places of worship.
    8. Insurgent sanctuaries and connectivity security: Northeast Indian connectivity through Bangladesh depends on continued cooperation against insurgent groups. Eg. Transit corridors through Bangladeshi territory to the northeast require sustained security cooperation to remain viable.

    Way Forward

    1. Open the Ganga treaty renewal early: Begin the final round of renewal talks well before the 31 December expiry so that the instrument does not lapse during a political transition.
    2. Separate the Teesta from the Ganga negotiation: Handle the two rivers on independent tracks so that a stalled file does not hold a functioning one hostage.
    3. Institutionalise engagement beyond the ruling party: Maintain contact across the political spectrum in Dhaka so that the relationship does not have to be rebuilt at each change of government.
    4. Correct the trade asymmetry: Expand duty free access, remove non tariff barriers and complete the proposed comprehensive economic partnership so that the deficit ceases to be a political argument.
    5. Complete connectivity projects on schedule: Deliver the remaining rail, road and inland waterway links so that the economic case for cooperation is visible to the Bangladeshi public.
    6. Reduce border fatalities to zero: Shift to non lethal means and joint patrolling protocols along the boundary, since this single issue does the most reputational damage.
    7. Coordinate on the Rohingya question: Support repatriation diplomacy with Myanmar and continue humanitarian assistance to Cox’s Bazar, which addresses a Bangladeshi priority at limited cost.

  • EOI for data centre project on islands withdrawn

    Why in the News

    The Andaman and Nicobar Islands administration has withdrawn an Expression of Interest seeking feasibility proposals for a private sector-led green artificial intelligence data centre on the islands, days after publishing it. The withdrawal follows reports that the Nicobarese population on Great Nicobar Island had not been informed of any plan to set up a data centre in the sea areas around the island.

    What is an Expression of Interest in a public project?

    1. About: An Expression of Interest is a pre-tender notice through which a government body invites interested parties to indicate willingness and capability to undertake a project, before a formal tender is issued.
    2. Purpose: It is used to test market interest and technical feasibility for a project whose scope, cost or technology is not yet fixed, so the responses shape the later tender document.
    3. Legal effect: It creates no contractual obligation and can be withdrawn or modified by the issuing authority at any stage before award.

    What is a green artificial intelligence data centre?

    1. About: A data centre is a facility housing servers and networking equipment, and an artificial intelligence data centre is optimised for the high power and cooling demands of large model training and inference.
    2. Why green: The green label refers to powering the facility with renewable energy and using low-water or seawater-based cooling, since artificial intelligence workloads consume far more electricity and cooling water than conventional server hosting.

    Who are the Nicobarese?

    1. About: The Nicobarese are the largest indigenous community of the Nicobar group of islands, a Scheduled Tribe living in village-based settlements across the Nicobar archipelago including Great Nicobar.
    2. Why they matter here: Their traditional lands and coastal commons fall within the footprint of island infrastructure projects, so their prior information and consent is the legal and administrative test for any such proposal.

    Why has the withdrawal drawn attention to consultation?

    1. The sequence: The Expression of Interest was published on 10 August, and a notice issued days later withdrew it with immediate effect due to administrative reasons.
    2. Location of the proposal: The data centre was proposed for the sea areas around Great Nicobar Island, which places it directly in the coastal zone the resident community depends on.
    3. The information gap: The local Nicobarese population on Great Nicobar Island had not been informed of any plan to set up a data centre in those waters.
    4. The wider protest: Local people are already protesting against the government’s proposed Rs 91,000-crore mega-infrastructure project on the same island.
    5. What the reason given does not settle: The notice cites administrative reasons without specifying whether the withdrawal responds to the consultation failure, the technical feasibility or the wider protest.

    What is at stake in the Great Nicobar mega project?

    1. Scale: The proposed mega-infrastructure project on Great Nicobar Island carries an estimated cost of Rs 91,000 crore.
    2. Components: The Great Nicobar Island Project comprises a transhipment port at Galathea Bay, an international airport, a power plant and a greenfield township.
    3. Strategic rationale: The transhipment port is intended to rival Colombo and Singapore for container transhipment, capturing traffic that currently bypasses Indian ports.
    4. Ecological setting: Great Nicobar hosts the Great Nicobar Biosphere Reserve, along with the Galathea Bay leatherback turtle nesting site and the Campbell Bay and Galathea National Parks.
    5. Community setting: The island is home to the Nicobarese and to the Shompen, a Particularly Vulnerable Tribal Group living in the interior forests.
    6. The consultation question: The data centre withdrawal repeats the question already raised about the mega project, which is whether affected communities are informed before proposals enter the public domain.

    Challenges to Island Infrastructure Development

    1. Prior informed consent: Project proposals reach the public domain before the resident community is told, which converts consultation into a post-facto formality. Eg. The Nicobarese on Great Nicobar were not informed of the data centre proposal in the waters around their island.
    2. Ecological irreversibility: Island ecosystems are small, endemic and cannot absorb clearance at the scale mainland projects assume. Eg. The Great Nicobar project involves diversion of a large tract of tropical forest and construction at the Galathea Bay leatherback turtle nesting beach.
    3. Seismic and tsunami exposure: The islands sit on an active subduction zone, so heavy coastal infrastructure carries a hazard the mainland does not face. Eg. The 2004 Indian Ocean tsunami devastated the Nicobar group and permanently submerged parts of the coastline near Indira Point.
    4. Water and power for data infrastructure: Artificial intelligence data centres demand continuous power and cooling that island grids cannot supply without new generation. Eg. The Andaman and Nicobar Islands depend substantially on diesel generation and an undersea optical fibre link commissioned in 2020.
    5. Rehabilitation of tribal populations: Displacement from customary land cannot be compensated in cash terms for communities whose livelihood is tied to a specific coastal ecology. Eg. Nicobarese families displaced by the 2004 tsunami were resettled in intermediate shelters, and return to original villages remained incomplete for years.
    6. Regulatory clearance layering: Island projects require forest, coastal zone, wildlife and tribal clearances from separate authorities, which invites piecemeal appraisal of a single project. Eg. The Great Nicobar project’s clearances have been challenged before the National Green Tribunal and reviewed by a high-powered committee.
    7. Strategic and civilian conflict: The islands host India’s only tri-service command, so security requirements limit civilian access and complicate transparent public consultation. Eg. Access to several Nicobar islands remains restricted under tribal reserve and defence notifications.

    “[2019] Consider the following statements about Particularly Vulnerable Tribal Groups (PVTGs) in India:

    1. PVTGs reside in 18 States and one Union Territory.

    2. A stagnant or declining population is one of the criteria for determining PVTG status.

    3. There are 95 PVTGs officially notified in the country so far.

    4. Irular and Konda Reddi tribes are included in the list of PVTGs.

    Which of the statements given above are correct?

    (a) 1, 2 and 3

    (b) 2, 3 and 4

    (c) 1, 2 and 4

    (d) 1, 3 and 4

  • Former SC judge-led panel to probe ‘police excesses’ against protesters

    Why in the News

    The Supreme Court has constituted a five member High-Powered Enquiry Committee headed by a former Supreme Court judge to examine alleged excesses and disproportionate use of force by police and security personnel at Jantar Mantar and other locations during last month’s protests over the National Eligibility cum Entrance Test (Undergraduate) paper leak. The Court framed twelve issues for the inquiry, covering both police conduct and violence by protesters. The order therefore turns a policing controversy into an examination of the constitutional limits on how the State may respond to assembly.

    What is the High-Powered Enquiry Committee?

    1. What it is: The High-Powered Enquiry Committee (HPEC) is a fact finding body constituted by the Supreme Court to examine allegations of excessive force by police and security personnel during the protests, and to report back to the Court.
    2. Who heads it and who sits on it: It is headed by former Supreme Court judge R Subhash Reddy. Its members are former Punjab and Haryana High Court Chief Justice Ravi Shankar Jha, former Delhi High Court judge Justice Shalinder Kaur, former Central Bureau of Investigation Director Rishi Kumar Shukla, and retired Director General of Police of Meghalaya L R Bishnoi.
    3. How it must function: The inquiry is not to be a one time exercise. The Committee is to undertake a continuous and periodic assessment of the enumerated issues and submit interim findings periodically, so the Court can issue directions as warranted.
    4. What it does not displace: The Court clarified that the constitution of the Committee shall in no way deter or debar police authorities or security forces from taking administrative or disciplinary action against officers found in contravention of the rules governing their conduct.

    What is the current status of the right to protest in India?

    1. The right itself: The right to protest is drawn from Article 19(1)(a), the freedom of speech and expression, and Article 19(1)(b), the right to assemble peaceably and without arms, read together.
    2. The condition built into the text: The assembly must be peaceable and without arms, so the protection falls away for an assembly that turns violent or armed.
    3. The limits on the right: Restrictions may be imposed under Article 19(2) on speech and Article 19(3) on assembly, and the restriction must be reasonable and imposed by law rather than by executive discretion alone.
    4. No right to occupy a public space indefinitely: The Supreme Court in Amit Sahni v Commissioner of Police (2020) held that public ways and public spaces cannot be occupied indefinitely, and that demonstrations must take place in designated areas.
    5. A blanket ban on a protest site is not permissible: In Mazdoor Kisan Shakti Sangathan v Union of India (2018) the Court set aside an absolute prohibition on demonstrations at Jantar Mantar and directed that guidelines be framed regulating rather than eliminating protest there.
    6. Force must be proportionate and compensable: In Anita Thakur v State of Jammu and Kashmir (2016) the Court held that use of excessive force by police against demonstrators violates Article 21 and awarded compensation to the injured.
    7. The operative statutory levers: Prohibitory orders are issued under Section 163 of the Bharatiya Nagarik Suraksha Sanhita, 2023, and speech and assembly prosecutions have been brought under Section 152 of the Bharatiya Nyaya Sanhita, 2023.

    Constitutional Provisions Related to the Right to Protest and Police Accountability

    1. Article 19(1)(a): Guarantees to all citizens the freedom of speech and expression, from which the right to voice dissent is drawn.
    2. Article 19(1)(b): Guarantees the right to assemble peaceably and without arms.
    3. Article 19(1)(c): Guarantees the right to form associations or unions, under which protest organisations operate.
    4. Article 19(2): Permits the State to impose reasonable restrictions on the freedom of speech and expression on enumerated grounds.
    5. Article 19(3): Permits reasonable restrictions on the right of assembly in the interests of the sovereignty and integrity of India or public order.
    6. Article 21: Guarantees that no person shall be deprived of life or personal liberty except according to procedure established by law, the provision under which bodily harm caused by disproportionate force is examined.
    7. Article 22: Provides safeguards on arrest and detention, including the right to be informed of the grounds of arrest and to consult a legal practitioner.
    8. Article 20(3): Protects a person accused of an offence against being compelled to be a witness against himself.
    9. Article 32 and Article 226: Provide the remedies before the Supreme Court and the High Courts through which protest related grievances and monitored inquiries are brought.
    10. Seventh Schedule, State List Entry 1 and Entry 2: Place public order and police within the legislative and executive competence of the States, which is why a national inquiry into police conduct proceeds through the Court rather than through a central department.

    What is Section 163 of the Bharatiya Nagarik Suraksha Sanhita, 2023?

    1. What it does: Section 163 empowers a District Magistrate, a Sub-divisional Magistrate or an Executive Magistrate to issue a written order directing a person or the public generally to abstain from a specified act, where there is an apprehension of obstruction, annoyance, danger to human life or a disturbance of public tranquillity.
    2. Its limits: An order under the section is temporary and cannot ordinarily remain in force beyond two months, and it corresponds to the power earlier exercised under Section 144 of the Code of Criminal Procedure, 1973.

    What is Section 152 of the Bharatiya Nyaya Sanhita, 2023?

    1. What it criminalises: Section 152 punishes acts that excite secession, armed rebellion, subversive activities or separatist feelings, or that endanger the sovereignty, unity and integrity of India, with punishment extending to life imprisonment or seven years with fine.
    2. What it replaced: It came into force on 1 July 2024 in place of Section 124A of the Indian Penal Code, 1860, the sedition provision inserted in 1870, and its constitutional validity is under challenge on grounds of vagueness and overbreadth.

    What are metallic kinetic projectiles?

    1. What they are: Metallic kinetic projectiles, commonly called pellets, are small metal shot fired in a scattering pattern from pump-action rifles or projectile-action guns, used as a crowd control weapon.
    2. Why they are contested: The scatter pattern makes the point of impact uncontrollable, so injuries to the eyes and upper body are common and the resulting harm is often irreversible.

    What are the twelve issues the Committee will examine?

    1. Issue 1, excessive force: Alleged use of excessive force and violence against protesters by police authorities and other agencies, including deployment of pellet guns, electric batons, lathi charges and tear gas without adequate warning or proportionality, resulting in severe bodily harm and injuries, some alleged to be of a grievous and lasting nature.
    2. Issue 2, proportionality of response: Ensuring a proportionate and measured police response during protests, public gatherings and peaceful assemblies, so as to strike an appropriate balance between maintaining public order and exercising the constitutional right to peaceful dissent.
    3. Issue 3, banning pellets: The desirability of banning the use of metallic kinetic projectiles or pellets fired from pump-action rifles or projectile-action guns, having regard to the grave and at times irreversible bodily harm they cause.
    4. Issue 4, identification of officers: The necessity of ensuring that police and security personnel wear proper uniforms and visible nameplates while effecting arrests or using force during crowd control operations, to secure accountability and enable identification of individual officers.
    5. Issue 5, surveillance: Allegations of monitoring and surveillance of protesters by police personnel, and the extent to which such measures were consistent with the protesters’ constitutional rights to privacy and free assembly.
    6. Issue 6, female protesters: Alleged incidents of targeted violence, harassment, molestation and secondary victimisation directed against female protesters, which warrant a focused and expeditious enquiry.
    7. Issue 7, medical support and compensation: The provision of medical and other requisite support, including award of compensation, to victims of alleged police abuse, and the manner and adequacy of the support extended so far.
    8. Issue 8, prohibitory orders: Regulation of the issuance of blanket prohibitory orders under Section 163 of the Bharatiya Nagarik Suraksha Sanhita, 2023, to prevent their use as a routine or pre-emptive measure that forecloses peaceful assembly rather than as a proportionate response to a real and imminent threat to public order.
    9. Issue 9, thresholds for Section 152: The establishment of strict constitutional thresholds and safeguards to prevent Section 152 of the Bharatiya Nyaya Sanhita, 2023 from being invoked to stifle political dissent and peaceful protest, so that it is not permitted to operate as a chilling restraint on constitutionally protected speech and assembly.
    10. Issue 10, violence by protesters: Alleged use of force and violence by protesters against police officers and other security personnel.
    11. Issue 11, damage to property: Damage to public property caused by the actions of protesters, including destruction of and injury to government installations, vehicles and other assets belonging to the State and to private citizens alike.
    12. Issue 12, injuries to police: The injuries sustained by police forces in the course of discharging their duties, and the consequent mental and emotional trauma borne by their families.

    Which issues has the Court told the Committee to take up first?

    1. The two priority issues: The Committee is to address Issue 1 on excessive force and Issue 6 on targeted violence against female protesters on a priority basis, bearing in mind the sensitivity attendant on them.
    2. The first deliverable: The Committee has been asked to complete its inquiry and deliberations on those two issues and submit its First Interim Report at the earliest.
    3. The additional head opened: The Committee may also examine the grant of interim compensation to those injured on either side, whether police personnel or protesters.
    4. The reporting design: Interim findings are to be submitted periodically rather than a single report at the end, so the Court can issue directions while the inquiry continues.
    5. When the order was made: The order is dated 19 August 2026 and was released on 20 August 2026.

    Why does the Court’s framing place police conduct and protester conduct on the same list?

    1. The list is symmetrical by design: Nine issues concern police and State conduct and three concern protester conduct, so the inquiry is not framed solely as an investigation of the police.
    2. The compensation head runs both ways: Interim compensation is opened for those injured on either side, which places an injured constable and an injured student within the same remedial frame.
    3. Trauma is recognised on the police side: Issue 12 extends to the mental and emotional trauma borne by the families of injured police personnel, a head rarely written into an inquiry mandate.
    4. Symmetry is not equivalence: The two issues marked for priority treatment are both allegations against the police, so the sequencing signals which set of allegations the Court treats as most urgent.
    5. The disciplinary channel stays open in parallel: The Court expressly preserved the power of police authorities to take administrative or disciplinary action against their own officers, so the inquiry does not become a reason to suspend departmental accountability.
    6. The tension the design carries: A committee asked simultaneously to judge police excess and protester violence must apply one standard of proportionality to an armed disciplined force and another to an unorganised crowd, without a settled test for either.

    Major debates surrounding the right to protest and the use of force

    1. Regulation against prohibition: One position holds that designated protest sites and prior permission are reasonable regulation of a public space, and the other holds that permission requirements convert a right into a licence.
    2. Two rulings pulling in opposite directions: Mazdoor Kisan Shakti Sangathan (2018) struck down a blanket prohibition at a protest site, and Amit Sahni (2020) held that public ways cannot be occupied indefinitely, so the boundary between the two remains contested.
    3. The proportionality standard for lethal and less lethal weapons: There is no settled judicial test fixing when tear gas, water cannon, batons or pellets may be used, so proportionality is assessed after the event rather than fixed in advance.
    4. Whether pellet weapons can be regulated or must be banned: One position accepts them as a less lethal alternative to firearms, and the other holds that an uncontrollable scatter pattern makes proportionate use impossible in principle.
    5. Prohibitory orders as prevention against pre-emption: Section 163 is defended as a preventive power against imminent threats and contested as a routine instrument that forecloses assembly before any threat materialises.
    6. Whether the narrowing of sedition survives its replacement: The Kedar Nath Singh (1962) requirement of incitement to violence narrowed the old sedition provision, and whether that narrowing automatically transfers to Section 152 of the Bharatiya Nyaya Sanhita, 2023 is unsettled.
    7. Command responsibility against individual liability: Accountability for crowd control failures is contested between the individual officer who used force and the supervising officer who ordered the deployment.
    8. The evidentiary gap the dispute turns on: Without uniforms carrying visible identification, body worn cameras and a contemporaneous record of orders, allegations on both sides rest on competing testimony rather than on documented fact.

    Challenges to the inquiry delivering accountability

    1. A fact finding committee is not a prosecuting authority: The Committee reports to the Court and cannot itself frame charges or convict, so accountability depends on what follows the report. Eg. The Court has separately preserved the departmental power to take disciplinary action, which sits outside the Committee’s control.
    2. Evidence degrades with time in crowd control cases: Injury records, video footage, control room logs and deployment orders have to be secured early or they cease to be reliable. Eg. Issue 4 arises precisely because officers using force were allegedly not identifiable by uniform or nameplate.
    3. Prosecution of police officers requires sanction: Proceeding against a public servant for acts done in the discharge of official duty depends on prior sanction from the government that employs him. Eg. The requirement of prior sanction has historically been the reason many custodial and encounter cases do not reach trial.
    4. Police is a State subject and the incidents spanned States: The Committee’s findings must be implemented by multiple State governments, each of which controls its own force. Eg. The mandate covers Jantar Mantar and other locations across the country during the same protest wave.
    5. Compensation without a fixed scale invites disparity: Interim compensation awarded case by case, on both sides, has no published scale to anchor it. Eg. In Anita Thakur (2016) compensation was fixed by the Court itself in the absence of any statutory schedule for excessive force.
    6. Monitored inquiries lose momentum once attention moves: A periodic assessment mandate depends on the Court continuing to list and act on interim reports over years. Eg. The Prakash Singh directions on police reform were issued in 2006 and remain incompletely implemented across States two decades later.
    7. The unresolved statutory questions sit outside the Committee’s power: Issues 8 and 9 ask for constitutional thresholds on Section 163 and Section 152, which only the Court or Parliament can settle. Eg. The constitutional challenge to Section 152 of the Bharatiya Nyaya Sanhita, 2023 is pending separately before the Supreme Court.

    Conclusion

    The Committee stands constituted with five members under an order dated 19 August 2026, and its immediate task is a First Interim Report on excessive force and on targeted violence against female protesters. The mandate is unusually wide, covering not only what the police did but also the statutory instruments through which protest was restricted, namely prohibitory orders under Section 163 of the Bharatiya Nagarik Suraksha Sanhita, 2023 and prosecutions under Section 152 of the Bharatiya Nyaya Sanhita, 2023. The constitutional question the order raises is whether the State can be held to a proportionality standard in crowd control when no such standard exists in written form. Until that standard is fixed in advance, each episode will continue to be judged after the fact by a fresh committee.

    “[2013, GS2, 10] Discuss Section 66A of IT Act, with reference to its alleged violation of Article 19 of the Constitution.”

  • Transaction fees on UPI in 2 weeks

    Why in the News

    A merchant discount rate of 0.3% on Unified Payments Interface (UPI) transactions of Rs 2,000 and above is expected to be announced within two weeks. Six years of zero pricing built a network that now carries most of India’s digital payment volume without generating the revenue to maintain it, and restoring a fee moves that cost onto merchants while keeping the transaction free for consumers.

    What is the merchant discount rate?

    1. About: The merchant discount rate (MDR) is a fee paid by businesses to payment processors for accepting digital payments, deducted from the amount the merchant receives.
    2. Who it is shared among: The fee funds the banks, payment service providers and network operators that carry a transaction between the payer and the merchant.
    3. Its history on UPI: An MDR of up to 0.3% of the transaction value applied to UPI person-to-merchant transactions until December 2019.
    4. Zero MDR: Zero MDR was introduced in January 2020 to accelerate digital payment adoption and encourage a shift from cash to digital payments.

    What is the UPI and Services Steering Committee?

    1. About: It is the body headed by the National Payments Corporation of India that will determine the merchant discount rate on UPI, its scope and its structure.

    What is Section 10A of the Payment and Settlement Systems Act, 2007?

    1. About: Section 10A is the provision granting statutory protection from charges to specified electronic payment modes, which is what prevented a fee being levied on UPI.
    2. What changed: The Taxation and Other Laws (Amendment) Bill, 2026 amended Section 10A to pave the way for an MDR on UPI transactions above a certain threshold.

    How will the fee actually be brought into effect?

    1. Step one, the gazette notification: The Department of Financial Services will likely issue a gazette notification within a week specifying which electronic payment modes continue to receive statutory protection from charges.
    2. Step two, the rate decision: The UPI and Services Steering Committee will then determine the MDR, its scope and its structure.
    3. The consumer assurance: The government assured during the parliamentary debate on the amending Bill that UPI transactions will remain free for consumers.

    Why is a fee being restored after six years of zero pricing?

    1. Volume outgrew the funding model: UPI transactions jumped sharply after the Covid-19 pandemic, and banks and payment intermediaries ramped up investment in payment infrastructure to carry that load.
    2. Industry pressure for sustainability: The scale of that investment produced industry calls for the restoration of charges to make the system financially sustainable.
    3. The interim substitute was a subsidy: The government introduced an incentive scheme providing banks and other ecosystem participants an incentive equivalent to 0.15% MDR on UPI transactions up to Rs 2,000.
    4. The parliamentary committee’s warning: The Parliamentary Standing Committee on Finance called for early implementation of a tiered MDR framework, warning that delays could leave payment service providers dependent on inadequate government subsidies and weaken investment in payment infrastructure.

    How does 0.3% compare with the cost of other payment instruments?

    1. Credit cards: The prevailing MDR on credit card transactions is 1% to 3% of transaction value.
    2. Debit cards: The prevailing MDR on debit card transactions runs up to 0.9%.
    3. UPI at the proposed rate: A reintroduced MDR of 0.3% above a threshold would still be substantially lower than either.
    4. The subsidy benchmark: The proposed rate is double the implicit rate the exchequer already bears through the incentive scheme on small-value payments.
    5. The volume the rate applies to: UPI processed 241.62 billion transactions worth Rs 314.23 lakh crore in 2025-26, so even a fraction of a percent applied above a threshold is a large revenue pool.

    Why does a free-to-consumer network still have to be paid for by someone?

    1. The cost does not disappear when the price is zero: Switching, settlement, fraud monitoring and dispute resolution have running costs, and zero MDR moved them from merchants onto banks and the exchequer.
    2. Subsidy funding is discretionary and can lapse: An incentive scheme depends on an annual budgetary allocation, which is what the Parliamentary Standing Committee on Finance identified as inadequate and unreliable.
    3. Merchants now bear what consumers do not: Keeping the consumer free means the fee lands on the acceptance side, on the same small merchants whose adoption zero MDR was designed to secure.
    4. The threshold is doing the distributive work: Applying the fee only at Rs 2,000 and above protects the low-value transactions that dominate UPI by count, and captures the higher-value transactions that dominate by value.

    What challenges does reintroducing MDR on UPI face?

    1. Merchant resistance at the acceptance point: Small merchants may refuse UPI above the threshold or steer customers to cash to avoid the fee. Eg. Cash-on-delivery persists across Indian e-commerce despite a decade of digital payment incentives.
    2. Transaction splitting to stay below the threshold: A hard cut-off gives both sides a reason to break one payment into two. Eg. A payment of Rs 2,500 broken into two of Rs 1,250 falls below the threshold and carries no fee.
    3. Erosion of the adoption gains zero MDR bought: The zero-price regime was introduced specifically to shift users from cash, and reversing it risks reversing part of that shift. Eg. Zero MDR was introduced in January 2020 for the stated purpose of accelerating digital payment adoption.
    4. Concentration risk in the underlying network: A small number of third-party applications carry most UPI volume, so pricing decisions transmit through a narrow set of intermediaries. Eg. The National Payments Corporation of India has repeatedly deferred its own market share cap on third-party application providers.
    5. Outage and reliability exposure at national scale: A single network carrying most retail payments makes any downtime a systemic event rather than a service failure. Eg. UPI accounted for 85% of India’s digital payment transactions by volume in 2025-26.
    6. Fraud and mule account misuse growing with volume: Higher-value transactions attract more sophisticated fraud, and the cost of investigation falls on the same intermediaries the fee is meant to fund. Eg. The Reserve Bank of India has repeatedly directed banks to tighten controls on accounts used to route proceeds of digital payment fraud.
    7. Cross-subsidy questions across instruments: Pricing UPI below cards while both run on shared bank infrastructure distorts the choice of instrument at the counter. Eg. Credit card MDR at 1% to 3% funds reward programmes that UPI cannot match at 0.3%.

    Conclusion

    Zero MDR delivered adoption at a scale no other retail payment system has reached, and it did so by placing the cost of the network on banks and on the exchequer rather than on its users. Restoring a 0.3% fee above Rs 2,000 converts that subsidy into a price, keeps consumers unaffected and tests whether merchants will absorb the cost at the acceptance point. The measure currently stands at the stage where Section 10A of the Payment and Settlement Systems Act, 2007 has been amended, and the next milestones are a gazette notification from the Department of Financial Services within a week and the rate decision by the UPI and Services Steering Committee within two weeks.

    “[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

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