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Subject: Economics

  • Only 9% use public transport to go to work

    Why in the News

    For the first time, India has a national survey of how households travel, and it finds that only 9% of Indians use public transport to get to work. The Ministry of Statistics and Programme Implementation (MoSPI) ran the National Household Travel Survey (NHTS), which also shows women relying on buses far more than men.

    What is the National Household Travel Survey, and why was it needed?

    1. What it is: The NHTS is the first nationwide survey of how people travel, including how they get to work and what it costs them.
    2. Coverage: It ran for a year, from July 2025 to June 2026.
    3. Sample size: It drew on responses from 20 lakh people across villages and urban blocks nationwide.
    4. Why it was needed: MoSPI wants evidence for regional transport planning, to find gaps, plan better routes and set how often buses and trains run.
    5. The takeaway: Cities and States can now plan transport on measured travel patterns rather than estimates.

    How do Indians get to work, and at what cost?

    1. Private vehicles dominate: 43% of Indians ride two-wheelers to work, and only 3% use cars.
    2. Public transport split: Among those travelling more than a kilometre to work, 6.7% take buses. The rest of the 9% use monorail, tram or rail.
    3. Rail-based transit: Metro, suburban rail, monorail and trams carry 5% of urban work commutes nationally. Usage is far higher in Maharashtra, West Bengal and Delhi.
    4. Urban commuting cost: Urban workers spend Rs 1,044 a month to get to work, against Rs 612 in rural areas, so city commutes cost far more.
    5. National average: The average monthly spend on the work commute is Rs 785.

    What does the survey say about women and free bus travel?

    1. Women ride buses more: 21.7% of urban women with commutes over a kilometre take a bus, against 6.9% of urban men, about three times as many.
    2. What counts as a bus: The category covers public, private, company and intercity buses.
    3. State variation: Women’s bus use is highest in Keralam and Tamil Nadu, followed by Karnataka and Telangana.
    4. Free travel policy: These figures support the decision of several States to offer free bus travel to women, since buses are already women’s main public mode.

    Challenges

    1. Weak last-mile links: Poor feeder services and footpaths push commuters to two-wheelers even where a metro exists.
    2. Thin bus fleets: Many cities run far fewer buses than their population needs, so waits are long and buses crowded.
    3. Fiscal strain of free rides: States must repay State transport undertakings, the State-owned bus operators, for free rides, which can delay fleet expansion.
    4. Women’s safety: Harassment and poorly lit stops deter women from using buses at night.

    Way Forward

    1. Bus fleet expansion: Scale up electric bus deployment under the PM-eBus Sewa scheme in cities with low bus use.
    2. Integrated planning: Use NHTS data in each city’s Comprehensive Mobility Plan, its long-term transport plan, to link buses, metro and walking routes.
    3. Safety measures: Fund CCTV, panic buttons and lit bus stops through the Nirbhaya Fund.
    4. Regular surveys: MoSPI should repeat the NHTS periodically so changes in travel can be tracked.

    Conclusion

    India’s first travel survey shows that the country commutes mainly on private two-wheelers, with buses serving women far more than men. Whether States and cities use the data to expand buses and link them to rail is what will decide if public transport’s share rises.

    Key numbers

    1. Urban women taking buses to work, by State: Keralam 46.8%, Tamil Nadu 41.1%, Karnataka 34.9%, Telangana 28.9%.
    2. Rail-based share of urban work commutes, by State: Maharashtra 20.7%, West Bengal 16.5%, Delhi 14.4%.
    3. Urban premium on commuting cost: 71% above rural spending.
    4. NHTS sample: 14,274 villages and 10,377 urban blocks.

    Back2Basics: Free bus travel for women

    1. What it is: Several State governments let women ride State-run buses free, with the State paying the transport corporation.
    2. Delhi: Free travel for women on Delhi Transport Corporation and cluster buses began in 2019.
    3. Tamil Nadu and Karnataka: Tamil Nadu began free town bus travel for women in 2021. Karnataka’s Shakti scheme followed in 2023.
    4. Telangana: The Mahalakshmi scheme gives women free travel on State-run buses from December 2023.

    Matching Previous Year Question

    “[2026] In what way(s) does the Vizhinjam International Seaport represent a structural shift in India’s maritime trade and logistics policy? 1. By functioning exclusively as a domestic cargo hub to reduce reliance on coastal shipping and eliminate the need for foreign collaborations. 2. By focusing primarily on passenger cruise tourism and heritage shipping to increase Kerala’s profile as a maritime heritage destination. 3. By leveraging its natural deep draft and strategic location to reduce dependence on foreign trans-shipment ports, enhance revenue retention, and reposition India in regional maritime trade. Select the answer using the code given below: (a) 1 only (b) 1 and 2 (c) 2 and 3 (d) 3 only ANSWER: D”

  • Coal stocks critically low as power demand rises in India

    Why in the News

    The official position is that India faces no coal shortage, only a surge in power demand, but Central Electricity Authority (CEA) data show 84 of the country’s 191 thermal power plants critically low on stock. The Union Coal and Mines Minister holds that position as power demand grows at its fastest pace in a decade. A weak monsoon has made the grid lean harder on coal.

    What does a “critically low” coal stock mean, and why does it matter?

    1. What it is: Every coal-fired plant must keep a normative stock, a buffer of coal sized to its daily burn, like a household keeping a week’s rations.
    2. When a plant turns critical: The CEA marks a plant critical when its stock falls below 25% of the normative level, or lasts less than three days.
    3. Scale of the problem: More than 44% of thermal plants were critical as of September 30.
    4. Shortage or demand: Whether the cause is short supply or high demand, the plant faces the same result: coal running out.
    5. The takeaway: Coal generates nearly four-fifths of India’s energy, so thin stocks put most power supply at risk.

    Why has power demand surged?

    1. Record growth: Power demand rose 10% in 2026, the highest year-on-year increase in a decade.
    2. Heat drives demand: The International Energy Agency (IEA) links the rise to unprecedented heat. Demand in 2025 rose and fell with each month’s peak temperature.
    3. Cooling appliances: The IEA attributes the surge to wider ownership of fans and air conditioners, which run hardest when it is hottest.
    4. Hottest August: The India Meteorological Department (IMD) recorded this August as India’s hottest since nationwide records began in 1901, with a mean of 28.01°C.
    5. All-time peak: Peak demand hit a record 270.8 GW on May 21 this year.

    How has a weak monsoon added to the pressure?

    1. Supply shortfall: Power shortages in September 2026 were the highest since August 2023, according to a Reuters report.
    2. Hydropower decline: Lower hydropower output pushed the grid to rely more on coal plants.
    3. Pacific warming: El Nino, a warming of the central and eastern Pacific, weakens monsoon winds over India. The monsoon was weaker in each of the last six strong-event years.
    4. June deficit: June 2026’s rainfall departure, meaning actual rain against the long-term average, was the worst for June since 2014, also a strong El Nino year.
    5. Relief is partial: Cooler months will ease demand, but lower pressure on stocks does not mean the supply shortage has eased.

    Challenges

    1. Coal transport bottlenecks: Plants far from mines depend on railway rakes, so stocks fall fast when movement slows. Eg. Passenger trains were cancelled to move coal in 2022.
    2. Hydropower volatility: Dams fail as a backup in drought years, exactly when cooling demand peaks.
    3. Evening peak gap: Solar output ends at sunset, leaving coal to meet the evening air-conditioning load.
    4. Costly imports: Blending imported coal raises generation costs, which strains distribution companies (discoms).

    Way Forward

    1. Pre-summer stocking: The Ministry of Power should require plants to build full normative stocks before the hot season.
    2. Rail priority: Indian Railways should guarantee coal rakes to plants nearing the critical mark.
    3. Storage build-out: Add pumped storage and battery storage so daytime solar can serve the evening peak.
    4. Efficient cooling: Tighten energy-efficiency star ratings for air conditioners to slow peak demand growth.

    Conclusion

    The dispute over whether India faces a coal shortage or a demand surge matters less than the fact that a hotter, drier climate is outrunning the grid’s buffers. Whether stocks recover before the next summer peak is the measure to watch.

    Key numbers

    1. Coal’s share of energy generated: 79% in 2024-25 (*Energy Statistics India*, Ministry of Statistics and Programme Implementation).
    2. Hottest August, departure from normal: 0.67°C above the normal of 27.34°C (IMD, 2026).
    3. 2025 temperature range tracked by demand: maximum of 25.53°C in January to an annual peak of 35.97°C in April.

    Back2Basics: Central Electricity Authority (CEA)

    1. Legal basis: The CEA is a statutory body under the Electricity Act, 2003, attached to the Ministry of Power.
    2. Planning role: It prepares the National Electricity Plan and advises the Union government on power policy.
    3. Standards: It sets technical standards for building, running and connecting power plants and grids.
    4. Data role: It collects and publishes power-sector data, including daily coal stocks at thermal plants.

    Matching Previous Year Question

    “[2026] In what way(s) does the Vizhinjam International Seaport represent a structural shift in India’s maritime trade and logistics policy? 1. By functioning exclusively as a domestic cargo hub to reduce reliance on coastal shipping and eliminate the need for foreign collaborations. 2. By focusing primarily on passenger cruise tourism and heritage shipping to increase Kerala’s profile as a maritime heritage destination. 3. By leveraging its natural deep draft and strategic location to reduce dependence on foreign trans-shipment ports, enhance revenue retention, and reposition India in regional maritime trade. Select the answer using the code given below: (a) 1 only (b) 1 and 2 (c) 2 and 3 (d) 3 only ANSWER: D”

  • The looming crisis of world unemployment

    Why in the News

    A World Bank forecast warns that 1.2 billion young people in the Global South, the developing world, will reach working age over the coming decade. The global economy will create no more than 400 million viable jobs. The gap of about 800 million jobs threatens to turn the demographic dividend, the growth boost a young workforce can give, into instability.

    Why is the old demographic dividend blueprint failing?

    1. Demographic dividend formula: As fertility falls, working-age adults briefly outnumber dependents, like a household with more earners than dependents. This window lifts productivity and savings.
    2. East Asian miracle: The formula fuelled the East Asian economic miracle of the late 20th century.
    3. Factory jobs ladder: Light manufacturing once moved unskilled workers from subsistence farming into urban jobs. Automation, robotics and industrial software have cut how much labour factories need.
    4. Premature deindustrialisation: Developing countries now lose factory jobs before reaching the income levels at which today’s rich economies industrialised.
    5. The takeaway: Youth bulges are arriving just as the old ladders of mobility stall, so a larger workforce no longer guarantees growth.

    What must change, and who must act?

    1. World Bank prescription: Unlock private capital and dismantle regulatory sclerosis, meaning rules so complex that they choke new firms.
    2. Barriers to small firms: Costly capital, erratic rules, predatory taxation and weak property rights deter investment. So small firms, the main job creators, cannot grow and hire.
    3. India’s record: India lags on regulation but does better on infrastructure. Building it absorbs labour, and the finished assets cut business costs.
    4. Shared burden: Rich economies and multilateral lenders must offer affordable long-term finance and technology transfer. Developing countries must carry out painful institutional reform.

    Which sectors can still absorb young workers at scale?

    1. Agri-tech and food value chains: Cold chains and local food processing can create rural jobs, so fewer people move to cities out of need (distress migration).
    2. Care economy: Nursing, community health and elder-care jobs cannot be outsourced and go largely to young women.
    3. Tourism and culture: Tourism is labour-intensive and resists automation.
    4. Green manufacturing: Solar components and electric two-wheelers can absorb labour if paired with skill-building.

    Why does the jobs gap matter, for the world and for India?

    1. Social instability: Educated youth shut out of work lose trust in governments, which fuels polarisation, extremism and civil unrest.
    2. Migration pressure: Joblessness in the Global South will push forced migration towards the Global North.
    3. India’s position: The world’s most populous nation adds millions of young workers each year, with a median age under 30. Its employment has not kept pace with GDP growth.
    4. India’s constraints: In a narrowing demographic window, India faces:
      • skills that do not match employers’ needs;
      • persistent underemployment and low female labour force participation;
      • farming that holds nearly half the population but yields only 16% of GDP (FY24).

    Challenges

    1. Thin formal skilling: Few young Indians hold formal vocational training. Eg. Only 4.4% of young people are formally skilled.
    2. Informality: Most workers hold informal jobs with low wages and no social security.
    3. Youth outside work and study: A quarter of youth aged 15 to 29 are NEET (not in employment, education or training).
    4. AI and services jobs: Artificial intelligence (AI) threatens entry-level IT and back-office work.

    Way Forward

    1. Job-linked incentives: Tie production incentives to jobs created in textiles, footwear and food processing.
    2. Care workforce: Expand nursing and elder-care training with formal wages and recognised certification.
    3. Regulatory simplification: Extend the decriminalisation of minor business offences begun by the Jan Vishwas (Amendment of Provisions) Act, 2023.
    4. Women’s participation: Fund childcare and safe transport so women can take up care and service jobs.

    Conclusion

    India’s demographic dividend will pay only if growth becomes labour-absorbing rather than capital-heavy. Whether the Centre and States ease regulation for small firms before the window closes will decide between dividend and disaster.

    What is the demographic dividend?

    1. UNFPA definition: The United Nations Population Fund (UNFPA) defines it as growth potential arising when the working-age (15 to 64) share of the population exceeds the non-working share.
    2. India’s window: A McKinsey Global Institute report (2023) gives India a 33-year window to use its demographic dividend.
    3. Growth potential: The International Monetary Fund (IMF) estimates it could add nearly 2 percentage points a year to India’s per capita GDP growth for two decades.
    4. Uneven across States: Southern States are nearing the end of their dividend. Northern States still have expanding workforces.

    Matching Previous Year Question

    “[2018] Consider the following statements : Human capital formation as a concept is better explained in terms of a process which enables 1. individuals of a country to accumulate more capital. 2. increasing the knowledge, skill levels and capacities the people of the country. 3. accumulation of tangible wealth. 4. accumulation of intangible wealth. Which of the statements given above is/are correct? (a) 1 and 2 (b) (b)2 only (c) (c)2 and 4 (d) 1, 3 and 4 ANSWER: (c)”

  • PM-SETU: One Year of Transforming India’s ITIs

    PM-SETU: One Year of Transforming India’s ITIs

    Why in the News?

    • PM-SETU was launched on 4 October 2025.
    • Completes one year on 4 October 2026.
    • Focus: modernisation of Government ITIs, industry-aligned training and demand-driven vocational education. Pasted text

    Key Facts

    • Full form: Pradhan Mantri Skilling and Employability Transformation through Upgraded ITIs.
    • Total outlay: ₹60,000 crore
      • Centre: ₹30,000 crore
      • States: ₹20,000 crore
      • Industry: ₹10,000 crore
    • Targets 1,000 Government ITIs.
    • Uses Hub-and-Spoke model:
      • 200 Hub ITIs
      • 800 Spoke ITIs
    • Each Hub connected to around 4 Spoke ITIs. Pasted text

    Component I: Government ITIs

    • 1,000 Government ITIs upgraded.
    • Hubs provide:
      • Innovation centres
      • Training-of-trainers facilities
      • Production units
      • Placement services
    • Spokes provide wider access to modern infrastructure and training.
    • Focus on smart classrooms, modern laboratories, digital content and industry-aligned courses.

    Component II: NSTIs

    • Capacity augmentation of 5 National Skill Training Institutes (NSTIs):
      1. Bhubaneswar
      2. Chennai
      3. Hyderabad
      4. Kanpur
      5. Ludhiana
    • Establishment of sector-specific National Centres of Excellence.
    • Advanced training of trainers through international partnerships. Pasted text

    Industry-Led Governance

    • ITI selection is led by States/UTs in consultation with industry.
    • National Steering Committee (NSC):
      • Chaired by Secretary, MSDE.
      • Provides policy direction.
      • Finalises guidelines.
      • Monitors implementation.
    • Strategic Investment Plan (SIP) required from prospective industry partners. Pasted text

    SPV Structure

    • Special Purpose Vehicles (SPVs) govern upgraded ITI clusters.
    • Anchor Industry Partner: 51%
    • Centre: 24.5%
    • State Government: 24.5% Pasted text

    One-Year Progress

    • 850 ITIs identified:
      • 172 Hub ITIs
      • 678 Spoke ITIs
    • 36 States/UTs identified clusters and created dedicated budget heads.
    • 35 States/UTs constituted State Steering Committees.
    • 26 States/UTs initiated industry participation.
    • Nationwide rollout approved for all 200 ITI clusters.
    • SIPs approved for 14 ITI clusters.
    • SIP investment: ₹3,446 crore. Pasted text

    New-Age Courses

    DGT has introduced 32 new-age courses under the Craftsmen Training Scheme covering:

    • Artificial Intelligence
    • Cyber Security
    • Additive Manufacturing
    • Electric Vehicles
    • Semiconductor Technology
    • Robotics
    • Green Hydrogen
    • Drones
    • Internet of Things (IoT)
    • Solar Energy
    • 5G
    • Software Testing Pasted text

    International Partnerships

    • Singapore – NSTI Chennai
    • France – NSTI Kanpur
    • Australia – NSTI Bhubaneswar
    • Germany – NSTI Hyderabad Pasted text

    ITIs: Important Background

    • ITIs provide vocational training under the Craftsmen Training Scheme (CTS).
    • Training duration: 6 months to 2 years depending on trade.
    • Directorate General of Training (DGT), under MSDE, is the apex organisation for vocational training at national level.
    • ITIs are under administrative and financial control of State Governments and UT Administrations.
    • Total ITIs increased from 9,776 in 2014 to 13,888 in 2026.
    • ITI enrolment increased from 9.51 lakh in 2014-15 to 14.70 lakh in 2025-26. Pasted text

    UPSC Prelims Quick Revision

    1. PM-SETU was launched on 4 October 2025.
    2. Total outlay is ₹60,000 crore.
    3. It targets 1,000 Government ITIs.
    4. Hub-Spoke structure: 200 Hubs + 800 Spokes.
    5. Industry gets 51% ownership in SPVs.
    6. Five NSTIs are covered under Component II.
    7. DGT introduced 32 new-age courses.
    8. 850 ITIs have been identified after one year. Pasted text

    UPSC Prelims Trap

    • PM-SETU targets Government ITIs, not all private ITIs.
    • ITIs are under State/UT administrative and financial control, while DGT coordinates vocational training nationally.
    • SPV ownership is 51% Anchor Industry Partner + 24.5% Centre + 24.5% State.
    • PM-SETU has two components: Government ITI upgradation and NSTI capacity augmentation.
  • NABKISAN WASH Social Bond

    NABKISAN WASH Social Bond

    Why in the News?

    • NABKISAN Finance Limited, a subsidiary of NABARD, listed India’s first Social Bond exclusively focused on Water, Sanitation and Hygiene (WASH) on the National Stock Exchange (NSE) on 1 October 2026.
    • The issue raised ₹180 crore and was oversubscribed 1.8 times.

    Key Highlights

    • Issuer: NABKISAN Finance Limited.
    • Parent institution: National Bank for Agriculture and Rural Development (NABARD).
    • Sector: Water, Sanitation and Hygiene (WASH).
    • Amount raised: ₹180 crore.
    • Oversubscription: 1.8 times.
    • Tenure: 5 years.
    • Coupon rate: 8.10%.
    • Maturity: September 2031.
    • Credit ratings: CRISIL AAA (Stable) and CARE AAA (Stable).
    • Listed on the National Stock Exchange (NSE), Mumbai.

    Use of Bond Proceeds

    • Funds will support access to:
      • Safe water
      • Sanitation
      • Hygiene solutions
    • Target beneficiaries include rural and underserved communities.
    • Expected development outcomes include improved:
      • Health
      • Livelihoods
      • Quality of life
    • Demonstrates the use of capital-market instruments for social development financing.

    Institutional Support

    • Water.org: Technical Advisor and Knowledge Partner.
    • Other stakeholders included market institutions, advisors, trustees and arrangers.
    • The bond is intended to deepen India’s sustainable finance market.

    Important Full Forms

    • WASH: Water, Sanitation and Hygiene
    • NABKISAN: NABKISAN Finance Limited
    • NABARD: National Bank for Agriculture and Rural Development
    • NSE: National Stock Exchange
    • CRISIL: Credit Rating Information Services of India Limited
    • CARE: Credit Analysis and Research

    UPSC Prelims Trap

    • NABKISAN, not NABARD directly, issued the bond.
    • It is a Social Bond, specifically focused on WASH, not a conventional government bond.
    • ₹180 crore is the amount raised, while 1.8 times refers to the level of oversubscription.
    • 8.10% is the coupon rate, while September 2031 is the maturity period.

  • Subhash Chandra’s IBC deal: ED probe focuses on big haircuts, proxy bidders

    Why in the News

    The insolvency law was meant to take failed companies away from their promoters, but investigators allege promoters are using the process itself to buy back their companies at deep discounts. The Enforcement Directorate (ED) has made such frauds its first operational priority, after Zee founder Subhash Chandra settled bank claims of over ₹22,000 crore for ₹6.5 crore.

    How is the insolvency process meant to work?

    1. What it is: The Insolvency and Bankruptcy Code (IBC), 2016 gives creditors a time-bound process to rescue or sell a defaulting company. It works like a court-supervised auction of a failed business.
    2. Who decides: In the Corporate Insolvency Resolution Process (CIRP), a resolution professional (RP) replaces management. A Committee of Creditors (CoC) approves a resolution plan by a 66% vote.
    3. Haircut: A haircut is the share of admitted claims creditors give up under a plan. A 94% haircut returns ₹6 per ₹100 owed.
    4. The takeaway: A process designed to end promoter control can become a cheap route back to it.

    What has the ED flagged?

    1. New priority: At an internal conference in Bengaluru, ED officers named “unearthing frauds under IBC and PMLA” the agency’s first operational thrust area. PMLA is the Prevention of Money-laundering Act, 2002.
    2. Specific target: The ED will examine “collusive resolution cases involving disproportionately large haircuts through which promoters re-acquire assets”.
    3. Earlier probes: Over two years, the ED has probed about a dozen cases alleging five forms of manipulation:
      • promoter-linked entities dominating creditor committees;
      • proxy bidders used to regain companies;
      • compromised resolution professionals;
      • assets moved out before or during the CIRP;
      • bids allegedly suppressed.

    How do promoters allegedly regain control?

    1. Alchemist: A group firm allegedly held 97% of CoC votes and the RP was a former group employee. The ED alleged the aim was immunity from past offences under Section 32A.
    2. Tribunal finding: The National Company Law Tribunal (NCLT) held the Alchemist CIRP vitiated by “fraud and collusion”. The Calcutta High Court later ordered a Central Bureau of Investigation probe.
    3. Sunstar Overseas: The company allegedly financed its own takeover through Umaiza Infracon LLP, a shell with no funds of its own, at an almost 85% haircut.
    4. Richa Industries: Saariga Constructions, allegedly set up by promoters through a former employee acting as a benamidar (front holder), bought CoC votes. Banks took a haircut of about 94%.

    How are assets allegedly stripped before or during insolvency?

    1. Amtek Auto: Fifteen group companies with claims over ₹34,000 crore were resolved at an average haircut of about 81%.
    2. Shell network: In Amtek, the ED identified about 500 shell companies allegedly holding properties bought with siphoned funds.
    3. Undervalued sales: In Angle Infrastructure, two acres were allegedly sold for ₹31 crore against a valuation of ₹160 crore. The RP denied it.
    4. Assets moved out: In Bhasin Infotech, 384 commercial units were allegedly shifted beyond the CIRP through “sham” and “backdated” agreements.

    Challenges

    1. Proxy loophole: Section 29A bars defaulting promoters from bidding, but benami fronts and shells evade it.
    2. Immunity risk: Section 32A’s protection for approved plans can shield a collusive buyer if fraud surfaces late.
    3. RP independence: Resolution professionals with links to promoters face weak checks before appointment.

    Way Forward

    1. Beneficial ownership checks: The Insolvency and Bankruptcy Board of India (IBBI) should require resolution applicants to disclose ultimate owners.
    2. Haircut trigger: Mandate an independent forensic audit when a haircut crosses a set threshold.
    3. RP vetting: The IBBI should screen RPs for prior links with the debtor group.
    4. Agency coordination: Set an information-sharing protocol between the ED, the IBBI and the NCLT.

    Conclusion

    Deep haircuts now draw scrutiny as possible fraud, not only as the cost of failure. Whether the IBBI tightens checks on bidder ownership and RP independence will decide if promoters can still buy back what they lost.

    Key numbers

    1. Richa Industries recovery: ₹40.29 crore against admitted claims of ₹696 crore (October 2025).
    2. Sunstar Overseas sale: ₹196 crore against admitted claims of ₹1,274.14 crore.

    Back2Basics: Section 32A of the IBC

    1. What it does: It ends a company’s liability for offences committed before the CIRP once the NCLT approves a resolution plan.
    2. Asset protection: The company’s property cannot then be attached for those earlier offences.
    3. Condition: The protection applies only where control passes to a new owner who is not a promoter, related party or abettor of the offence.
    4. Origin: Inserted in 2020, it gives genuine buyers a clean start; offenders stay personally liable.

    Matching Previous Year Question

    “[2024] Consider the following statements: Statement-I: Syndicated lending spreads the risk of borrower default across multiple lenders. Statement-II: The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line. Which one of the following is correct in respect of the above statements? (a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I (b) Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I (c) Statement-I is correct, but Statement-II is incorrect* (d) Statement-I is incorrect, but Statement-II is correct ANSWER:”

  • Global capital is no longer cheap, that’s the challenge

    Why in the News

    Ten-year government bond yields in the United States (US) and France have hit 5.34% and 4.99%, their highest since 2002, and Japan’s has crossed 3.1% for the first time since 1996. Investors now demand higher returns even from rich-country governments, so India must plan for a world where global capital is no longer cheap.

    What is a bond yield, and why does its rise matter?

    1. What it is: A bond yield is the return investors demand for lending to a government through tradable debt. It works like the interest rate a lender charges a borrower.
    2. Why it was seen as safe: Government bonds are treated as default risk-free, because a sovereign can tax and print currency to repay.
    3. What changed: Borrowing costs for rich-country governments rose 1.2 to 1.4 percentage points in a year, roughly twice India’s rise.
    4. No safe-haven discount: Investors now treat advanced and emerging economies as almost equally risky, and advanced-economy bond yields have surged to multi-decade peaks.
    5. The takeaway: When even the safest borrowers pay more, every other borrower, India included, pays more for global money.

    Why are rich-country borrowing costs rising?

    1. Persistent deficits: Developed-country governments keep running deficits because of ageing populations, expanded welfare alongside military build-up, and voter resistance to higher taxes or entitlement cuts:
      • US public debt has crossed $40 trillion;
      • the US defence budget reached a record $1 trillion for 2026;
      • advanced economies paid over $3.3 trillion in interest last year, according to the Institute of International Finance (IIF);
      • China, wary of US fiscal risk, cut its holdings of US Treasuries (US government bonds) to an 18-year low of $618 billion in July 2026.
    2. Commodity inflation: War and weather-driven supply shocks raise commodity prices, so central banks raise interest rates and signal more increases.
    3. Artificial intelligence (AI) infrastructure race: The four hyperscalers (firms running giant cloud data centres), Meta, Microsoft, Amazon and Google, are funding much of their capital spending with debt. As technology firms borrow in bond markets, governments must compete harder for investors, which drives up yields even on “safe haven” long-term US Treasuries.

    What does this mean for India?

    1. Domestic yield: India’s 10-year government security (G-sec) yield rose 0.7 percentage points in a year and closed the week at 7.21%.
    2. Costlier foreign capital: Policymakers and corporates must accept that cheap global capital is no longer available for borrowing or investment plans.
    3. Fiscal discipline: Heavy government borrowing at home pushes up interest rates and leaves less credit for private firms. This is crowding out, so restraint matters for India too.

    Challenges

    1. Portfolio outflows: Higher US yields pull foreign investors out of Indian bonds. Eg. Net foreign portfolio outflows pressured the rupee in 2025.
    2. Large borrowing programme: The Centre still plans heavy market borrowing, competing with firms for domestic savings.
    3. Imported inflation: Commodity shocks raise India’s import bill, so interest rate cuts get delayed.
    4. Corporate foreign debt: Firms with unhedged foreign currency loans, meaning loans not protected against currency swings, face higher refinancing costs.

    Way Forward

    1. Debt anchor: The Centre should hold to its path of cutting debt to about 50% of GDP by March 2031.
    2. Quality of spending: Shift borrowing toward capital expenditure rather than revenue spending.
    3. Deeper bond market: The Reserve Bank of India should widen the domestic investor base for long-term G-secs.
    4. Currency hedging: Regulators should push corporates to hedge external commercial borrowings (loans raised abroad).

    Conclusion

    A world of costlier capital punishes fiscal slippage faster than before, and emerging economies have less room than rich ones to absorb it. Whether India keeps its borrowing in check as advanced-economy deficits and AI-driven debt keep rising is what will set its cost of capital.

    Key numbers

    1. Chinese holdings of US Treasuries, peak: $1.32 trillion, November 2013.
    2. Proposed US defence budget: $1.5 trillion for the coming fiscal year.
    3. Hyperscaler capital spending: $410 billion (2025), $725 billion projected (2026), over $1.1 trillion (2027).

    Back2Basics: Government security (G-sec)

    1. What it is: A G-sec is a tradable debt instrument issued by the Central or a State government, acknowledging its debt.
    2. Types: Short-term Treasury Bills mature in under one year; dated securities run for one year or more.
    3. Who manages it: The Reserve Bank of India issues and manages G-secs on the government’s behalf.
    4. Why its yield matters: The 10-year G-sec yield is the benchmark against which other long-term loans in the economy are priced.

    Matching Previous Year Question

    “[2026] Which one of the following best describes the ‘Crowding Out Effect’ in the context of fiscal policy? (a) A situation where private investment increases due to increased Government spending (b) A situation where Government borrowing leads to higher interest rates, which reduces private investment (c) A situation where an increase in taxes leads to increased private sector investment (d) A situation where Government spending has no impact on aggregate demand Answer: B”

  • Next-Gen GST and India’s next phase of growth

    Why in the News

    The Union Finance Minister has said that Next-Gen GST, the rate rationalisation in force since September 2025, has widened reported economic activity without weakening tax revenue. A second round of process reforms on registration, returns, refunds, disputes and input tax credit goes before the GST Council on October 7.

    What is Next-Gen GST, and why was it introduced?

    1. What GST is: The Goods and Services Tax (GST), introduced in 2017, is one national indirect tax. It works like a single checkout counter in place of separate central and State taxes.
    2. What Next-Gen GST is: Next-Gen GST is the next stage of GST reform, built on nine years of taxpayer and State experience.
    3. Two connected purposes: It set out to reduce and rationalise rates and to make compliance easier. The rate changes took effect on 22 September 2025.
    4. The takeaway: The reform is now judged on whether lower rates can expand activity enough to keep revenue growing.

    What has happened to economic activity since the rate cut?

    1. Taxable supplies: The value of reported taxable supplies grew 25.8% in the ten months after the rate cut, compared with a year earlier.
    2. Breadth of growth: Supplies grew across all 11 sector groups and all major States.
    3. Consumer sales: Reported business-to-consumer (B2C) sales, meaning sales to households, rose 26.7%. Lower prices lift household buying, which flows back to retailers, suppliers and producers.

    Has revenue held up alongside the relief?

    1. Gross collections: Gross GST collections reached ₹12.46 lakh crore in the first half of 2026-27, up 11.6% on a year earlier.
    2. Monthly momentum: Collections grew at double digits each month from June to September, nearly 15% combined.
    3. Net collections: Collections net of refunds grew 10.4% over the half year, so lower rates did not shrink the revenue base.
    4. States’ position: Aggregate State GST (SGST) receipts, including their share of Integrated GST (IGST), the tax on supplies between States, grew about 16%, funding infrastructure and public services.

    What do the coming process reforms aim to fix for small firms?

    1. Wider participation: About 1.71 crore businesses were registered under GST by end August, so more firms sell into a national market.
    2. Timely filing: GSTR-3B returns (the monthly summary return through which tax is paid) filed on time rose 12.6% for April to July.
    3. Input tax credit: Input tax credit lets a firm deduct tax already paid on inputs. A larger share of liability is now paid through credits, and idle accumulated credit has declined, which frees working capital.
    4. Refund predictability: Predictable refunds let firms plan purchases and production. Refund speed also shows how well tax administration performs.
    5. Smaller towns: The reforms aim to cut compliance time for firms in Tier-2 and Tier-3 towns.

    Challenges

    1. Self-reported data: The gains rest on reported supplies, so part of the rise may be formalisation, meaning firms newly declaring existing sales, not new activity.
    2. Refund delays: Exporters and firms with an inverted duty structure (higher tax on inputs than outputs) still depend on slow refunds.
    3. Dispute backlog: Appeals pile up because the GST Appellate Tribunal has only recently begun hearing cases.
    4. Excluded items: Petroleum and electricity stay outside GST, so firms cannot claim credit for tax paid on them.

    Way Forward

    1. Refund deadlines: Fix time-bound, risk-based refund processing for small exporters.
    2. Tribunal capacity: The Centre and States should staff all GST Appellate Tribunal benches to clear pending appeals.
    3. Price pass-through data: Publish sector-wise data showing whether rate cuts reached consumer prices.
    4. Energy inclusion roadmap: Set a timeline to bring petroleum products into GST.

    Conclusion

    Next-Gen GST has so far combined tax relief with rising revenue, which strengthens the case for the Council as a forum of cooperative federalism. Whether the Council adopts the process reforms at its coming meeting will decide if the rate gains last.

    Key numbers

    1. Refunds paid: about ₹1.80 lakh crore, April to September 2026.
    2. Growth in registrations: nearly 15% year on year, end August 2026.

    Back2Basics: GST Council

    1. Constitutional basis: The GST Council is a constitutional body under Article 279A, inserted by the Constitution (One Hundred and First Amendment) Act, 2016.
    2. Composition: The Union Finance Minister chairs it, with the Union Minister of State for Finance and the Finance Ministers of all States and Union Territories with legislatures as members.
    3. Voting: Decisions need a three-fourths weighted majority, with the Centre holding one-third of the vote and the States together two-thirds.
    4. Role: It recommends GST rates, exemptions and procedures to keep the tax uniform across States.

    Matching Previous Year Question

    “[2025] Consider the following statements: Statement I: In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax. Statement II: In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961. Which one of the following is correct in respect of the above statements? (a) Both Statement I and Statement II are correct and Statement II explains Statement I (b) Both Statement I and Statement II are correct but Statement II does not explain Statement I (c) Statement I is correct but Statement II is not correct (d) Statement I is not correct but Statement II is correct Answer: B”

  • [3rd October 2026] The Hindu OpED: India’s Model BIT: a decade later, amid changes

    [3rd October 2026] The Hindu OpED: India’s Model BIT: a decade later, amid changes

    Question (2020, GS3 – 15 Marks): Explain the meaning of investment in an economy in terms of capital formation. Discuss the factors to be considered while designing a concession agreement between a public entity and a private entity.
    Linkage: A Bilateral Investment Treaty is effectively a macro-level concession/protection agreement between a host state and foreign private investors. Designing a BIT requires balancing public interest safeguards against the private entity’s need for capital security and predictability.
    [2022] Which one of the following situations best reflects “Indirect Transfers” often talked about in media recently with reference to India ?
    (a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
    (b) A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
    (c) An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
    (d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

    Mentor’s Comment

    India’s treaty practice has already moved ahead of its model. The UAE, Uzbekistan and Israel agreements shortened the remedies period and allowed counterclaims while the 2015 text stayed unchanged. The revision matters only if it writes this practice into the model. If it does not, the model remains a reference that negotiators bypass.

    Why in the News

    The Union Budget 2025-26 announced that India’s Model Bilateral Investment Treaty (BIT) would be revamped and made more investor-friendly, and the revised model is reportedly finalised and awaiting Cabinet approval. The real question is not whether investors get more or less protection, but what India has learnt from a decade of treaty practice.

    What is a Model BIT, and why was the 2015 version cautious?

    1. What it is: A BIT protects one country’s investors in the other. A Model BIT is India’s opening template, like a standard contract form, showing the protections it offers and obligations it expects.
    2. Why it turned cautious: The White Industries Australia Limited vs Republic of India award (2011) and worries about investor-state dispute settlement (ISDS), where investors sue states before international tribunals, made India defensive.
    3. Design of the 2015 Model: It narrowed what counts as an investment and kept regulatory exceptions for state action. Investors had to exhaust local remedies for five years, using Indian courts first, before arbitration.
    4. The takeaway: After nearly a decade, the revision decides whether India keeps this defensive design or trades some of it for investor confidence.

    How has India’s own treaty practice moved since 2015?

    1. New-generation agreements: Since 2015, India has concluded newer investment agreements with the United Arab Emirates (UAE), Uzbekistan and Israel.
    2. Shorter local remedies: The India-UAE BIT and the India-Israel Bilateral Investment Agreement, in force since July 2026, cut the local remedies period to three years.
    3. Greater flexibility: These treaties show India has already departed from its own model in practice.

    How has the global investment regime changed?

    1. UNCTAD’s shift: UN Trade and Development (UNCTAD) records treaties moving toward investment facilitation, making investing procedurally easier, with narrower protections. They rely less on ISDS.
    2. UNCITRAL reform agenda: The UN Commission on International Trade Law (UNCITRAL) is examining a permanent tribunal with an appellate mechanism to correct errors. It is also studying rules on damages and dispute prevention.
    3. Rule-shaper, not rule-taker: Scholar Makane Moïse Mbengue argues a developing state can shape investment law through its treaties, so India’s model must answer this new regime, not merely edit the old text.

    How should the new model handle the MFN clause?

    1. What MFN does: A Most Favoured Nation (MFN) clause lets one partner’s investor claim any better treatment India gives under another treaty. Most Indian treaties omit it, and a new clause needs precise scope.
    2. Maffezini vs Spain: An investor used MFN to bypass an 18-month local-court requirement by borrowing friendlier dispute rules from another treaty.
    3. Plama vs Bulgaria: The tribunal refused to import such dispute provisions where the treaty did not clearly allow it.
    4. Carve-out practice: Recent treaties expressly exclude dispute settlement from MFN, so a waiting period cannot be bypassed.

    What else must the new model get right?

    1. Counterclaims: The India-Uzbekistan BIT lets a state file a counterclaim, suing the investor back in the same case. The new model can list investor obligations and when counterclaims apply.
    2. Dispute prevention: The model can add consultation and dispute-prevention steps before arbitration, now discussed at UNCITRAL Working Group III (WG III).
    3. Precise protections: Expropriation (the state taking an investment) and fair and equitable treatment (FET) (a broad promise of fair handling) need clear wording. Precise terms protect the state’s right to regulate.
    4. Binding, balanced text: Responsible investment must be written as a legal duty, not a declaration. The model should be clearer for both sides and leave room to adjust each treaty.

    Challenges

    1. MFN imports: Tribunals have used MFN to import stricter standards. Eg. White Industries borrowed an “effective means” duty from the India-Kuwait BIT.
    2. Tax claims: Easier arbitration exposes sovereign tax measures to challenge. Eg. The Vodafone and Cairn Energy awards of 2020.
    3. Thin treaty network: India terminated most older BITs after 2016, so few partners hold treaties under any model.

    Way Forward

    1. MFN carve-out: The Department of Economic Affairs should exclude dispute settlement and procedural rights from any MFN clause.
    2. Closed FET list: Define FET as a closed list of breaches, such as denial of justice and manifest arbitrariness.
    3. Active WG III role: India should help design the permanent tribunal so its appellate review reflects developing country concerns.

    Conclusion

    India must write a model that reassures investors without surrendering the space to regulate in the public interest. Whether the Cabinet-approved text settles MFN scope and investor obligations, or leaves them to tribunals, will show if the decade’s lessons were learnt.

  • Mumbai’s Jawahar Dweep Becomes India’s First Plastic-free Oil Terminal

    Mumbai’s Jawahar Dweep Becomes India’s First Plastic-free Oil Terminal

    Why in the News?

    • Jawahar Dweep Marine Oil Terminal under the Mumbai Port Authority has been declared plastic-free.
    • The milestone was marked during Swachhata Abhiyan 2026 on 2 October 2026, Gandhi’s birth anniversary.

    Key Highlights

    • Location: Jawahar Dweep, Mumbai.
    • Authority: Mumbai Port Authority (MbPA).
    • Ministry: Ministry of Ports, Shipping and Waterways (MoPSW).
    • Declared India’s first plastic-free oil terminal.
    • Focuses on reducing single-use plastic and improving waste management.
    • Mumbai Port plans to extend plastic-reduction efforts to:
      • Docks
      • Residential colonies
      • Coastal areas
    • Oil Spill Response (OSR) facilities were also dedicated to the nation.
    • Sanitation workers (Safai Karmis) were felicitated for their contribution to port cleanliness.
    • A sea-cleaning activity was conducted as part of the cleanliness drive.

    Jawahar Dweep

    • A key marine oil terminal of Mumbai Port.
    • Its plastic-free declaration represents an effort to combine port operations with environmental sustainability.
    • The initiative focuses on reducing plastic pollution while maintaining port operations.

    Swachhata Abhiyan 2026

    • Held at Grey Gate, Indira Dock, Mumbai.
    • Organised to mark Mahatma Gandhi’s birth anniversary.
    • Activities included:
      • Swachhata Pledge
      • Felicitation of Safai Karmis
      • Cleanliness drives
      • Sea-cleaning activity
      • Awareness activities on waste management

    Important Full Forms

    • MbPA: Mumbai Port Authority
    • MoPSW: Ministry of Ports, Shipping and Waterways
    • OSR: Oil Spill Response

    Prelims Quick Revision

    • Jawahar Dweep: Mumbai.
    • Declared India’s first plastic-free oil terminal.
    • Authority: Mumbai Port Authority.
    • Ministry: MoPSW.
    • Declaration made during Swachhata Abhiyan 2026.
    • Date: 2 October 2026.
    • Jawahar Dweep is a marine oil terminal.
    • OSR facilities were dedicated to the nation during the programme.

    UPSC Prelims Trap

    • Jawahar Dweep is an oil terminal, not a general-purpose port.
    • The initiative concerns plastic-free operations at Jawahar Dweep, under the Mumbai Port Authority.
    • MoPSW is the concerned ministry, while MbPA is the port authority.
    • OSR stands for Oil Spill Response, not a plastic-waste management programme.