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Subject: Economics

  • PM Gram Sadak Yojana

    Why in the News?

    The Ministry of Rural Development (MoRD) asked states to add QR codes to Prime Minister Gram Sadak Yojana (PMGSY) rural road boards to boost public monitoring and streamline upkeep via the eMARG platform.

    About PM Gram Sadak Yojana (PMGSY):

    • Launch: It was launched on December 25, 2000, by then PM Atal Bihari Vajpayee as a Central Sector Scheme to provide all-weather road connectivity to unconnected rural habitations.
    • Objective: The scheme helps bridge the rural-urban divide and improves access to markets, healthcare, education, and public services.
    • Implementation: It is now a centrally sponsored scheme led by the Ministry of Rural Development (MoRD) and supported by state governments.
    • Monitoring: Progress is tracked using e-MARG, a digital platform for monitoring road construction and maintenance.
    • Implementation Phases:
      1. Phase I (2000): Focus on connecting unconnected habitations.
      2. Phase II (2013): Upgrading roads built in Phase I to enhance rural infrastructure.
      3. Phase III (2019–2025): Consolidation of 1.25 lakh km of rural roads connecting habitations to Gramin Agricultural Markets, Higher Secondary Schools, and Hospitals. Cost: ₹80,250 crore (2019-2025). Funding: 60:40 (Centre), 90:10 for North-East and Himalayan States.
      4. Phase IV (2024–2029): Aims at constructing 62,500 km of all-weather roads to provide connectivity to 25,000 unconnected habitations with a focus on Left-Wing Extremism (LWE) areas, tribal areas, and remote regions.

    Key Features of PMGSY:

    • Rural Connectivity Focus: Targets habitations based on population thresholds (e.g., 500+ in plains, 250+ in hill/NE areas).
    • Funding Pattern: Initially 100% central funding; since 2015–16, it follows a 60:40 split (90:10 for NE and Himalayan states).
    • Maintenance Period: Contractors are responsible for road upkeep for 5 years post-construction.
    • Quality Assurance: Involves routine inspections and geo-tagged photographs to evaluate maintenance performance.
    • Economic Impact: Improves rural livelihoods, reduces migration, and enhances access to markets and services.
    [UPSC 2001] Consider the following schemes launched by the Union Government: I. Antyodaya Anna II. Gram Sadak Yojana III. Sarvapriya IV. Jawahar Gram Samriddhi Yojana. Which of these were announced in the year 2000?

    Options: (a) I and II* (b) II and IV (c) III and IV (d) I, II and III

     

  • FASTag Annual Pass Scheme

    Why in the News?

    Union Transport Minister announced a new FASTag-based Annual Pass system for private non-commercial vehicles (cars, jeeps, vans) to ensure smoother travel across National Highways.

    What are FASTags?

    • FASTag is a contactless toll payment system that uses Radio Frequency Identification (RFID) technology to enable automatic toll collection at National Highway toll plazas.
    • Managed by the National Highways Authority of India (NHAI) and National Payments Corporation of India (NPCI), it was launched in 2014 and became mandatory in 2021 for all four-wheeled vehicles.
    • It is a sticker affixed on a vehicle’s windshield, linked to a prepaid wallet or savings account. Toll charges are automatically deducted when the vehicle passes through an electronic toll gate.
    • It enhances convenience, reduces traffic congestion, and promotes digital payments across India’s highway network.
    • As per the Motor Vehicles Rules, FASTags are mandatory for all new four-wheelers and necessary for renewal of fitness certificates and national permits.

    About the FASTag Annual Pass Scheme:

    • Overview: It is a new initiative announced by the Ministry of Road Transport and Highways to provide cost-effective and hassle-free travel for private non-commercial vehicles.
    • Implementation: The pass will be effective from August 15, 2025, and is optional, intended for cars, jeeps, and vans (not for commercial vehicles).
    • Objectives: The scheme is designed to reduce per-trip costs (as low as ₹15/toll) and provide savings of up to ₹7,000 annually for frequent travelers.
    • Benefits: It allows unlimited passage at National Highway (NH) and National Expressway (NE) toll plazas for either:
      • One year, or
      • 200 toll crossings, whichever is earlier.

    Key Features:

    • Eligibility: Applicable only for non-commercial private vehicles with a valid, active FASTag linked to a registered vehicle number.
    • Activation: Can be activated via the Rajmargyatra mobile app or NHAI website with a one-time payment of ₹3,000 for FY 2025–26.
    • Validity: Covers 200 trips or one year and then reverts to regular FASTag mode unless renewed.
    • Trip Count:
      • Point-based plazas: Each pass counts as one trip per crossing.
      • Closed toll systems: Entry and exit combined count as one trip.
    • Transfer Restrictions: The pass is non-transferable and valid only for the vehicle on which the FASTag is registered.
    • Coverage: Valid only at NH and NE toll plazas managed by the Centre. It does not apply to state highway or local toll plazas.
    • Fee Revision: The base fee may be revised annually starting April 1 every year.
    • Existing Users: No need for a new FASTag if one is already affixed and active. The pass can be added on top of the existing tag after eligibility verification.
    [UPSC 2023] With reference to India’s projects on connectivity, consider the following statements:

    1. East-West Corridor under Golden Quadrilateral Project connects Dibrugarh and Surat.

    2. Trilateral Highway connects Moreh in Manipur and Chiang Mai in Thailand via Myanmar.

    3. Bangladesh-China -India -Myanmar Economic Corridor connects Varanasi in Uttar Pradesh with Kunming in China. How many of the above statements are correct? Options: (a) Only one (b) Only two (c) All three (d) None*

     

  • What is Reverse-Flipping?

    Why in the News?

    SEBI has introduced key regulatory relaxations to ease IPO norms and incentivize startups to shift their legal base back to India through reverse-flipping.

    About Reverse-Flipping:

    • Reverse-flipping refers to the process by which Indian startups that were earlier incorporated abroad shift their domicile back to India, making India their legal and operational headquarters.
    • It allows Indian companies to access domestic capital markets, reduce compliance complexity, and align with the evolving global tax and regulatory environment.
    • This shift helps startups tap Indian stock exchanges, reduce reliance on foreign jurisdictions, and benefit from a favorable Indian regulatory ecosystem.

    Types of Reverse-Flipping

    1. Share Swap Arrangement:
      • In this structure, shareholders of the foreign parent company exchange their shares for shares in the Indian subsidiary.
      • This process may trigger capital gains tax under the Income Tax Act, 1961, especially for Indian shareholders.
    1. Inbound Merger (Cross-Border Merger):
      • The foreign parent company merges with its Indian subsidiary, with the Indian entity becoming the surviving legal structure.
      • If all conditions under the Foreign Exchange Management Act (FEMA), the Companies Act, 2013, and National Company Law Tribunal (NCLT) are met, this merger route can be tax-neutral.

    Key Features:

    • Domestic Listing Access: Startups gain access to Indian IPO markets and valuations.
    • Simplified Compliance: Reduced legal and regulatory complications from operating across jurisdictions.
    • Investor Incentives: SEBI now allows foreign venture funds and AIFs to be counted towards minimum promoter contribution in public issues.
    • ESOP Relaxation: SEBI has allowed promoters/founders to retain Employee Stock Option Plans (ESOPs) granted one year prior to the filing of the Draft Red Herring Prospectus (DRHP).
    • Capital Market Boost: The move supports India’s goal to become a global startup and financial hub by encouraging reverse-flipping.
    • Tax & Legal Alignment: Shifting domicile can help startups comply better with Indian tax and business laws.

    Note:

    Employee Stock Option Plans (ESOPs) are structured benefit schemes that grant employees the right to purchase shares of their company at a predetermined price—known as the exercise price—after completing a specific period.

     

    [UPSC 2025] Consider the following statements:

    Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.

    Statement II: Bondholders are lenders to a company whereas stockholders are its owners.

    Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company.

    Which one of the following is correct in respect of the above statements?

    (a) Both Statement II and Statement III are correct and both of them explain Statement I *

    (b) Both Statement I and Statement II are correct and Statement I explains Statement II

    (c) Only one of the Statements II and III is correct and that explains Statement I

    (d) Neither Statement II nor Statement III is correct

     

  • PM-WANI Scheme

    Why in the News?

    The TRAI ordered that public Wi-Fi hotspot operators under PM-WANI programme should not be charged more than twice what a residential broadband user paid for setting up a hotspot.

    What is the PM WANI Scheme?

    • Overview: PM Modi launched the Prime Minister Wi-Fi Access Network Interface (PM WANI) in December 2020.
    • Nodal agency: It is an initiative under the Department of Telecommunications (DoT).
    • Objective: To democratize internet access, particularly in remote and underserved areas.
    • Goals: It takes forward the goal of the National Digital Communications Policy, 2018 (NDCP) of creating a robust digital communications infrastructure.
    • Implementation: Leverages Public Data Offices (PDOs) established in public spaces like railway stations, banks, post offices, and more. Users can access the internet via Wi-Fi at these locations without requiring a SIM card.
    • PM-WANI ecosystem consists of four parts: 
      1. Public Data Office (PDO): It establishes the Wi-Fi Hotspots and provides internet access to users
      2. Public Data Office Aggregator (PDOA):  It provides authorisation and accounting services to PDOs.
      3. App Provider: It displays the available hotspots in the phone’s proximity.
      4. Central Registry: This overseen by the Centre for Development of Telematics maintains details of App Providers, PDOs, and PDOAs.
    • How to Utilize PM WANI?
      • To access PM WANI services, users must install the Data PM WANI app on their smartphones.
      • Through the app, users can connect to nearby public Wi-Fi PDOs.
      • This application facilitates seamless connectivity to PM-WANI-compliant Wi-Fi hotspots, empowering users to access broadband services conveniently.

    Role of Public Data Offices (PDOs):

    • The PM-WANI scheme includes a provision for establishing Public Data Offices (PDOs) by rural entrepreneurs in remote regions.
    • These PDOs procure internet bandwidth from telecom service providers or ISPs to offer Wi-Fi services at minimal charges.
    • This model enables individuals to access the internet even in areas with limited or no data connectivity.
    [2018] Which of the following is/are the aim/aims of “Digital India” Plan of the Government of India?

    1. Formation of India’s own Internet companies like China did.
    2. Establish a policy framework to encourage overseas multinational corporations that collect Big Data to build their large data centres within our national geographical boundaries.
    3. Connect many of our villages to the Internet and bring Wi-Fi to many of our school, public places and major tourists.

    Select the correct answer using the codes given below:

    (a) 1 and 2 only

    (b) 3 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

     

  • PRASHAD Scheme

    Why in the News?

    The long-awaited Chamundi Hills development project in Karnataka is finally gaining momentum under the Pilgrimage Rejuvenation and Spiritual Heritage Augmentation Drive (PRASHAD) scheme.

    About the PRASHAD Scheme:

    • Launch: It was launched in 2014–15 by the Ministry of Tourism.
    • Core Objective: It aims to revitalize pilgrimage sites and develop spiritual tourism infrastructure across India.
    • Scope and Mission: In 2017, PRASHAD was upgraded to a National Mission, integrating features of the HRIDAY scheme to create a unified heritage and spiritual site development model.
    • Cultural Focus: The scheme emphasises cultural preservation, community involvement, and promoting both domestic and international spiritual tourism.
    • Implementation:
      • Executing Agencies: Projects are executed by state-level agencies appointed by the respective state or union territory governments.
      • Funding Model: The scheme offers 100% central financial assistance for eligible infrastructure and development components.
      • Public-Private Support: It encourages Corporate Social Responsibility (CSR) contributions and Public-Private Partnerships (PPP) to expand sustainability and local ownership.
      • Centre-State Collaboration: Implementation is designed to ensure close cooperation between central and state governments while respecting local cultural and religious traditions.

    Key Features:

    • Infrastructure Development: Roads, drinking water, sanitation, solid waste management, lighting, and public conveniences at pilgrimage sites.
    • Connectivity Enhancement: Improved rail, road, and air links to facilitate easier access for pilgrims.
    • Pilgrim Facilities: Creation of accommodation, food courts, wayfinding systems, and security measures for safe and hygienic pilgrimages.
    • Cultural Conservation: Restoration of temples, monuments, ghats, and sacred lakes; integration of cultural traditions in tourism.
    • Community Empowerment: Skill training for locals, development of tourism-linked jobs, and stakeholder participation in project design and operation.
    • Sustainability Focus: Use of eco-friendly technologies, green energy, and promotion of responsible tourism to reduce environmental impact.
    [UPSC 2022] The Prime Minister recently inaugurated the new Circuit House near Somnath Temple at Veraval. Which of the following statements are correct regarding Somnath Temple?

    1. Somnath Temple is one of the Jyotirlinga shrines.

    2. A description of Somnath Temple was given by Al-Biruni.

    3. Pran Pratishtha of Somnath Temple (installation of the present day temple) was done by President S. Radhakrishnan.

    Select the correct answer using the code given below:

    Options: (a) 1 and 2 only * (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3

     

  • What are Passively Managed Funds?

    Why in the News?

    Passively Managed Funds—those that track a market index without active stock selection—have become increasingly popular among investors seeking low-cost, predictable returns.

    About Passively Managed Funds:

    • Passively managed funds, commonly known as passive funds, are investment vehicles designed to replicate the performance of a specific market index, such as the Nifty Fifty or the Sensex.
    • Unlike actively managed funds, the fund manager in a passive fund does not select stocks or make frequent buy-and-sell decisions.
    • Instead, the fund holds the same stocks in the same proportion as the underlying index.
    • How Passive Funds Work?
      • These funds track a benchmark index by investing in all or a representative sample of the securities in that index.
      • The objective is to mirror the index’s returns, not to outperform it.
      • As a result, they incur lower management costs and have minimal portfolio turnover.

    Types of Passive Funds:

    1. Index Funds:
      • These are mutual funds that can be purchased or redeemed directly from the fund house.
      • Transactions are processed only once a day, based on the day’s closing Net Asset Value.
      • They offer ease of use and are suitable for systematic investment plans and long-term investors.
    1. Exchange Traded Funds:
      • These are funds listed on stock exchanges, like the National Stock Exchange or the Bombay Stock Exchange.
      • Investors buy or sell units during trading hours through brokers, just like stocks.
      • They require a dematerialised account and are suitable for investors seeking intraday trading flexibility.

    Advantages of Passive Funds:

    • Low Expense Ratios: Because no active research or trading is involved.
    • Transparency: Holdings closely follow a well-known index.
    • Diversification: Spreads investment risk across multiple securities.
    • No Human Bias: Avoids mistakes due to the fund manager’s poor decisions.

    Limitations:

    • No Outperformance: Returns will always be close to the index and cannot exceed it.
    • Tracking Error: Slight variation between the fund’s performance and the index due to operational reasons.
    • Limited Flexibility: Cannot adapt to sudden market downturns.
    [UPSC 2025] Consider the following statements:

    Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.

    Statement II: Bondholders are lenders to a company, whereas stockholders are its owners.

    Statement III: For repayment purposes, bondholders are prioritised over stockholders by a company.

    Which one of the following is correct in respect of the above statements?

    (a) Both Statement II and Statement III are correct, and both of them explain Statement I *

    (b) Both Statement I and Statement II are correct, and Statement I explains Statement II

    (c) Only one of the Statements II and III is correct and that explains Statement I

    (d) Neither Statement II nor Statement III is correct

     

  • Brewing crisis: How climate change is unravelling India’s tea heartland

    Why in the News?

    North Bengal’s tea gardens are in crisis, especially for women workers, due to climate change, pests, low wages, and reduced production, causing economic struggles and increased gender-based hardships.

    What challenges do women tea workers face due to climate change and poor labour conditions?

    • Extreme Heat Exposure: Women work under open skies with no shade, facing soaring temperatures due to climate change. Eg: Workers suffer from headaches, vomiting, and exhaustion while plucking leaves during peak summer months like April and May.
    • Lack of Basic Facilities: Absence of crèches, sanitation, and rest shelters forces women to manage both labour and childcare in unsafe conditions. Eg: Children are hung in cloth cradles tied to trees as mothers continue work in the gardens.
    • Human-Wildlife Conflict: Encroachment of wildlife into tea estates due to changing weather patterns increases risk of attacks. Eg: Leopard attacks have injured several women, despite efforts like using whistles to drive them away.

    Why is tea yield and quality declining in North Bengal?

    • Erratic Rainfall Patterns: The monsoon is no longer evenly spread, with rainfall occurring in short, intense bursts, affecting soil moisture and crop cycle. Eg: Dry spells during critical growth months like February and March reduce yields and degrade leaf quality.
    • Rising Temperatures: Increasing heat reduces the ideal climatic conditions necessary for tea cultivation, impacting both quantity and flavour. Eg: Temperatures crossing 30°C for extended periods lead to loss of the tea’s aroma and taste.
    • Increased Pest and Disease Attacks: Climate change weakens tea bushes, making them more vulnerable to pests and diseases. Eg: Frequent pest attacks force farmers to use chemical sprays, which also degrade leaf quality.

    How do low wages impact the lives of tea plantation workers?

    • Economic Hardship: Low daily earnings make it difficult for workers to meet basic needs such as food, healthcare, and education. Eg: A worker earning only Rs 250 per day struggles to support their family after losing a spouse.
    • Lack of Childcare Support: Insufficient income prevents access to proper childcare facilities, forcing unsafe alternatives at the workplace. Eg: In some cases, children are kept in cloth cradles tied to trees due to the absence of crèche facilities.
    • No Scope for Upward Mobility: With stagnant wages and no savings, workers remain stuck in poverty with no chance to improve living standards. Eg: Despite long-standing demands to increase wages to Rs 600 per day, many still earn significantly less, affecting their long-term well-being.

    What climate-resilient practices are tea estates adopting?

    • Organic Farming: Switching to organic methods reduces chemical use and improves soil health for long-term sustainability. Eg: Some estates have gone fully organic, avoiding chemical fertilisers and promoting natural soil enrichment.
    • Soil Conservation Techniques: Practices like mulching and intercropping help retain moisture, reduce erosion, and maintain fertility during erratic rainfall. Eg: Estates use mulching and intercropping with legumes to prevent soil erosion and conserve moisture during dry spells.
    • Water Management Strategies: Creation of water bodies and rainwater harvesting enhances water availability during prolonged dry periods. Eg: Gardens are building water bodies to improve microclimates and ensure irrigation in the absence of seasonal showers.

    Why is the tea sector overlooked in policy and climate action?

    • Lack of Market Visibility: Despite being globally consumed, tea lacks strong marketing and policy attention compared to other cash crops. Eg: Unlike coffee, tea receives little brand promotion, limiting public and policymaker focus.
    • Neglect of Women Labour Force: Tea is the largest employer of women labourers, yet there is inadequate investment in their welfare or working conditions. Eg: No crèche facilities exist in many gardens, forcing women to hang children from trees during work.
    • Insufficient Climate Funding: Small growers lack access to funds and technical guidance to adopt climate-resilient practices. Eg: High cost of herbal pesticides prevents adoption, while most farmers rely on peer advice instead of expert support.

    Way forward: 

    • Improve Working Conditions and Wages: Ensure minimum wage revision, provide shade, drinking water, crèche facilities, and medical support for women tea workers to enhance their safety and well-being.
    • Promote Climate-Resilient Practices with Institutional Support: Encourage organic farming, soil conservation, and afforestation, backed by government funding and policies tailored to protect both workers and the environment.

    Mains PYQ:

    [UPSC 2024] What are the major challenges faced by Indian irrigation system in recent times? State the measures taken by the government for efficient irrigation management.

    Linkage: The tea gardens are experiencing “prolonged dry spells” and a drop in the “groundwater table”, highlighting a critical challenge for irrigation and water management in the tea heartland.

  • What is Merchant Discount Rate (MDR)?

    Why in the News?

    The Finance Ministry has firmly denied recent online rumours suggesting that the government is planning to impose Merchant Discount Rate (MDR) charges on UPI transactions.

    About Merchant Discount Rate (MDR):

    • Overview: MDR refers to the fee charged to merchants by banks or payment service providers for processing digital payments made via credit cards, debit cards or other digital modes.
    • Purpose: It serves to compensate multiple stakeholders involved in a digital transaction, including the issuing bank, acquiring bank, payment gateway, and network operator.
    • Fee Structure: MDR is typically calculated as a percentage of the total transaction amount, usually ranging from 1% to 3%, depending on the transaction and merchant type.
    • RBI Regulation: The Reserve Bank of India (RBI) regulates MDR, and merchants are NOT permitted to pass this fee onto customers.
    • Discontinuation: To promote cashless payments, the government waived MDR on UPI and RuPay card transactions in 2020, benefiting small merchants and consumers.

    How does it work?

    • Transaction Flow: When a customer pays digitally, the payment amount is credited to the merchant’s account after deducting the MDR fee.
    • Example: If a customer pays ₹1,000 and the MDR is 2%, the merchant receives ₹980, while the remaining ₹20 is distributed among the banks and service providers.
    • Automatic Deduction: The MDR amount is automatically deducted by the settlement system at the time of transaction processing.
    • Variable Rates: The MDR rate may vary depending on factors such as the type of card used, nature of business, monthly transaction volume, and average transaction value.
    • Merchant Agreements: Merchants are required to sign MDR agreements with their payment service providers before they begin accepting digital payments.
    • Operational Cost: MDR is treated as a part of the merchant’s operational costs when offering customers the convenience of digital payment options.
    [UPSC 2017] Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news?

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

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

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

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

     

  • Why govts revise GDP base year and methodology, why the proposed 2026 revision matters for India’s global standing

    Why in the News?

    India will update the base year for calculating GDP to 2022–23, and the new data is expected by February 2026. This change, confirmed by Saurabh Garg from the Ministry of Statistics, is an important step to improve the accuracy and trust in India’s economic data both in the country and around the world.

    Why is the base year for GDP being revised to 2022-23?

    • To Reflect Structural Changes in the Economy: India’s economy has shifted significantly from agriculture to services and digital sectors. Revising the base year captures these structural shifts more accurately. Eg: The rise of digital platforms, fintech, and gig economy post-2015 needs to be incorporated into GDP estimates.
    • To Incorporate Improved and Updated Data Sources: New datasets such as the Periodic Labour Force Survey (PLFS) and administrative records like MCA-21 provide more comprehensive and timely data for accurate GDP computation. Eg: PLFS helps capture employment trends better than the older Employment-Unemployment surveys.
    • To Ensure Compatibility with International Standards and Better Inflation Adjustment
      Regular base year revisions align with UN and IMF guidelines and help in more precise estimation of real GDPby adjusting for price changes. Eg: Without a revision, outdated price structures (like 2011-12) may overstate or understate real growthdue to inflation distortions.

    What challenges delayed the previous GDP base year revision in 2017-18?

    • Data Quality Concerns in Key Surveys: The government raised concerns about the credibility of the Consumer Expenditure Survey (CES) and Periodic Labour Force Survey (PLFS) conducted in 2017-18. Eg: CES showed a decline in consumer spending, suggesting rising poverty — a politically sensitive finding that was never officially released.
    • Economic Disruptions during the Reference Year: Major policy shocks such as demonetisation (2016) and the introduction of Goods and Services Tax (GST) in 2017 led to economic volatility, making 2017-18 an unsuitable “normal” year for baseline calculations. Eg: GDP growth fell from 8.3% in 2016-17 to below 4% by 2019-20, reflecting prolonged economic slowdown post these disruptions.
    • Delayed Acceptance and Use of Survey Results: While the PLFS findings were eventually accepted after the 2019 elections, the CES was rejected, causing a gap in key inputs required for GDP revision. Eg: Without reliable consumption and employment data, the GDP estimation would lack accuracy, forcing the government to drop 2017-18 as the base year.

    Which other economic indicators are also undergoing base year revisions?

    • Index of Industrial Production (IIP): Base year to be revised to 2022-23.
    • Consumer Price Index (CPI): Base year to be revised to 2023-24.
    • National Accounts (GDP): Base year to be revised to 2022-23, effective February 27, 2026.

    How does base year revision affect the credibility of India’s economic data globally?

    • Improves Accuracy and International Comparability: A timely base year revision ensures that GDP estimates reflect current economic structures, making India’s data more credible and aligned with international standards (like those of IMF and UN). Eg: Including digital economy or renewable energy sectors helps match the metrics used by other G20 nations.
    • Builds Investor Confidence: Transparent and methodologically sound revisions enhance global investor trust, which is crucial for foreign direct investment (FDI) and sovereign credit ratings. Eg: A credible GDP estimate influences decisions by agencies like Moody’s or Fitch, and reassures multinational corporations evaluating India’s market.
    • Reduces Skepticism from Global Analysts: Past controversies—like the 2015 revision which some experts claimed overstated growth—have raised doubts on India’s data integrity. A robust 2022-23 revision can restore credibility. Eg: Even former Chief Economic Advisor Arvind Subramanian questioned past data quality; accurate revisions now can counteract such reputational damage.

    Way forward: 

    • Institutionalise Regular Data Revisions: Establish a fixed 5-year cycle for revising base years of GDP and other macroeconomic indicators, in line with National Statistical Commission recommendations, to ensure timeliness, consistency, and credibility.
    • Enhance Data Transparency and Accessibility: Improve the quality, frequency, and public availability of key datasets like Consumer Expenditure Survey (CES), PLFS, and Census, to build trust among researchers, investors, and global institutions.

    Mains PYQ:

    [UPSC 2021] What are the main features of the estimation of India’s Gross Domestic Product(GDP) before the year 2015 and after the year 2015.

    Linkage: The changes in GDP estimation around the 2015 revision, which is a prime example of the process of revising the base year and methodology. The “India’s GDP: Revising the Economic Base” source provides extensive details on this very topic, explaining the rationale and significance of such revisions, including the upcoming 2026 revision and its importance for India’s global standing.

  • Consultative regulation-making that should go further

    Why in the News?

    India’s main financial regulators — the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) — have, for the first time, created clear step-by-step procedures for how they will create and update their rules.

    What procedural reforms have the RBI and SEBI recently introduced in regulation-making?

    • Mandatory Public Consultation: Both RBI and SEBI now require a 21-day window for public feedback before finalizing regulations. Eg: When SEBI proposes changes to investment guidelines, stakeholders can submit suggestions during this consultation period.
    • Introduction of Impact Analysis and Regulatory Objectives: RBI must conduct an impact analysis to assess the effect of new regulations. SEBI must state the regulatory intent and objectives behind any proposed rule. Eg: Before introducing digital lending norms, RBI must assess how it affects NBFCs and consumers.
    • Periodic Review of Existing Regulations: Both regulators are now required to periodically review existing laws to ensure relevance and effectiveness. E.g.: SEBI may revisit earlier mutual fund rules to assess if they align with current market dynamics.

    Why is identifying economic rationale important for regulatory interventions?

    • Targets Actual Market Failures: Ensures that regulations are introduced to solve real economic issues, not just perceived ones. Eg: RBI introducing regulations on digital lending platforms to tackle predatory lending practices.
    • Improves Resource Allocation: Helps in the efficient use of regulatory capacity and government resources by focusing only where intervention is necessary. Eg: SEBI focusing surveillance on high-risk investment products rather than low-risk ones.
    • Enables Evidence-Based Policy Making: Economic rationale demands data-backed decision-making, leading to more robust and defensible policies. Eg: Mandating minimum capital buffers after analysing risk exposure in banks post-2008 crisis.
    • Strengthens Cost-Benefit Analysis: Clarifies whether the expected benefits outweigh the compliance and administrative costs. Eg: Before enforcing stricter disclosure norms, SEBI can evaluate if the benefits to investors justify the burden on companies.
    • Increases Public and Stakeholder Trust: When the rationale is transparent, it builds confidence in the regulator’s objectivity and fairness. Eg: Clearly stating economic reasoning behind banning front-running in trading enhances credibility.

    How do international practices like those in the US and EU guide regulatory impact assessment?

    • Mandatory Cost-Benefit Analysis: US regulators must evaluate the economic impact of any regulation before adoption to ensure benefits outweigh costs. Eg: The Office of Information and Regulatory Affairs (OIRA) reviews federal regulations to minimize economic burdens.
    • Problem Identification and Alternatives Assessment: The EU’s Better Regulation Framework requires identifying the core problem, evaluating alternative policy options, and selecting the most effective one. Eg: EU energy efficiency regulations involved assessing multiple alternatives before finalizing appliance labeling norms.
    • Monitoring and Evaluation Frameworks: Both the US and EU emphasize post-implementation reviews to check if regulations achieve intended goals. Eg: The EU conducts ex-post evaluations as part of its regulatory cycle to ensure continuous improvement.

    When should regulations be reviewed and why?

    • At Pre-defined and Regular Intervals: Regulations should be reviewed periodically (e.g., every 3 years) to assess continued relevance. Eg: The IFSCA mandates review of its regulations every 3 years to align with changing market needs.
    • After Significant Economic or Sectoral Changes: Major changes like market failures, technological advancements, or crises should trigger a regulatory review. Eg: The COVID-19 pandemic led to a re-evaluation of financial sector norms to support liquidity and credit flow.
    • To Evaluate Effectiveness and Stakeholder Impact: Reviews help assess whether regulations have achieved their intended goals and consider public feedback. Eg: SEBI may review listing regulations based on feedback from companies and investors to enhance market transparency.

    Who can ensure uniform regulatory standards in India?

    • Parliament through Enactment of a Common Law: Parliament can introduce a standardised law (similar to the U.S. Administrative Procedure Act) to ensure consistent regulatory practices like impact assessments, public consultations, and periodic reviews across all regulators. Eg: A central Regulation-Making Procedure Act could mandate that all financial regulators follow uniform protocols.
    • Government Agencies Issuing Common Guidelines: The Central Government or NITI Aayog can issue model guidelines or frameworks to harmonise regulation-making procedures among regulators. Eg: Like the UK and Canada, India can adopt unified regulatory guidelines to promote transparency and accountability across SEBI, RBI, IFSCA, etc.

    Way forward: 

    • Enact a Unified Regulatory Procedure Law: Parliament should legislate a comprehensive framework for regulation-making that mandates impact analysis, public consultation, and periodic review across all regulators to ensure transparency and consistency.
    • Strengthen Institutional Capacity and Oversight: Build the capacity of regulatory bodies through training, digital tools, and staffing, and set up an independent oversight mechanism to monitor compliance with procedural norms and ensure accountability.

    Mains PYQ:

    [UPSC 2018] “Citizens’ Charter is an ideal instrument of organizational transparency and accountability, but it has its own limitations. Identify the limitations and suggest measures for greater effectiveness or the Citizens Charter.”

    Linkage: The theme of “consultative regulation-making that should go further” as discussed in “Crafting India’s Regulatory Future”. In the article primarily discusses financial regulators and the PYQ addresses the Citizens’ Charter, both embody the fundamental principle of existing governance mechanisms needing to evolve and be strengthened to achieve their stated objectives of transparency, accountability, and more effective public engagement, moving beyond a “nascent stage” or “welcome start” to truly “go further.”