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Subject: Economics

  • Architect of Indian Economic Reforms passes way

    Why in the News?

    People around the world paid tribute to Dr. Manmohan Singh, known for opening up India’s economy and making it a global player, who passed away at the age of 92.

    How did Manmohan Singh’s reforms transform India’s economic landscape?

    • 1991 Economic Liberalization (LPG):  He abolished the “License Raj,” which required businesses to seek government approvals for setting up industries.
      • Example: The IT sector flourished, with companies like Infosys and Wipro gaining international prominence.
    • Tax Reforms and Currency Devaluation: Singh’s government implemented substantial tax cuts and devalued the Indian rupee to enhance competitiveness.
      • Example: Corporate tax was reduced from 50% (pre-1991) to around 35% by the mid-1990s, boosting business sentiment.
    • Welfare Schemes: Alongside economic liberalisation, Singh’s administration introduced welfare initiatives aimed at sharing the benefits of growth with the rural poor, thereby addressing socio-economic disparities.
      • Introduced schemes like MGNREGA (2005) and expanded rural credit, improving employment and poverty alleviation.
      • Poverty rates dropped from 37.2% (2004-05) to 21.9% (2011-12), and India’s middle class expanded significantly due to higher income levels.
    • Economy growth: As Finance Minister, in 1991 economic reforms addressed the balance-of-payments crisis by reducing the fiscal deficit from 8.4% of GDP (1991) to 5.7% (1993) and reviving GDP growth from 1.1% (1991-92) to 5.3% (1992-93) through measures such as dismantling industrial licensing, devaluing the rupee, and encouraging foreign investment.

    How did he left a lasting imprint on external relations?

    • US-India Civil Nuclear Deal (2008): He played a pivotal role in finalising the Civil Nuclear Agreement, which ended India’s nuclear isolation and strengthened strategic ties with the United States.
      • It also marked a shift in global recognition of India as a responsible nuclear power.
    • Strengthening India’s Strategic Partnerships: Deepened ties with major global powers, including the US, EU, Japan, and Russia, enhancing India’s diplomatic and economic engagement globally.
    • Championing India’s Role in Global Governance: Advocated for reforms in international institutions like the UN, IMF, and World Bank to reflect the rising stature of emerging economies, particularly India.
      • His leadership elevated India’s voice in global forums like G20 and BRICS.
    • Focus on Regional and Economic Integration: Fostered closer economic and diplomatic ties with ASEAN, SAARC nations, and other Asian neighbours, reinforcing India’s position in regional trade and security frameworks.
      • His outreach contributed to India’s Act East Policy and improved relations with key partners in the Indo-Pacific region.

    Conclusion: The Indian government should embrace Dr. Manmohan Singh’s legacy by prioritizing bold economic reforms, fostering global partnerships, and championing inclusive growth. Emphasizing strategic investments in infrastructure, skilling, and technology while deepening ties with regional and global partners can sustain long-term growth, reduce disparities, and solidify India’s leadership in global governance.

    Mains PYQ:

    Q Has the Indian governmental system responded adequately to the demands of Liberalization, Privatization and Globalization started in 1991? What can the government do to be responsive to this important change? (UPSC IAS/2016)

  • Matsya Seva Kendras

    Why in the News?

    India’s fisheries sector, contributing to the livelihoods of over 3 crore fishers and producing a record 175 lakh tons of fish in 2022-23, is being strengthened through initiatives like Matsya Seva Kendras.

    About Matsya Seva Kendra (MSK)

    • MSKs are one-stop centers established under the Pradhan Mantri Matsya Sampada Yojana (PMMSY) to support fishers and fish farmers.
    • They provide a wide range of technical, advisory, and capacity-building services aimed at modernizing the fisheries sector and ensuring sustainable practices.
    • Role of MSKs:
      • Offer water, soil, and microbial analysis to address disease management and improve aquaculture productivity.
      • Conduct capacity-building programs for fishers, focusing on sustainable practices and advanced aquaculture techniques.
      • Empower women and weaker sections with 60% financial assistance for setting up MSKs.
      • Mobilize start-ups, cooperatives, and fish farmer producer organizations to share best practices.
      • Promote regenerative and conservation practices to tackle challenges posed by climate change.

    About Pradhan Mantri Matsya Samapada Yojana (PMMSY):

    • The scheme aims to bring about a Blue Revolution through sustainable and responsible development of India’s fisheries sector.
    • It was launched as part of the ‘Atma Nirbhar Bharat’ package with an investment of ₹20,050 crore, the highest-ever allocation for the fisheries sector.
    • It is implemented across all States and Union Territories from FY 2020-21 to FY 2024-25.
    • It provides insurance coverage, financial assistance, and Kisan Credit Card (KCC) facilities to fishers.
    • It is implemented as an umbrella scheme with two components:
      • Central Sector Scheme: Entirely funded by the Central Government.
      • Centrally Sponsored Scheme: Cost shared between the Centre and States/UTs.

    How Do Sagar Mitras Support Fishers?

    • Sagar Mitras act as a vital link between the government and sea-borne fishers, facilitating access to information and resources in coastal regions.
    • Role of Sagar Mitras:
      • Collect data on marine catch, price trends, and market requirements.
      • Provide updates on local regulations, weather conditions, and potential fishing zones.
      • Educate fishers on hygienic fish handling, sustainable fishing techniques, and compliance with regulatory measures.
      • Act as a key contact during emergencies, offering information on natural calamities and safety protocols.

    PYQ:

    [2018] Defining the Blue Revolution, explain the problems and strategies of fisheries in India. 

  • What is Automated & Intelligent Machine-aided Construction (AIMC) system?

    Why in the News?

    • The Ministry of Road Transport & Highways (MoRTH) is moving toward large-scale use of Automated & Intelligent Machine-aided Construction (AIMC) for National Highway projects.
      • AIMC will provide real-time data at each stage of road construction, which will be sent directly to stakeholders, including MoRTH.

    About Automated & Intelligent Machine-aided Construction (AIMC) System

    Details
    What is it?
    • A technology-driven approach for road and infrastructure projects, employing advanced machinery (GPS, sensors, real-time data tools) to automate and monitor construction tasks.
    • Integrates machine automation, real-time data reporting, and precision engineering to enhance quality and speed of highway construction.
    • In India, explored by the Ministry of Road Transport & Highways (MoRTH) to reduce project delays and ensure consistent construction quality.
    Features of the System
    • GPS-Aided Equipment: Motor graders, intelligent compactors, and stringless pavers use GPS/digital designs for precise alignment and compaction.
    • Automated Surveys: Drones or sensor-fitted machinery capture topographical data, enabling continuous verification of design parameters.
    • Real-Time Documentation: Every stage (embankment, subgrade, sub-base, paving) is monitored and instantly shared with stakeholders.
    • Integrated Software Platforms: Centralized software creates a digital twin of the site for analytics and alerts.
    • Adaptive Workflows: Machines can operate 24/7, guided by digital models and real-time data.
    • Precision & Safety Controls: AI-driven predictive maintenance and automated tasks reduce worker risk.
    Significance of the System
    • Faster Project Completion: Real-time monitoring cuts down manual checks and paperwork, expediting construction.
    • Improved Quality & Precision: Sensor-based feedback loops align construction closely with design specifications.
    • Real-Time Data Sharing: Construction progress and quality metrics are instantly communicated, enabling immediate corrective actions.
    • Reduced Human Error: Automated machinery limits inconsistencies from manual oversight.
    • Better Accountability: Detailed digital records promote transparency and performance tracking.
    • Cost-Efficiency: Minimizes delays and rework, lowering overall project expenses.

  • Looking at 2025, The Economy: Some positives, some concerns

    Why in the News?

    The Finance Minister describes the slowdown in Q2 growth as a “temporary blip,” while the RBI has revised its GDP growth forecast for 2024-25 downward, from 7.2% to 6.6%.

    Why RBI has revised its GDP growth forecast for 2024-2025 downward, from 7.2% to 6.6%?

    • Economic Slowdown: The RBI’s downgrade reflects concerns over a cyclical downturn, with GDP growth in Q2 FY25 at 5.4%, indicating fundamental challenges hindering growth prospects.
      • Fundamental challenges: Declining corporate investments, sliding consumption growth, and “softness” in urban demand have weakened the investment climate, prompting a downward revision in growth expectations.
    • Inflationary Pressures: Persistent inflation near double digits complicates monetary policy, forcing the RBI to consider prolonged high interest rates, which could further suppress growth and investments.

    What are the expected growth rates for major economies in 2025?

    • India: Projected to achieve a growth rate of 6.5% over the next five years, maintaining its status as the fastest-growing major economy globally, despite a recent dip in economic output in 2024.
    • China: Growth is expected to stabilize around 4-5%, lower than its historical rates due to structural challenges like demographic shifts and a cooling property sector.
    • United States: Growth is projected at 1.5-2%, as the Federal Reserve maintains a tight monetary policy to counter inflation.
    • Eurozone: Growth is forecasted at around 1%, reflecting a sluggish recovery from the energy crisis and geopolitical uncertainties.
    • Japan: Expected growth rate of 1-1.5%, supported by fiscal stimulus but constrained by aging demographics.
    • Emerging Markets (excluding China and India): Growth is expected to range from 3-4%, depending on commodity prices and fiscal discipline.

    How will inflation and monetary policy evolve?

    • Inflation Persistence: Inflation in India remains at the upper end of the permissible range, with food prices nearing double digits. This persistent inflation strengthens the argument for maintaining high interest rates, complicating the Reserve Bank of India’s (RBI) monetary policy decisions as they balance growth with inflation control.
    • Monetary Policy Adjustments: The RBI may need to reconsider its previous projections of GDP growth, which could lead to adjustments in interest rates. If inflation continues to be a concern, the RBI might maintain or even increase rates longer than necessary which impacts investment and economic activity.
    • Investment and Economic Recovery: A slowdown in corporate investments and a decline in household financial savings have been observed, which could hinder economic recovery.
      • The RBI’s ability to stimulate growth through monetary policy will depend on addressing these investment challenges and ensuring that fiscal measures effectively support economic activity without exacerbating inflation.

    What are the key risks and uncertainties facing the global economy?

    • Investment Slowdown: A significant challenge is the sluggish performance of corporate investments, exacerbated by high food inflation and muted urban demand. This trend poses risks for growth and job creation.
    • Savings-Investment Gap: A decline in household financial savings down to 5.3% of GDP from 7.3% coupled with rising household debt (5.8% of GDP) presents a risk to economic stability1.
    • Credit Growth Decline: Falling credit growth, particularly in household borrowing for home purchases and limited industrial appetite for new projects, indicates a tightening economic environment.
    • Fiscal Challenges: Increased state expenditures on subsidies may strain fiscal resources, potentially affecting overall economic sustainability and growth prospects.

    What should be done by the government? (Way forward)

    • Balanced Fiscal and Monetary Coordination: Governments should prioritize targeted fiscal measures to stimulate investment and demand while ensuring fiscal discipline, complemented by a flexible monetary policy that carefully balances inflation control with growth stimulation.
    • Boosting Household Savings and Investments: Implement policies to encourage higher household financial savings and incentivize corporate investments through tax reforms, reduced regulatory barriers, and support for credit access in productive sectors.

    Mains PYQ:

    Q The nature of economic growth in India in recent times is often described as jobless growth. Do you agree with this view? Give arguments in favour of your answer. (UPSC IAS/2015)

  • India’s First Bio-Bitumen National Highway Inaugurated

    Why in the News?

    India’s first bio-bitumen-based National Highway stretch was inaugurated on NH-44 in Mansar, Nagpur, Maharashtra by Union Minister Nitin Gadkari.

    About Bio-Bitumen

    • Bio-bitumen is a bio-based binder derived from renewable, sustainable sources such as: Vegetable oils, Crop stubble, Algae, Lignin (a component of wood), Animal manure.
    • It serves as an alternative to traditional bitumen, which is primarily derived from the distillation of crude oil.
    • The production of bio-bitumen reduces dependence on petroleum and is a step toward sustainable road construction and infrastructure development.

    Significance and Features of Bio-Bitumen:

    • Bio-bitumen reduces the carbon footprint associated with the traditional bitumen production process.
    • By using renewable sources such as lignin (a byproduct of wood), it helps mitigate environmental concerns like stubble burning and contributes to lower greenhouse gas emissions, potentially by as much as 70% compared to fossil-based bitumen.
    • India, which heavily imports traditional bitumen, can reduce its import dependency by switching to bio-bitumen made from locally available materials.
    • The use of bio-bitumen stimulates bio-refineries, creating opportunities for revenue generation and providing economic benefits to farmers and the bio-refining industry.

    India’s Bitumen Scenario:

    • India imports around 50% of its total annual bitumen requirements, which amounted to 3.21 million tonnes in FY 2023-24.
    • The country produced 5.24 million tonnes of bitumen in the same period.
    • India’s bitumen consumption has been steadily increasing, averaging 7.7 million tonnes annually over the past five years.
    • In 2023-24, India constructed around 12,300 km of national highways, averaging nearly 34 km per day.

     

  • On Kisan Diwas: Why terms of trade have improved more for farm workers than farmers

    Why in the News?

    Crop prices have lagged behind the rising production costs, while agricultural wages have grown faster than inflation over the past two decades.

    What is ‘Terms of Trade’?

    • Terms of Trade (ToT) refers to the relative prices of goods and services that a country exports compared to the prices of goods and services it imports. In the context of agriculture, it specifically relates to the prices received by farmers for their produce versus the prices they pay for inputs (like seeds, fertilizers, and equipment).
    • A favourable ToT means that farmers are receiving higher prices for their products relative to their costs, which enhances their profitability.

    What factors have contributed to the improved terms of trade for farm workers compared to farmers?

    • Wage Growth: Agricultural labourers have experienced significant increases in wages, with their Index of Prices Received (IPR) rising more than threefold from 49.1 to 151.4 between 2004-05 and 2013-14, while their Index of Prices Paid (IPP) increased only modestly from 76.4 to 129.3 during the same period. This resulted in a substantial improvement in their ToT from 64.2% to 117.1%.
    • Stagnation of Farmer Incomes: In contrast, farmers’ IPR rose by only 56.3% from 2013-14 to 2022-23, while their IPP increased by 58.4%. This led to a decline in their ToT from 98.6% to 97.2%, indicating that farmers are facing a cost squeeze as input prices rise faster than the prices they receive for their produce.
    • Economic Diversification: The expansion of employment opportunities outside agriculture has allowed agricultural labourers to seek better-paying jobs in sectors like construction and services, increasing their bargaining power and wage rates.

    How do government policies impact the economic conditions (of farmers versus farm workers)?

    • Employment Schemes: Government initiatives such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) have provided rural labourers with guaranteed employment, improving their income stability and negotiating power against employers.
    • Income Support Programs: Various states have implemented income support schemes targeting women, which have further tightened the labour market and increased wage demands among agricultural workers. For example, Mukhya Mantri Mahila Kisan Sashaktikaran Yojana (MMKSY).
    • Subsidies and Minimum Support Prices: While subsidies on inputs like fertilizers and electricity have provided some relief to farmers, they have not sufficiently offset the rising costs or improved farmers’ ToT significantly, leading to ongoing economic distress among this group.

    What are the broader implications of these changes for the agricultural sector and rural economy?

    • Shift in Economic Power: The improved ToT for agricultural labourers relative to farmers reflects a shift in economic power dynamics within rural areas, potentially leading to greater social mobility for labourers but also highlighting the vulnerabilities faced by farmers.
    • Increased Demand for Labor: As agricultural labourers gain better wages and conditions, there may be a reduction in available labour for farming activities, leading to challenges for farmers who may struggle to find enough workers willing to accept lower wages or demand better working conditions.
    • Social Tensions: The disparities between the economic conditions of farmers and agricultural labourers can lead to social tensions, especially as farmers express dissatisfaction over stagnant incomes while labourers experience wage growth. This situation may exacerbate calls for policy reforms aimed at addressing these inequities.

    Way forward: 

    • Enhance Farmer Profitability: Introduce policies to ensure fair pricing for crops, reduce input costs through targeted subsidies, and promote crop diversification and value addition to improve farmers’ income and Terms of Trade (ToT).
    • Strengthen Rural Employment: Expand employment opportunities in rural non-farm sectors and align government schemes like MGNREGA with skill development programs to sustain wage growth for agricultural labourers while addressing labour shortages in farming.

    Mains PYQ:

    Q What are the main constraints in the transport and marketing of agricultural produce in India? (UPSC IAS/2020)

  • A Study of Budgets of 2024-25 (Fiscal Reforms by States) Report released by RBI

    Why in the News?

    • According to the RBI report on state finances, India’s fiscal deficit has increased from 2.8% of GDP in FY22 to a projected 3.2% in FY24, signaling that fiscal consolidation is being side-lined in favor of increasing expenditure.
      • Capital expenditure (capex) has risen from 2.2% of GDP in FY23 to a budgeted 3.2% in FY24, indicating increased investment in assets for future growth.

    Fiscal position of the States as per the Report

    • Fiscal Deficit:
      • The Gross Fiscal Deficit (GFD) of states is projected to rise from 2.7% of GDP in FY2022-23 to 2.9% of GDP in FY2023-24.
      • This rise indicates that fiscal consolidation has been put on hold, with states continuing to spend more than their revenues.
      • Many states have budgeted for fiscal deficits above the 3% of GSDP mark, including Andhra Pradesh, Himachal Pradesh, Madhya Pradesh, and West Bengal, among others.
    • Revenue Expenditure:
      • Revenue Expenditure is expected to increase to 14.6% of GDP in FY2025, up from 13.5% in FY2024, indicating a rise in the current expenditure of states.
    • Capital Expenditure (Capex):
      • States have ramped up their capital expenditure (spending on creating assets), which has increased from 2.2% of GDP in FY2023 to 3.2% of GDP in FY2024.
      • This increase is in line with the government’s focus on infrastructure and long-term growth.
    • State Revenue:
      • State revenues are projected to increase from 13.3% of GDP in FY2024 to 14.3% in FY2025, driven by improved tax collections.
      • There has been a marked improvement in own tax revenue buoyancy compared to the pre-Covid period.
    • Debt-to-GDP Ratio:
      • The debt-to-GDP ratio for states has increased slightly to 28.8% in FY2024, from 28.5% in FY2023.
      • States with high fiscal deficits tend to have debt-to-GDP ratios above the national average, which suggests they have been sustaining deficits for a longer time.
    • Borrowing Trends:
      • States have shifted significantly towards market borrowings.
      • The share of market borrowings in financing the fiscal deficit has increased from 17% in 2005-06 to 79% in FY2024-25.
    • Recommendations:
      • The report suggests prudent management of subsidies, rationalization of centrally sponsored schemes, debt consolidation, and the adoption of climate and outcome budgeting to improve state fiscal health.

    PYQ:

    [2018] Consider the following statements:

    1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
    2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
    3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.

    Which of the statements given above is/are correct?

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

  • Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA)

    Why in the News?

    Since its launch, PM-AASHA has significantly benefitted farmers, contributing to the procurement of 195.39 lakh metric tonnes (LMT) of agricultural commodities, valued at ₹1,07,433.73 crore, from over 99 lakh farmers.

    Procurement Details:

    • In the Rabi 2023-24 season, 6.41 LMT of pulses, valued at ₹4,820 crore, were procured from 2.75 lakh farmers. This included:
      • 2.49 LMT of Masoor
      • 43,000 metric tonnes of Chana
      • LMT of Moong
    • In addition, 12.19 LMT of oilseeds, valued at ₹6,900 crore, were procured from 5.29 lakh farmers.
    • In the ongoing Kharif season, the government has procured 5.62 LMT of Soyabean, valued at ₹2,700 crore, benefiting 2.42 lakh farmers.

    About the PM-AASHA Scheme

    Details Launched in 2018, PM-AASHA is an umbrella scheme encompassing various components to ensure farmers receive fair prices for their produce.
    Aims and Objectives
    • Ensuring fair prices for farmers by providing price support when market prices fall below the Minimum Support Price (MSP).
    • Stabilize the prices of essential commodities, benefiting both farmers and consumers.
    • Addressing price fluctuations and ensuring sustainable agricultural practices for crops like pulses, oilseeds, and copra.
    Structural Mandate and Implementation
    • Type: Central Sector Scheme (Fully funded by the Centre).
    • Nodal Ministry: Ministry of Agriculture & Farmers Welfare.
    • Fund Allocation: Rs. 35,000 crore during the 15th Finance Commission Cycle (up to 2025-26).
    • Central Nodal Agencies (CNA):
      • Guarantees to lender banks for extending cash credit facilities to agencies like NAFED (National Agricultural Co-operative Marketing Federation of India Limited) and NCCF (National Co-operative Consumer’s Federation of India Limited) for MSP procurement.
      • Department of Consumer Affairs (DoCA) will procure pulses at market price from pre-registered farmers on eSamridhi Portal of NAFED and eSamyukti Portal of NCCF when prices exceed MSP.

    Key Components:

    • Price Support Scheme (PSS):
    • The PSS is the core component of PM-AASHA, operating through state governments to procure notified commodities at the Minimum Support Price (MSP) levels.
    • It provides financial relief to farmers when market prices fall below MSP, offering remunerative prices and promoting investment in agriculture.
    • The government fixes the MSP for 24 crops at 1.5 times the Cost of Production (CoP) to ensure a fair income for farmers.
    • Price Deficiency Payment Scheme (PDPS):
    • Under PDPS, farmers are provided direct payments if the market prices of oilseeds fall below the MSP.
    • It helps bridge the gap between MSP and market prices, ensuring that farmers still get a fair return.
    • Market Intervention Scheme (MIS):
    • The MIS provides financial assistance to states for price stabilization of perishable agricultural commodities like Tomato, Onion, and Potato, which are not covered under MSP.
    • This scheme helps manage price volatility and benefits both farmers and consumers by stabilizing prices.

     

    PYQ:

    [2020] In India, the term “Public Key Infrastructure” is used in the context of:

    (a) Digital security infrastructure

    (b) Food security infrastructure

    (c) Health care and education infrastructure

    (d) Telecommunication and transportation infrastructure

  • [pib] Comprehensive Telecom Development Plan

    Why in the News?

    The Comprehensive Telecom Development Plan for North Eastern Region (NER) funded from Digital Bharat Nidhi (DBN) aims to provide mobile coverage to uncovered villages and National Highways.

    About the Comprehensive Telecom Development Plan (CTDP):

    Overview
    • CTDP aims to enhance telecommunications infrastructure in India’s North Eastern Region (NER) by improving mobile and broadband access.
    • The plan is funded by the Digital Bharat Nidhi (DBN) programme.
    Digital Bharat Nidhi (DBN):

    • Established under the Telecommunications Act, 2023.
    • Replaces the Universal Service Obligation Fund (USOF).
    • USOF was created to provide telecom services in remote and rural areas at affordable prices.
    • Funded by a 5% Universal Service Levy on the Adjusted Gross Revenue (AGR) of telecom operators.
    • Aimed to expand telecom networks in low-profit remote and rural areas.
    • Statutory Status: Granted in December 2003 through amendments to the Indian Telegraph Act (now superseded by the Telecom Act, 2023).
    Salient Features
    • Mobile Coverage Expansion: Extend mobile coverage to previously uncovered villages and National Highways in NER.
    • Enhanced Connectivity: Installation of 2,619 mobile towers, covering 3,223 villages and 286 highway locations.
    • 4G Saturation: Providing 4G connectivity to remote villages.
    • Support for Socio-Economic Development: Empower citizens through ICTs for development.
    • Digital Inclusion: Help bridge the digital divide in NER.
    Structural Mandate and Implementation
    • Funding: Primarily funded by the Digital Bharat Nidhi (DBN) programme.
    • Implementation: Coordinated through DBN-funded schemes focusing on mobile towers, 4G coverage, and broadband development.
    • Agencies Involved:
      • Ministry of Communication: Oversees implementation, ensures spectrum and policy approvals.
      • DBN: Provides funding and operational support.
      • Telecom Service Providers: Deploy infrastructure like towers and 4G networks.
      • State Governments of NER: Facilitate local implementation.
      • Project Management Agencies: Involved in setting up towers and maintenance.

     

    PYQ:

    [2018] Which of the following is/are the aims/aims of the “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 schools, public places and major tourist centres.

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 3 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

  • Why the government could discontinue the sovereign gold scheme?

    Why in the News?

    Sovereign gold bonds provide a safer and more cost-effective alternative to holding physical gold, as they reduce risks and storage expenses. However, the central government is considering discontinuing the SGB scheme.

    What is the Sovereign Gold Bond scheme?

    About GOI launched it on October 30, 2015.
    Structural Mandate Nodal Agency: Ministry of Finance;
    Issued by RBI on behalf of the GOI.
    Aims and Objectives To reduce dependence on gold imports and shift savings from physical gold to paper form.
    Targeted Beneficiaries Residents of India, including individuals, HUFs, trusts, universities, and charitable institutions.
    Funding Mechanism
    • The Sovereign Gold Bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government of India. This ensures a sovereign guarantee for both the principal and interest payments.
    • The bonds are made available for subscription in tranches. The RBI notifies the terms and conditions for each tranche, including the subscription dates and issue price, which is based on the average closing price of gold of 999 purity published by the India Bullion and Jewellers Association (IBJA).
    • SGBs are sold through various channels, including scheduled commercial banks (excluding small finance banks), designated post offices, Stock Holding Corporation of India Limited (SHCIL), and recognized stock exchanges like NSE and BSE.
    Features
    • Sovereign gold Bonds are issued in 1-gram denominations with an 8-year tenure and early exit from the 5th year.
    • The minimum investment is 1 gram, a maximum 4 kg for individuals, and 20 kg for trusts.
    • Benefits include security, interest, and loan collateral.

    What are the concerns regarding sovereign gold bonds?

    • High Cost of Financing: The government perceives the cost of financing its fiscal deficit through SGBs as disproportionately high compared to the benefits provided to investors. This perception has led to a significant reduction in the issuance of SGBs, dropping from ten tranches annually to just two.
    • Limited Issuance in Current Financial Year: In the financial year 2024-25, no new sovereign gold bonds have been issued so far, and net borrowing through these bonds has been significantly reduced from previous estimates.
    • Market Competition from Physical Gold: The recent reduction in customs duty on gold from 15% to 6% has led to a surge in demand for physical gold. Investors may prefer holding physical gold over waiting for returns from debt securities like SGBs, which require maturity periods before realizing gains.

    What are the challenges due to the import of Gold?

    • Impact on Trade Deficit: Gold imports are a major contributor to India’s trade deficit, with a record $14.8 billion spent in November 2024, which weakened the rupee. Between 2016 and 2020, gold imports made up 86% of the country’s gold supply, leading to significant foreign exchange outflows and economic instability.
    • Encouragement of Smuggling: High import duties on gold have driven a rise in smuggling, with 65% to 75% of smuggled gold entering India through air routes. This illegal trade undermines government revenue and complicates market regulation.

    Way forward: 

    • Increase Liquidity and Accessibility: Similar to gold-backed ETFs in the U.S. and Gold Bullion Securities in Australia, India can enhance the liquidity of SGBs by allowing them to be traded on stock exchanges, providing easy access and better market engagement for investors.
    • Encourage Regular Investments: Drawing inspiration from Germany’s gold savings plans, India can introduce flexible investment options such as monthly or quarterly contributions, enabling dollar-cost averaging and attracting retail investors over time.

    Mains PYQ:

    Q Craze for gold in Indian has led to surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of Gold Monetization scheme. (UPSC IAS/2015)