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Subject: Economics

  • [19th February 2026] The Hindu OpED: India’s moment to restoring balance to copyright

    PYQ Relevance

    [UPSC 2024] What is the present world scenario of intellectual property rights with respect to life materials? Although India is second in the world to file patents, still only a few have been commercialised. Explain the reasons behind this less commercialization.

    Linkage: This question links with the AI-copyright debate as both concern intellectual property rights, innovation, and the balance between protection and public use of knowledge. It helps analyse how rigid IPR frameworks can limit technological development and commercialization, similar to challenges faced in AI data and copyright regulation.

    Mentor’s Comment

    The editorial discusses India’s copyright challenge in the age of Artificial Intelligence (AI). It explains that old copyright laws, designed for the print era, are conflicting with AI, data mining, and digital access to knowledge. The article examines historical trends, policy gaps, global comparisons, and governance choices to understand how India can balance creator rights with innovation, accessibility, and public interest.

    Why in the News?

    The rise of Artificial Intelligence has triggered a major debate on copyright laws because AI systems require large-scale data for training, while existing copyright rules remain restrictive and outdated. India is now at a policy crossroads where balancing creator rights with innovation and public access has become urgent, making the issue highly relevant for governance and digital regulation today.

    Introduction

    Copyright law historically aimed to reward creators while ensuring eventual public access to knowledge. Over time, however, protections expanded in duration and scope, producing a system described as “copyright maximalism.” The emergence of AI disrupts this balance because machine learning requires extensive data scraping and analysis, challenging traditional definitions of copying, authorship, and creative ownership.

    How has copyright law evolved from incentive to over-expansion?

    1. Historical Purpose: Ensures limited monopoly rights for creators to incentivize publishing and dissemination of knowledge; early laws allowed controlled duplication mainly for printing and libraries.
    2. Expansion of Duration: Extends protection for the author’s lifetime plus long posthumous periods, reducing entry into the public domain and restricting reuse.
    3. Shift Toward Maximalism: Expands copyright beyond publication to automatic ownership of every created work, including minor or functional outputs.
    4. Outcome: Restricts free circulation of knowledge despite original intent of encouraging creativity.

    Why does AI challenge traditional copyright assumptions?

    1. Data Dependency: Requires large volumes of digital text, images, and media for training; machine learning models process patterns rather than reproduce works directly.
    2. Functional Use vs Creative Use: Treats data as statistical input rather than expressive content, questioning whether it constitutes infringement.
    3. Scale Problem: AI systems must crawl massive portions of the internet, making individual licensing impractical.
    4. Governance Gap: Creates uncertainty for developers, researchers, and innovation ecosystems in absence of clear legal exemptions.

    What does global evidence reveal about text and data mining policies?

    1. Comparative Study Findings: Survey across multiple countries showed most jurisdictions lack clear exceptions permitting large-scale AI data mining.
    2. Legal Restriction: Countries such as the Philippines and Sri Lanka largely prohibit unrestricted copying for analysis.
    3. Progressive Models: Japan and Singapore allow broader text and data mining exceptions, enabling technological experimentation.
    4. Policy Implication: Flexible copyright frameworks correlate with stronger AI innovation environments.

    Why is India’s current approach seen as a regulatory risk?

    1. Absence of Explicit Exception: Indian copyright law does not clearly permit AI-oriented data mining.
    2. Innovation Uncertainty: Creates legal ambiguity for startups, research labs, and academic institutions.
    3. Comparative Disadvantage: Countries providing explicit exemptions attract advanced AI research and investment.
    4. Governance Concern: Raises institutional accountability questions on balancing creator rights and technological advancement.

    How does copyright intersect with accessibility and public interest?

    1. Access to Knowledge: Restrictive copyright historically limited access for visually impaired persons until exceptions were introduced via the Marrakesh framework.
    2. Policy Lesson: Demonstrates that flexible copyright exceptions can advance inclusion without undermining creativity.
    3. Public Interest Principle: Supports constitutional goals of equality and knowledge dissemination.
    4. Institutional Responsibility: Requires regulators to ensure copyright does not hinder socially beneficial technological use.

    Should copyright protect jobs or creativity in the AI era?

    1. Technological Transition: Historical innovations eliminated certain roles but created new industries and employment forms.
    2. Policy Perspective: Copyright aims to encourage creativity, not permanently preserve existing occupations.
    3. Institutional Role: Governments may support displaced workers through taxation and social policy instead of restricting innovation.
    4. Outcome: Supports balanced governance between innovation and welfare measures.

    What should copyright law protect in an AI-driven future?

    1. Human Contribution: Protects genuine creative expression rather than data patterns or computational processes.
    2. Openness Principle: Encourages collaborative innovation and derivative creativity.
    3. Regulatory Reform: Requires modern exceptions for AI training, research use, and data mining.
    4. Strategic Objective: Aligns copyright with digital economy goals while maintaining creator incentives.

    Conclusion

    India’s copyright framework stands at a policy crossroads where rigid protection models confront AI-led innovation. A balanced approach that safeguards genuine creativity while enabling data-driven technological development is necessary. Clear legal exceptions, institutional foresight, and alignment with constitutional values of access and innovation can help restore equilibrium between creators, technology, and public interest.

  • India’s First Private Helicopter Assembly Line at Vemagal

    Why in the News?

    India’s first private sector helicopter Final Assembly Line was inaugurated at Vemagal, Kolar district, Karnataka to manufacture Airbus H125 helicopters through a partnership between Tata Advanced Systems and Airbus.

    Key Entities Involved

    • Tata Advanced Systems Limited
    • Airbus
    • France
    • Hindustan Aeronautics Limited

    About the Facility

    • Location: Vemagal, Kolar district, Karnataka
    • Type: Private sector Final Assembly Line
    • Product: Airbus H125 single engine helicopter
    • Initial annual capacity: 10 helicopters
    • First delivery expected: Early 2027
    • Will serve Indian and South Asian markets

    This becomes the fourth global production site for the H125 after France, USA and Brazil.

    About H125 Helicopter

    • One of the world’s best selling single engine helicopters
    • Over 4,300 units flying globally
    • Certified under European Union Aviation Safety Agency standards
    • Designed for high altitude and rugged terrain operations

    Military Variant

    • H125M version proposed
    • Seen as a successor to Cheetah and Chetak helicopters
    • Suitable for:
      • Tactical reconnaissance
      • High altitude logistics
      • Search and rescue
      • Medical evacuation
    [2024] Consider the following aircraft: 

    1. Rafael 

    2. MiG-29 

    3. Tejas MK-1 

    How many of the above are considered fifth generation fighter aircraft? 

    (a) Only one (b) Only two (c) All three (d) None

  • The cost of controls on the fertiliser industry

    Why in the News?

    The Uttar Pradesh government has prohibited urea manufacturers and suppliers from selling “gair-anudaanit” (non-subsidised) fertilisers in the state. The order affects cooperative, public, and private firms.

    The action follows allegations of “tagging,” wherein farmers were allegedly compelled to purchase non-subsidised products along with subsidised fertilisers. However, the non-subsidised segment constitutes only 0.4 million tonnes annually, compared to India’s 67 million tonnes total fertiliser market, making the regulatory response appear disproportionate in scale.

    What is the Structure of the Fertiliser Industry in India

    1. High Regulatory Intensity: One of the most regulated industries in India.
    2. Core Products: Urea, Di-Ammonium Phosphate (DAP), Muriate of Potash (MOP), NPK complexes.
    3. Statutory Framework: Governed under Fertiliser Control Order (FCO), 1985.
    4. Administered Pricing: Urea MRP fixed at same level since November 2012.
    5. Subsidy Regime: P&K fertilisers operate under Nutrient-Based Subsidy (NBS) with capped retail pricing.
    6. Decontrol Paradox: Though labelled “decontrolled,” effective price and profit oversight continues through subsidy-linked conditions.

    How has fertiliser consumption and import dependence evolved?

    1. Rising Consumption: Total consumption increased significantly over recent years, reaching 67 million tonnes (2024-25).
    2. Urea Dominance: Urea consumption significantly exceeds P&K usage due to lower administered prices.
    3. Import Dependence: High import reliance for phosphatic and potassic fertilisers increases vulnerability to global price volatility.
    4. Price Differential: DAP priced at ₹27/kg and MOP at ₹19.40/kg under subsidy regime; non-subsidised variants priced substantially higher.
    5. Nutrient Imbalance: Excessive nitrogen usage distorts soil health due to price asymmetry.

    How does the fertiliser price control regime operate under the Fertiliser Control Order (FCO), 1985?

    1. Statutory Control: Operates under the Fertiliser Control Order, 1985 issued under the Essential Commodities Act framework.
    2. Administered Pricing: Fixes Maximum Retail Price (MRP) of urea at ₹266.5 per 45 kg bag.
    3. Subsidy Mechanism: Compensates manufacturers for cost-production gap through Direct Benefit Transfer (DBT) to companies.
    4. Input Regulation: Controls MRP of urea; phosphatic and potassic (P&K) fertilisers operate under Nutrient-Based Subsidy (NBS) scheme.
    5. Movement Control: Allocates fertiliser supply across states based on assessed demand.

    Is the fertiliser sector truly decontrolled, or does effective government control persist?

    The fertilizer sector operates under the Fertiliser Control Order, 1985 issued under the Essential Commodities Act framework.

    1. Profit Oversight: Department of Fertilisers can recover subsidy if “unreasonable profit” is detected.
    2. Conditional Decontrol: Companies cannot freely price products without risking subsidy clawback.
    3. Operational Dependence: Business viability tied to state reimbursement mechanisms.

    How does state control extend beyond pricing into movement and distribution?

    1. Agreed Supply Plan: Department of Fertilisers prepares state-wise, season-wise, month-wise allocation.
    2. Railway Rake Planning: Dispatches governed by official rail and road movement schedules.
    3. District Allocation: Agriculture officers allocate fertiliser dealer-wise upon arrival.
    4. FOR Basis Delivery: Companies must supply on freight-on-road basis.
    5. Limited Commercial Autonomy: Private firms cannot independently determine timing, quantity, or geography of sales.

    Does price control ensure equity or generate inefficiency in fertiliser distribution?

    1. Affordability Objective: Ensures low input costs for farmers, supporting food security.
    2. Fiscal Burden: Expands fertiliser subsidy bill significantly; recurrent pressure on Union Budget.
    3. Inefficient Usage: Encourages overuse of subsidised urea due to artificially low prices.
    4. Leakages and Diversion: Facilitates diversion for industrial use or cross-border smuggling.
    5. Soil Degradation: Skews NPK ratio, affecting long-term soil productivity.

    What economic role do non-subsidised fertilisers play in the industry’s survival model?

    1. Cross-Subsidisation Mechanism: Higher margins from speciality nutrients offset thin margins from urea.
    2. Capital Recovery: Supports working capital cycles in a subsidy-dependent system.
    3. Innovation Incentive: Enables R&D in micronutrients and water-soluble fertilisers.
    4. Market Size Contrast: 0.4 million tonnes speciality vs 67 million tonnes total market.
    5. Profitability Cushion: Provides financial flexibility under price-capped regime.

    What governance concerns arise from restrictions on non-subsidised fertiliser sales?

    1. Market Distortion: Restricting non-subsidised fertiliser sales limits firms’ ability to offset losses from controlled urea pricing.
    2. Investment Sentiment: Reduces profitability of a ₹13,000 crore segment, affecting private sector participation.
    3. Regulatory Overreach: State-level intervention in areas traditionally governed by central FCO raises federal coordination concerns.
    4. Cross-subsidisation Constraint: Prevents companies from leveraging higher-margin non-subsidised products.
    5. Policy Uncertainty: Sudden bans create unpredictability in regulatory environment.

    Does price asymmetry distort nutrient usage and environmental sustainability?

    1. Price Signal Distortion: Urea at ₹5.9/kg incentivises excessive nitrogen application.
    2. Nutrient Imbalance: Skews N:P:K ratio in Indian soils.
    3. Soil Health Impact: Degrades soil productivity over time.
    4. High-Value Crop Use: Speciality fertilisers critical for fruits, vegetables, sugarcane.
    5. Environmental Externalities: Overuse contributes to groundwater contamination and emissions.

    What are the governance and federalism implications of the UP ban?

    1. Concurrent Jurisdiction: Fertilisers fall under Entry 33, Concurrent List.
    2. Centre-State Overlap: FCO issued by Centre; implementation often state-driven.
    3. Regulatory Fragmentation: State-specific bans risk policy inconsistency.
    4. Investor Sentiment Impact: Capital-intensive industry requires regulatory predictability.
    5. Unintended Consequence Risk: May enable unorganised low-quality suppliers to fill supply gap.

    Does heavy subsidy dependence raise fiscal sustainability concerns?

    1. Large Subsidy Outlay: Fertiliser subsidy remains a major budgetary commitment.
    2. Fiscal Trade-offs: Crowds out productive expenditure.
    3. Import Dependence: Raw materials such as phosphate rock and potash largely imported.
    4. Global Price Exposure: Vulnerable to external commodity shocks.
    5. Reform Stagnation: Urea decontrol proposals repeatedly deferred.

    Conclusion

    India’s fertiliser sector demonstrates the limits of excessive state control in a market critical to food security. While administered pricing and subsidies ensure affordability, layered controls over pricing, movement, and profitability risk distorting nutrient use, weakening industry viability, and discouraging investment. A calibrated approach that rationalises subsidies, restores balanced price signals, and ensures regulatory predictability is essential to align farmer welfare with long-term agricultural sustainability.

    PYQ Relevance

    [UPSC 2023] What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies.

    Linkage: This question directly links to India’s fertiliser subsidy regime, price controls, and DBT architecture. It also connects to debates on subsidy distortion, fiscal burden, and compliance with the WTO’s Agreement on Agriculture (AoA), especially concerning input subsidies and trade distortion limits.

  • R&D Roadmap for CCUS Launched to Achieve Net Zero by 2070

    Why in the News?

    The R&D Roadmap to Enable India’s Net Zero Targets through Carbon Capture, Utilization and Storage CCUS was launched on 2 December 2025 by the Department of Science and Technology and unveiled by the Principal Scientific Adviser to the Government of India.

    Context

    • India has committed to achieving Net Zero emissions by 2070.
    • Hard to abate sectors such as Power, Cement and Steel require technological solutions beyond renewables.
    • CCUS is identified as a critical pillar for deep decarbonisation.

    What is CCUS?

    Carbon Capture, Utilization and Storage is a technology that:

    1. Captures carbon dioxide emissions from industrial sources.
    2. Utilizes captured CO₂ for industrial purposes such as chemicals or fuels.
    3. Stores CO₂ underground in geological formations to prevent atmospheric release.

    Key Features of the Roadmap

    1. Strategic guidance on thematic R&D priorities.
    2. Focus on moving technologies from lab scale to commercial readiness.
    3. Support for breakthrough next generation carbon management technologies.
    4. Emphasis on regulatory standards, safety norms and skilled manpower.
    5. Promotion of early shared infrastructure and public private partnerships.

    Institutional Framework

    • Prepared by DST based on nearly seven years of CCUS research support.
    • Guided by a High Level Task Force.
    • Establishment of three National Centres of Excellence in CCUS.
    • Linked with ₹1 lakh crore Research Development and Innovation Scheme to promote private sector led industrial decarbonisation.

    Focus Sectors

    • Thermal power plants, Cement industry, Steel sector and Energy intensive manufacturing. 
    • These sectors contribute significantly to India’s greenhouse gas emissions.
    [2023] Consider the following activities: 

    1. Spreading finely ground basalt rock on farmlands extensively. 

    2. Increasing the alkalinity of oceans by adding lime. 

    3. Capturing carbon dioxide released by various industries and pumping it into abandoned subterranean mines in the form of carbonated waters. 

    How many of the above activities are often considered and discussed for carbon capture and sequestration? 

    (a) Only one (b) Only two (c) All three (d) None

  • UPI One World Wallet Extended for Foreign Visitors

    Why in the News?

    The National Payments Corporation of India has extended the UPI One World wallet facility to visitors from over 40 countries attending the India AI Impact Summit 2026 held in New Delhi from 16 to 20 February 2026.

    About UPI One World Wallet

    • A prepaid wallet based on the PPI UPI model designed for inbound international travellers.
    • Launched by: NPCI through authorised Prepaid Payment Instrument issuers.

    Key Features

    1. No Indian bank account or mobile number required: Foreign visitors can make UPI payments without opening an Indian bank account.
    2. Person to Merchant P2M Payments: Payments can be made by scanning UPI QR codes across India.
    3. Multiple Loading Options: Wallet can be loaded using various international payment methods.
    4. Availability Points: Available at New Delhi International Airport and NPCI Pavilion at Bharat Mandapam.
    5. Refund Facility: Unused balance can be transferred back to the original payment source as per forex rules.

    What is PPI?

    Prepaid Payment Instrument: A payment instrument where money is loaded in advance and used for transactions without direct linkage to a bank account for each payment.

    Significance

    • Promotes India’s digital public infrastructure globally
    • Facilitates seamless real time retail payments for foreign tourists
    • Reduces dependence on cash and currency exchange
    • Demonstrates scalability of UPI as a cross border payment solution

    About UPI

    • Unified Payments Interface UPI is a real time payment system developed by NPCI that enables instant fund transfers between bank accounts using mobile platforms. It is currently the world’s largest real time payment ecosystem.
    [2025] Consider the following countries: I. United Arab Emirates 

    II. France 

    III. Germany 

    IV. Singapore 

    V. Bangladesh 

    How many countries amongst the above are there other than India where international merchant payments are accepted under UPI? 

    (a) Only two (b) Only three (c) Only four (d) All the five

  • What are bio-based chemicals and enzymes

    Why in the News?

    The Biotechnology for Economy, Employment and Environment (BioE3) Policy has prioritised bio-based chemicals and enzymes as strategic sectors. Bio-based chemicals and enzymes use renewable biological feedstocks and reduce dependence on fossil-based industrial inputs. The sector is important for India to cut petrochemical imports (e.g., $479.8 million acetic acid in 2023), strengthen energy security, and support climate goal.

    What are Bio-based chemicals and enzymes?

    1. Bio-based chemicals are industrial chemicals produced using biological feedstocks like sugarcane, corn, starch, or biomass residues, often through fermentation or enzymatic processes. 
    2. Examples include organic acids (such as lactic acid), bio-alcohols, solvents, surfactants, and intermediates used in plastics, cosmetics, and pharmaceuticals. 
    3. Enzymes are biological catalysts widely used in detergents, food processing, pharmaceuticals, textiles, pulp and paper, and increasingly in biomanufacturing. 
    4. Enzymes often work at lower temperatures and pressures, reducing energy use and emissions.

    How Do Bio-based Chemicals Align with India’s Energy Security and Industrial Policy Objectives?

    1. Import Substitution: Reduces dependence on petrochemical imports such as acetic acid valued at $479.8 million in 2023.
    2. Feedstock Utilisation: Leverages agricultural residues, sugarcane, and starch base to create industrial value chains.
    3. Manufacturing Expansion: Strengthens domestic production capacity in sustainable chemicals.
    4. Energy Efficiency: Enables lower temperature and pressure processing, reducing industrial energy consumption.
    5. Strategic Autonomy: Diversifies raw material base beyond fossil fuels.

    How Does the BioE3 Policy Institutionalise Bio-manufacturing as a Governance Priority?

    1. Policy Prioritisation: Places bio-based chemicals and enzymes under the Department of Biotechnology’s BioE3 framework.
    2. Economic Integration: Links biotechnology with employment generation and environmental sustainability.
    3. Sectoral Coordination: Aligns industrial biotechnology with manufacturing sector expansion.
    4. Innovation Ecosystem: Encourages microbial strategy development for chemical production.

    Does India Possess Institutional and Market Capacity to Scale Bio-based Production?

    1. Corporate Leadership: Praj Industries and Godrej Industries lead bio-chemical initiatives.
    2. Refinery Innovation: Godavari Biorefineries produces acetyls and intermediates such as acetic anhydride (ethyl acetate).
    3. Enzyme Market Consolidation: Top players account for over 75% market share.
    4. Key Industry Actors: Novozymes India, DuPont, DSM, Advanced Enzyme Technologies, BASF SE, and Ultreze Enzymes Private Limited operate in India.
    5. Fermentation Expertise: Strong pharmaceutical and vaccine manufacturing base supports scaling.

    What Governance and Regulatory Challenges Constrain Sectoral Expansion?

    1. Capital Intensity: Bio-refineries require high initial investment.
    2. Feedstock Volatility: Agricultural raw material supply fluctuates seasonally.
    3. Technology Dependence: Advanced microbial engineering still requires global collaboration.
    4. Regulatory Clearances: Multi-layer approvals delay commercial scaling.
    5. Market Competitiveness: Petrochemical alternatives remain cost-competitive due to legacy infrastructure.

    How Does Global Policy Context Shape India’s Strategic Choices?

    1. EU Bioeconomy Strategy: Integrates bio-based chemicals into circular economy and climate transformation goals.
    2. USDA BioPreferred Program: Mandates federal procurement preference for bio-based products.
    3. Climate Alignment: Links industrial decarbonisation with bio-manufacturing.
    4. Waste Reduction: Encourages conversion of biomass residues into chemicals.
    5. Global Competition: Positions bio-based chemicals as emerging industrial frontier.

    Conclusion

    Bio-based chemicals and enzymes integrate industrial growth with environmental sustainability. India’s agricultural base, fermentation expertise, and BioE3 policy provide structural advantage. Scaling requires regulatory reform, technology deepening, and feedstock security. The sector offers scope for import substitution, green growth, and strategic industrial positioning.

    PYQ Relevance

    [UPSC 2023] Discuss several ways in which microorganisms can help in meeting the current fuel shortage.

    Linkage: This PYQ tests understanding of industrial biotechnology in addressing energy security and reducing fossil fuel dependence under GS 3. Bio-based chemicals and enzymes similarly use microbial processes to enable green manufacturing and reduce petrochemical imports.

  • CBDC Based Public Distribution System Launched in Gujarat

    Why in the News?

    The Union Home Minister launched a Central Bank Digital Currency based Public Distribution System in Gandhinagar, Gujarat. This marks the integration of digital currency into the food security delivery mechanism.

    What is CBDC?

    • Central Bank Digital Currency is a digital form of sovereign currency issued and regulated by a central bank.
    • In India, the digital rupee is issued by the Reserve Bank of India.
    • It is different from cryptocurrency because it is legal tender and backed by the government.

    What is the Public Distribution System?

    • The Public Distribution System is a food security system that distributes subsidised food grains to eligible beneficiaries under the National Food Security framework.
    • Around 80 crore beneficiaries receive free food grains under the scheme.

    Key Features of CBDC Based PDS

    1. Digital transfer and settlement using CBDC.
    2. Reduction of leakages and middlemen.
    3. Transparent and traceable transactions.
    4. Faster and automated grain dispensing via Annapurna machine.
    5. Planned nationwide rollout within 3 to 4 years.

    The Annapurna machine reportedly dispenses 25 kg of food grains in about 35 seconds.

    Governance Linkages

    • Linked to Digital India initiative.
    • Inspired by Direct Benefit Transfer model.
    • Reflects the principle of minimum government maximum governance.
    • Strengthens last mile delivery through technology.

    Related Schemes Mentioned

    • Pradhan Mantri Garib Kalyan Anna Yojana providing 5 kg free food grains per person per month.
    • PM SVANidhi providing working capital loans to street vendors.
    [2024] Consider the following statements in respect of the digital rupee: 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy. 

    2. It appears as a liability on the RBI’s balance sheet. 

    3. It is insured against inflation by its very design. 

    4. It is freely convertible against commercial bank money and cash. 

    Which of the statements given above are correct? 

    (a) 1 and 2 only (b) 1 and 3 only (c) 2 and 4 only (d) 1, 2 and 4

  • India’s Power Generation Capacity Update

    Why in the News?

    India has added 52,537 MW of electricity generation capacity in the current financial year up to January 31, 2026. This is the highest ever annual capacity addition, taking total installed capacity to 5,20,510.95 MW.

    Key Data

    1. Total capacity addition (FY 2025-26 till Jan 31): 52,537 MW
    2. Previous record: 34,054 MW in FY 2024-25
    3. Total installed capacity (Jan 31, 2026): 5,20,510.95 MW
    4. Growth over last FY: More than 11 percent increase

    Breakup of Installed Capacity

    1. Renewable Energy:
      • 2,63,189.33 MW
      • Around 50.5 percent of total capacity
      • Solar: 34,955 MW added this year
      • Wind: 4,613 MW added
    2. Fossil Fuel Based:
      • 2,48,541.62 MW
      • Around 48 percent of total
    3. Nuclear Energy:
      • 8,780 MW
      • Around 1.6 percent

    Important Concepts for Prelims

    • Installed Capacity: Maximum electricity that can be generated under ideal conditions.
    • Renewable Energy Sources: Solar, wind, hydro, biomass etc.
    • Energy Mix: Composition of different energy sources in total generation capacity.

    Significance

    • India’s renewable share has crossed 50 percent of installed capacity.
    • Indicates progress toward climate commitments and energy transition goals.
    • Strengthens energy security and reduces fossil fuel dependence in long term.
    [2025] Consider the following statements about ‘PM Surya Ghar Muft Bijli Yojana’: I. It targets installation of one crore solar rooftop panels in the residential sector. 

    II. The Ministry of New and Renewable Energy aims to impart training on installation, operation, maintenance and repairs of solar rooftop systems at grassroot levels. 

    III. It aims to create more than three lakhs skilled manpower through fresh skilling and up-skilling, under scheme component of capacity building. 

    Which of the statements given above are correct? 

    (a) I and II only (b) I and III only (c) II and III only (d) I, II and III

  • NPS Equity Exposure Increased to 25% by FY27

    Why in the News?

    The Chairperson of the Pension Fund Regulatory and Development Authority announced that the National Pension System (NPS) will raise its equity exposure to 25 percent by FY2027, and that pension funds may begin investing in Alternative Investment Funds (AIFs) by March 2026.

    About the National Pension System

    • Launched in 2004 for government employees and extended to all citizens in 2009
    • Regulated by PFRDA
    • Defined contribution pension scheme
    • Market-linked returns
    • Two types:
      • Tier I: Mandatory retirement account
      • Tier II: Voluntary savings account

    Key Announcements

    • Increase in Equity Exposure

      • Equity cap in the Government Composite Scheme raised from 15 percent to 25 percent
      • Current equity exposure around 19 percent
      • Corporate bond exposure has reduced slightly
      • G Sec share remains largely stable
      • Objective: Improve long term returns while maintaining prudent risk levels.
      • Investment in AIFs: NPS to allow exposure to Alternative Investment Funds (AIFs) by March 2026

    • MARS Committee

      • PFRDA has constituted the Minimum Assured Return Scheme (MARS) committee
      • Exploring a pension product offering a guaranteed minimum return
    [2017] Who among the following can join the National Pension System (NPS)? (a) Resident Indian citizens only 

    (b) Persons of age from 21 to 55 only 

    (c) All State Government employees joining the services after the date of notification by the respective State Governments 

    (d) All Central Government Employees including those of Armed Forces joining the services on or after 1st April, 2004

  • The hidden cost of insurance distribution

    Why in the News?

    India’s life insurance industry paid ₹60,799 crore in commissions in FY2025, yet premium growth stood at only 6.7% while commission payouts increased by 18%. This divergence signals a structural imbalance between distribution costs and value creation. The Life Insurance Corporation (LIC) reduced its commission ratio from 5.45% to 5.17% despite premium growth of 2.8%, whereas private insurers increased commission ratios sharply to 7.21%-8.95%, leading to a 38.8% surge in commission payouts to ₹35,491 crore. Insurance penetration declined from 4% of GDP in FY2020 to 3.7% in FY2024. The issue marks a shift from episodic compliance concerns to a structural distribution faultline affecting financial stability and consumer welfare.

    Public-Private Structure of India’s Insurance Sector

    1. Life Insurance Composition: LIC, the sole public-sector life insurer, contributes 57.07% of total new business premiums (FY2024-25). The sector comprises 27 life insurers, including 26 private companies.
    2. General (Non-Life) Market Distribution: Private insurers hold approximately 64-66% market share, while Public Sector General Insurance Companies (PSGICs) account for 31-32%. The industry includes 34 non-life insurers, 6 public and 28 private (including standalone health and specialised insurers).
    3. Health Segment Significance: Health insurance constitutes 41.42% of gross direct premiums in FY2024-25, emerging as the largest non-life segment. Public sector general insurers’ premiums increased from ₹80,000 crore (2019) to approximately ₹1.06 lakh crore (early 2025).

    What Is the Structural Difference Between Public and Private Insurers?

    1. Channel Composition: LIC derives 95% of business from agency channels, enabling tighter commission control.
      1. Agency channels are individual agents appointed by an insurance company to sell its policies directly to customers.
    2. Commission Ratio Reduction: LIC reduced commission ratio from 5.45% to 5.17% despite 2.8% premium growth.
    3. Alternate Channel Dependence: Private insurers rely heavily on bancassurance, brokers, and marketing firms.
      1. Bancassurance is a distribution model where banks sell insurance products to their existing customers.
    4. Sharp Commission Escalation: Private commission ratios rose from 7.21% to 8.95% (174 basis points increase).
    5. Commission Outgo Surge: Private insurer commission payouts increased 38.8% to ₹35,491 crore from ₹25,564 crore.

    Why Does Distribution Cost Escalation Reflect Structural Market Imbalance?

    1. Bargaining Concentration: Twenty-six life insurers compete for access to banks operating over 4,00,000 branches, strengthening distributor leverage.
    2. High Switching Power: Banks and brokers control infrastructure and customer base, increasing negotiation power over insurers.
    3. Channel Dependence: Greater reliance on alternate channels directly increases commission payouts.
    4. Incentive Distortion: Competitive pressures push insurers to offer higher commissions to secure partnerships.
    5. Persistent Pattern: Rising commission ratios despite regulatory changes indicate systemic, not temporary, escalation.

    How Effective Have Regulatory Reforms Been?

    1. Product-Wise Caps: IRDAI introduced product-level commission ceilings to contain rising distribution payouts.
    2. Expense of Management (EOM) Consolidation: The regulatory framework later shifted to a unified Expense of Management structure, embedding commissions within overall expense limits.
    3. Competitive Structuring: Marketing tie-ups, infrastructure arrangements, and distribution negotiations limited the restraining effect of reforms.
    4. Structural Persistence: Commission escalation continued despite regulatory redesign, indicating unchanged bargaining asymmetry.

    What Changed in Expense of Management (EOM) Norms?

    1. Unified EOM Framework: 2023-24 reform merged management, acquisition, and commission expenses.
    2. Embedded Leverage: Commission expenses remained embedded within overall expense limits.
    3. Institutional Assertiveness: Institutions with bargaining power demanded higher payouts.
    4. Agent Retention Share: Agents retain approximately 35-40% of headline commissions after overrides and deductions.
    5. Concentration of Gains: Nearly ₹26,000 crore in FY2025 accrued to corporate intermediaries and large marketing firms.

    What Are the Consumer and Macroeconomic Implications?

    1. Limited Consumer Benefit: High distribution costs do not proportionately enhance policyholder value.
    2. Low Visibility Incentives: Informal rebates push transactions outside regulatory transparency.
    3. Penetration Decline: Insurance penetration declined from 4% (FY2020) to 3.7% (FY2024).
    4. Middle-Income Impact: High costs restrict sustainable inclusion for middle-income households.
    5. Financial Stability Concern: RBI flagged distribution cost sustainability concerns in the Financial Stability Report (December 2025).

    What Policy Correction Is Proposed?

    1. Outcome-Based Regulation: Focus on retention, service quality, and claim settlement ratios.
    2. Joint Oversight: IRDAI and RBI coordination on bancassurance governance.
    3. Commission Rebalancing: Shift from upfront commissions toward renewal-based income streams.
    4. Incentive Redesign: Align commissions with persistence and servicing metrics.
    5. Rational Cost Containment: Ensure sustainable penetration expansion.

    Conclusion

    Rising distribution costs signal a structural imbalance in India’s insurance ecosystem rather than a temporary market distortion. Regulatory recalibration under the amended IRDAI framework must prioritise cost efficiency, persistence-based incentives, and balanced public-private participation. Sustainable insurance penetration depends on correcting bargaining asymmetries while safeguarding financial stability and consumer interest.

    Value Addition

    Insurance Density 

    Key Figures & Trends: 

    1. Recent Density: Around $97 per person for 2024-25.
    2. Life Density: Increased to $72 in 2024-25.
    3. Non-Life Density: Stable at $25 in 2024-25.
    4. Growth: Gradual, steady increase observed since 2016-17.
    5. Comparison with Global Averages (Approximate):  India’s density ($97) is a fraction of the global average (around $874 in 2021-22).

    Insurance penetration 

    1. It in India stood at approximately 3.7% in FY25, remaining relatively stagnant and well below the global average of 7.3%. 
    2. Life insurance penetration dipped to 2.7%, while non-life insurance remained flat at 1.0%.

    PYQ Relevance

    [UPSC 2013] The product diversification of financial institutions and insurance companies, resulting in overlapping of products and services strengthens the case for the merger of the two regulatory agencies, namely SEBI and IRDA. Justify.

    Linkage: Recent amendments to the Insurance Regulatory and Development Authority Act have renewed focus on insurance sector reforms, making regulatory architecture and governance in insurance a high-priority area for GS II and GS III. The article’s discussion on distribution costs and bargaining asymmetry highlights why regulatory design under the revised IRDAI framework remains central to sectoral stability.