đŸ’„Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • RBI introduces Unified Markets Interface (UMI)

    Why in the News?

    RBI Governor has unveiled the Unified Markets Interface (UMI) a next-generation financial market infrastructure developed by the Reserve Bank of India (RBI).

    What is Unified Markets Interface (UMI)?

    • Overview: The UMI is a next-generation financial market infrastructure conceptualized by the Reserve Bank of India (RBI) to tokenize financial assets and settlements using the wholesale Central Bank Digital Currency (CBDC).
    • Purpose: It aims to modernize India’s financial markets by enabling blockchain-based asset transactions, improving market transparency, and streamlining settlements through digital automation.
    • Significance: The UMI represents India’s entry into asset tokenization, the conversion of real-world financial instruments into digital tokens, thereby integrating CBDC, smart contracts, and digital public infrastructure within a single interoperable ecosystem.

    Features of UMI:

    • CBDC-Enabled Settlement: Uses the wholesale Central Bank Digital Currency (CBDC) to execute high-value settlements instantly and securely.
    • Asset Tokenization: Converts traditional financial assets into digital tokens on blockchain, allowing fractional ownership and seamless transferability.
    • Unified Infrastructure: Creates an integrated, interoperable market interface linking banks, investors, and financial intermediaries on a single digital framework.
    • Smart Contract Automation: Employs programmable contracts for real-time clearing, settlement, and compliance, reducing manual intervention.
    • Transparency and Efficiency: Blockchain ensures immutable transaction records and enhances traceability, reducing fraud and settlement delays.

    Back2Basics: Asset Tokenization

    • Definition: The process of converting real-world assets, such as bonds, real estate, commodities, or equities, into digital tokens stored on blockchain networks.
    • Mechanism: Each token represents fractional ownership, enabling smaller investors to participate in high-value assets traditionally limited to institutions.
    • Technology Base: Built on blockchain and smart contracts, ensuring transparent, secure, and automated transactions.
    • RBI’s Application: Tokenized financial assets under UMI will settle through wholesale CBDC, providing real-time, tamper-proof, and traceable transactions.

  • [pib] Bharat Taxi Initiative

    Why in the News?

    India is launching Bharat Taxi, a cooperative-based national ride-hailing platform under Digital India, with NeGD partnering Sahakar Taxi Cooperative for technical and advisory support.

    About the Bharat Taxi Initiative:

    • Objective: To create a citizen-centric alternative to global ride-hailing corporations, ensuring fair wages, cooperative governance, and local ownership.
    • Nature: A cooperative-owned, technology-driven national ride-hailing platform designed to provide affordable, secure, and transparent mobility solutions.
    • Timeline: Expected by December 2025, targeting both urban and rural transport needs.
    • Promoters: Supported by leading cooperative and financial institutions NCDC, IFFCO, AMUL, KRIBHCO, NAFED, NABARD, NDDB, and NCEL.

    Key Features:

    • Cooperative Ownership Model: Operated and governed by driver cooperatives, ensuring profit-sharing, fair pricing, and collective decision-making.
    • Digital Integration: Linked with national platforms such as DigiLocker, UMANG, and API Setu, allowing seamless identity verification, license validation, and service delivery.
    • Inclusive Design: Provides multilingual UI, accessibility for differently-abled users, and equal participation for women drivers.
    • Transparent Fare System: Uses open-source algorithms for real-time fare calculation to prevent overcharging or surge pricing manipulation.
    • Integration with Digital Public Infrastructure: Aligned with Aadhaar, UPI, and DigiLocker, facilitating digital payments and paperless onboarding.

  • India’s long history of resistance to economic domination

    Why in the News?

    Trade negotiations between India and the United States remain stalled after President Trump’s administration doubled tariffs on Indian goods to 50% and imposed an additional 25% duty on Russian oil imports by India.

    Introduction

    External Affairs Minister S. Jaishankar emphasised that while understanding with the US, “the world’s largest market” is essential, India’s economic sovereignty and red lines must be respected.

    This impasse reflects the global shift from free trade to protectionism, echoing earlier eras when India resisted externally imposed economic dominance, first under colonial exploitation, and later through planned economic reconstruction after independence.

    Colonial Economic Exploitation and India’s Resistance:

    1. Transformation of Economy: The British colonial system dismantled India’s self-sufficient agrarian and artisanal base, converting the country into a supplier of raw materials and a market for British-manufactured goods.
    2. Drain Theory and Fiscal Exploitation: Dadabhai Naoroji, in Poverty and Un-British Rule in India (1901), argued that India’s wealth was drained to Britain, financing its prosperity: “The British Indian Empire is formed and maintained entirely by Indian money and mainly by Indian blood.”
    3. Phases of Colonial Capitalism:
      • Mercantile Capitalism (EIC Era): Extraction through monopoly trade and taxation.
      • Industrial Capitalism (19th Century): India reduced to an exporter of raw cotton and importer of textiles.
      • Finance Capitalism (Early 20th Century): British private capital dominated infrastructure, plantations, and banking, reinforcing dependency.
    4. Economic Consequences: The structure produced de-industrialisation, agrarian stagnation, excessive taxation, and recurring famines, resulting in widespread impoverishment.

    Intellectual Critiques of the Colonial Economy:

    1. R. C. Dutt – Industrial Destruction: In The Economic History of India (1901–02), he demonstrated how colonial policies deliberately destroyed indigenous industries to protect British manufacturers.
    2. M. G. Ranade – Economic Dependency: Criticised colonial economic dependence and advocated industrial regeneration through Indian entrepreneurship.
    3. R. Palme Dutt – Stages of Imperialism: In India To-day (1940), identified three stages of capitalist domination , mercantile, industrial, and finance , highlighting the evolution of imperial control.
    4. G. V. Joshi , an Economist, aptly described railway expenditure as an “Indian subsidy to British industry.”

    Economic Reconstruction After Independence:

    1. Inherited Structural Weakness: At independence in 1947, India faced an agrarian, impoverished, and unequal economy drained of capital and industrial base.
    2. Ideological Synthesis: Rejecting Cold War binaries, India adopted a non-aligned mixed economy, blending socialist planning with capitalist pragmatism to ensure self-reliance and equity.
    3. Intellectual Precursors to Planning:
      • Visvesvaraya Plan (1934) – advocated industrialisation and state coordination.
      • National Planning Committee (1938) – set the foundation for state-directed development.
      • Bombay Plan (1944) – proposed large-scale industrialisation with public–private cooperation.
      • Gandhian and People’s Plans (1944–45) – emphasised decentralisation and rural self-sufficiency.
    4. First and Second Five-Year Plans:
      • First Plan (1951–56): Focused on agriculture, irrigation, and rural reconstruction.
      • Second Plan (1956–61): Based on P. C. Mahalanobis model, prioritising heavy industries, capital goods, and import substitution.

    Planned Economy and Centralisation of Authority:

    1. Institutional Creation: The Planning Commission (1950), chaired by the Prime Minister, institutionalised centralised planning and target allocation.
    2. Fiscal Centralisation: The Finance Commission (Article 280), though constitutionally mandated for fiscal transfers, became secondary to plan-based resource allocation.
    3. Limited Federal Consultation: The National Development Council (1952) was created to involve states but lacked independent financial powers.
    4. Command Economy Features: India’s planning structure mirrored Soviet-style central control, aiming for rapid industrialisation, public sector expansion, and poverty eradication, yet it consolidated central dominance in economic governance.

    Transition to Federal Economic Governance:

    1. Liberalisation Era (1991): The balance-of-payments crisis triggered wide-ranging reforms , ending the Licence–Permit–Quota Raj, deregulating industries, reducing tariffs, and inviting foreign investment.
    2. Market Orientation: The 1991 reforms replaced the state-led model with market-driven growth and integration into the global economy.
    3. Institutional Transformation:
      • Abolition of the Planning Commission (2014) reflected a shift from central command to federal cooperation.
      • Creation of NITI Aayog (2015) introduced cooperative and competitive federalism, emphasising state innovation and evidence-based policymaking.
    4. Fiscal Federal Tensions: The Goods and Services Tax (GST) exemplifies fiscal unity but has also constrained state autonomy, fuelling debates on vertical imbalance and fiscal equity.

    India–US Trade Divergences in the Contemporary Context:

    1. Tariff Dispute Dynamics: The Trump tariff regime, justified on grounds of national security and domestic job protection, contradicted WTO’s comparative advantage principle, undermining global free-trade norms.
    2. India’s Strategic Response: Rooted in historical awareness, India’s trade policy seeks to balance self-reliance with pragmatic global engagement, defending domestic interests while avoiding isolationism.
    3. Philosophical Continuity: Jaishankar’s remark, “If trade becomes tariffs, where is competitiveness?”, encapsulates India’s enduring critique of externally imposed asymmetry, echoing nationalist economic thought since the colonial period.

    Legacy of India’s Economic Resistance:

    1. Continuum of Policy Evolution: From colonial subjugation through planned reconstruction to liberal federalism, India’s economic trajectory reflects a consistent assertion of sovereignty and self-determination.
    2. Recurrent Themes: The pursuit of self-reliance, equitable growth, and resistance to external control runs through every policy phase from Naoroji’s drain theory to NITI Aayog’s cooperative model.
    3. Contemporary Relevance: The present India–US trade friction is not merely a tactical disagreement but a symbolic reaffirmation of India’s historical resolve to resist economic subordination and preserve strategic autonomy.

    Way Forward:

    1. Strategic Engagement: Pursue trade negotiations with the US grounded in reciprocity, not submission.
    2. Institutional Resilience: Strengthen WTO-aligned frameworks for dispute resolution to safeguard multilateralism.
    3. Domestic Competitiveness: Expand manufacturing and exports through PLI schemes and innovation-driven incentives.
    4. Federal Balance: Reinforce fiscal autonomy of states to sustain broad-based economic growth.
    5. Economic Diplomacy: Integrate trade with technology partnerships, digital cooperation, and sustainable supply chains to mitigate external shocks.

    PYQ Relevance:

    [UPSC 2014] Examine critically the various facets of economic policies of the British in India from mid-eighteenth century till independence.

    Linkage: This topic is critical because India’s historical experience of economic domination, marked by policies such as the Drain of Wealth and de-industrialisation during the colonial era, profoundly shapes its present-day foreign policy and economic decision-making.

     

  • Are workers’ rights being eroded?

    Introduction / Context

    • Recent Disasters: In 2025, three major industrial accidents — the Sigachi Industries chemical blast in Telangana (June 30), the Gokulesh Fireworks explosion in Sivakasi (July 1), and the Ennore Thermal Power Station collapse in Chennai (September 30) — killed nearly 60 workers within three months.
    • Scale of the Problem: According to the British Safety Council, one in four fatal workplace accidents globally occurs in India, though actual figures are higher due to underreporting in informal sectors.
    • Structural Failure: These tragedies expose a systemic breakdown in safety enforcement, where profit maximisation overrides worker protection.

    Why Workplace Accidents Occur

    1. Preventable Failures: Most industrial accidents occur due to negligence in hazard prevention such as poor equipment design, absence of alarms, and lack of maintenance.
    2. Telangana Case: The chemical reactor was operated at twice its safe limit, safety alarms failed, and untrained contract workers were deployed without records or protection.
    3. ILO Findings: The International Labour Organization (ILO) attributes most accidents to cost-cutting by managements, not random chance or individual mistakes.
    4. Human Error Myth: Employers blame workers for “human error”, but systemic issues like excessive work hours, fatigue, and exploitative conditions are the root causes.
    5. Lack of Safety Oversight: The absence of mandatory inspections and safety officers allows hazardous practices to continue unchecked.

    Evolution of Workplace Safety Laws in India

    1. Colonial Roots: The first Factories Act of 1881 was enacted under British rule to regulate working hours and conditions in textile mills.
    2. Post-Independence Framework: The Factories Act of 1948 became the foundation of India’s occupational safety regime, covering licensing, rest periods, and machine maintenance.
    3. Bhopal Legacy: The 1987 Amendment followed the Bhopal Gas Tragedy, introducing stricter safety clauses but failing in enforcement due to bribery and falsified records.
    4. Compensation Mechanisms: The Workmen’s Compensation Act (1923) and Employees’ State Insurance Act (1948) provide for injury and income loss but remain financially inadequate.
    5. Lack of Criminal Accountability: Employers rarely face criminal charges for fatal negligence; compensation is often paid through government relief funds, not company liability.

    Post-Liberalisation Deregulation and Impact

    1. Shift in Policy: Since the 1990s, India’s industrial policy has prioritised labour flexibility over worker protection.
    2. Self-Certification: States like Maharashtra (2015) allowed industries to self-certify compliance, effectively dismantling inspection-based oversight.
    3. Ease of Doing Business: Safety rules are now portrayed as regulatory hurdles, diluting mandatory standards for inspection and reporting.
    4. Contract Labour Expansion: Informal and outsourced workforces dominate hazardous sectors, operating without registration or legal protection.
    5. Erosion of State Capacity: Labour departments have been underfunded and depowered, reducing preventive enforcement to mere paperwork.

    The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020

    1. Purpose: Consolidates 13 older laws including the Factories Act (1948), Mines Act (1952), and Contract Labour Act (1970) into one unified framework.
    2. Scope: Applies to all workplaces with 10 or more workers and covers mines, docks, and factories.
    3. Employer Duties: Mandates risk-free work environments, medical check-ups, and welfare amenities, with provisions for National and State Safety Boards.
    4. Penalties: Prescribes monetary penalties for violations and limited punishment for accidents causing death.
    5. Criticism: The Code converts safety from a statutory right to administrative discretion, weakening enforceability and inspection mechanisms.

    Other Key Labour Codes:

    1. Code on Wages (2019): Ensures minimum wages, equal pay for equal work, and timely payment, reducing wage-related exploitation.
    2. Industrial Relations Code (2020): Governs strikes, layoffs, and retrenchments, focusing on maintaining employer–employee harmony under managerial control.
    3. Social Security Code (2020): Extends healthcare, pension, and insurance benefits to gig and platform workers, integrating fragmented welfare laws into one structure.

    Current Trends and Emerging Risks

    1. Extended Working Hours: Post-pandemic, States have increased daily limits and reduced rest periods, heightening fatigue-related risks.
    2. Case Example: Karnataka (2023) made longer shifts permanent, undermining rest and recovery norms critical to accident prevention.
    3. Informalisation: Over 90% of India’s workforce operates informally, with no safety records or accident insurance, leaving families uncompensated.
    4. Weakened Enforcement: Inspections replaced by self-reporting allow companies to evade accountability for safety violations.
    5. Outcome: India remains among the world’s most dangerous industrial economies, with preventable deaths treated as operational costs.

    Institutional and Governance Failures:

    1. Policy Shift: The State’s role has shifted from enforcer to facilitator, prioritising investment over worker welfare.
    2. Diluted Inspections: Labour departments, understaffed and politically pressured, no longer conduct surprise or independent audits.
    3. Token Punishment: Accident inquiries result in minor fines or temporary closures, not criminal prosecutions.
    4. Moral Blindness: Treating workplace deaths as “inevitable” reflects a moral and administrative collapse in valuing human life.

    Way Forward: Restoring Safety as a Fundamental Right

    1. Safety as Right: Workplace safety must be reinstated as a non-negotiable constitutional right, not a regulatory privilege.
    2. Reinforce Inspection: Mandatory and surprise inspections must replace self-certification to ensure compliance.
    3. Criminal Liability: Employers responsible for preventable deaths must face criminal prosecution, not ex gratia settlements.
    4. Economic Logic: Studies confirm that safe workplaces increase productivity and profitability, contradicting industry claims of cost burdens.
    5. Moral Imperative: Until the State enforces accountability, transparency, and legal deterrence, India’s workers will remain collateral casualties of deregulated growth.

     

    [UPSC 2024] Discuss the merits and demerits of the four ‘Labour Codes’ in the context of labour market reforms in India. What has been the progress so far in this regard?

    Linkage: The topic of the erosion of workers’ rights is highly important for the upcoming UPSC Mains, particularly because it connects statutory, economic, and social issues, making it a favorite for analytical questions

     

  • Why Indian capital needs to invest domestically?

    Introduction:

    India faces a critical policy challenge — balancing the long-term gains of global trade with the short-term risks of unemployment, stagnant wages, and inequality among vulnerable populations. The existing economic system prioritises private capital accumulation over mass welfare, requiring a realignment of capitalism toward inclusivity and public interest.

    Amid global trade disruptions, tariff wars, and falling external demand, Indian capital must reinvent itself, collaborate closely with the government, and anchor domestic economic stability through investment, innovation, and equitable growth.

    Evolution of Indian Capital and the Need for Reorientation:

    • Protected Growth Era: Historically, Indian capital thrived under state protection before liberalisation, leveraging tariff barriers and inward-looking policies to earn supernormal profits in closed domestic markets.
    • Global Expansion Phase: Liberalisation in the 1990s enabled Indian firms to expand globally, acquiring foreign assets and establishing international linkages. This evolution created a few industrial conglomerates that dominate key sectors.
    • Shift Toward Public-Interest Capitalism: With global trade slowing and protectionism rising, these firms must now redefine their role — from being beneficiaries of state incentives to partners in public-interest growth.
    • Reinvention of Capitalism: Capitalism, as history shows, can adapt and evolve. The moment demands an inclusive capitalism that balances private profit with national development goals.

    Global Trade, Demand, and Economic Vulnerabilities

    • Determinants of Demand Expansion: Economic history identifies three drivers of mass-market expansion, creation of a wage-labour class, productivity gains from industrial production, and rising personal incomes leading to higher demand.
    • Neglect of Aggregate Demand: Growth of aggregate demand is vital for sustaining production and profits, yet most policy frameworks underestimate its role, assuming supply automatically creates demand.
    • Domestic vs. External Demand: In a globalised economy, demand comprises domestic and external components. While early industrial policies relied on internal markets, the post-reform phase emphasised exports.
    • Vulnerability to Global Shocks: Today’s volatile global trade marked by tariffs and supply-chain distortions, has weakened external demand. Thus, strengthening domestic consumption through higher wages, internal investment, and industrial diversification is the pragmatic path forward.

    The Role of Domestic Capital in Stimulating Growth

    1. Reviving Private Investment

      • Stagnation in Private Capex: Despite record corporate profits, private investment has stagnated, with the state driving capital formation through public infrastructure and fiscal stimulus.
      • Rise in Public Investment: Public capex surged from â‚č3.4 lakh crore (FY20) to â‚č10.2 lakh crore (FY25) — a CAGR of 25%, primarily in railways, roads, and communications.
      • Outward vs. Inward Investment: Private capex remains subdued even as outward FDI by Indian firms has grown 12.6% annually (2019–2024), indicating stronger foreign than domestic investment appetite.
      • Strategic Redirection Needed: A strategic reversal is required — redirecting capital toward domestic expansion, capacity building, and industrial diversification.

    1. Ensuring Moderate Wage Growth

      • Profit–Wage Imbalance: The Economic Survey 2024–25 highlighted a growing imbalance — corporate profits at a 15-year high versus stagnant real wages.
      • Falling Real Incomes: Rating agencies project real wage growth to fall from 7% (FY25) to 6.5% (FY26), weakening purchasing power and domestic demand.
      • Labour Market Precarity: Contractualization and weakened collective bargaining in formal sectors have reduced labour’s share of income, intensifying inequality.
      • Need for Wage-Linked Growth: Sustainable growth requires balanced profit–wage dynamics, linking productivity with equitable income distribution to expand internal demand.

    1. Expanding R&D and Innovation:

      • Low R&D Spending: India’s gross expenditure on R&D (GERD) stands at 0.64% of GDP, far below that of the U.S., China, Japan, and South Korea, where private enterprise funds over 70% of total R&D.
      • Weak Private Contribution: In India, the private sector contributes only 36%, with concentration in a few industries, pharmaceuticals, IT, defence, and biotechnology.
      • Innovation as a Structural Imperative: To ensure long-term competitiveness, Indian firms must increase basic and applied research spending, moving beyond short-term, profit-driven innovation cycles.

    Way Forward: Aligning Private Capital with Public Purpose

    • Need for Coordination: The global economic uncertainty necessitates coordinated policy–business action to safeguard growth.
    • Government’s Supportive Role: The government has built a supportive framework through fiscal incentives, simplified regulation, infrastructure development, and credit facilitation. Yet, without active private participation, momentum will stall.
    • Reorientation of Corporate Priorities: Indian capital must realign its priorities:
      • National Responsibility: Treat national economic stability as a collective responsibility, not merely a policy backdrop.
      • Domestic Reinvestment: Reinvest profits domestically to generate employment and strengthen demand.
      • Wage-Led Expansion: Commit to wage-led growth, ensuring equitable income distribution.
      • R&D Commitment: Integrate R&D-driven innovation as a structural pillar of industrial policy.
    • Conclusion: A partnership model — where the state provides the framework and domestic capital drives inclusive, innovation-led expansion — can secure both growth resilience and social legitimacy in the post-globalisation era.

    PYQ Relevance:

    [UPSC 2023] Do you agree that Indian capitalism needs re-orientation towards inclusive and sustainable growth?

     

    Linkage: The issue aligns with GS-III themes: Indian Economy and issues relating to growth, inclusive development, investment models, and effects of liberalisation on the economy.

    It also fits Essay Paper topics like “Capitalism without conscience is a peril to society” or “Economic self-reliance and global interdependence must coexist.”

    The debate concerns how Indian private capital can become a stakeholder in inclusive growth amid protectionism, global trade uncertainty, and sluggish domestic demand.

     

  • SC to examine Constitutional Validity of Securities Transaction Tax (STT)

    Why in the News?

    The Supreme Court of India has agreed to examine a petition challenging the constitutional validity of the Securities Transaction Tax (STT) imposed under the Finance Act, 2004.

    Legal Context of this Case:

    Petitioner: Aseem Juneja – contends that STT violates fundamental and economic rights.

    Bench: Headed by Justice J.B. Pardiwala; formal notice issued to Union Ministry of Finance.

    • The plea invokes Article 265 — “No tax shall be levied or collected except by authority of law.”
    • The Court will assess reasonableness, equity, and proportionality in transaction-based taxation.
    • A ruling against STT may impact â‚č30,000-crore annual revenue and require redesign of securities taxation.

    SC to examine Constitutional Validity of Securities Transaction Tax (STT)

    What is the Securities Transaction Tax (STT)?

    • About: A direct tax levied on purchase and sale of securities through recognised stock exchanges.
    • Introduction: Under the Finance Act, 2004, to ensure transparency and curb tax evasion in capital markets.
    • Objective: Replace complex capital-gains tracking with a small, upfront levy to counter under-reporting and increase tax buoyancy.
    • Administered by: Central Board of Direct Taxes (CBDT), Ministry of Finance.
    • Scope: Applies to-
      1. Equity shares of listed companies
      2. Derivatives (futures & options)
      3. Equity-oriented mutual funds and ETFs.
    • Purpose:
      • Simplify tax collection from capital market participants.
      • Create a traceable, automated tax mechanism.
      • Generate steady revenue while discouraging speculative trading.
    • Nature: A transaction-based tax (TBT) collected automatically at the time of trade, irrespective of overall profit or loss.
    • Distinctive features:
        • Applies even on loss-making trades payable merely for conducting a transaction.
        • Non-refundable and non-adjustable, unlike TDS.
        • Raises transaction costs for high-frequency traders.
    • Imposition of STT:
      • Mode of collection: Automatically deducted by stock exchanges on every taxable trade and deposited into the government account; Ensures near-universal compliance and minimal evasion.
      • Rate & coverage: Varies across instruments and between buy/sell transactions; Periodically revised through Union Budgets.

    Key Grounds of Challenge:

    • Violation of Fundamental Rights:
      1. Article 14 (Equality): Unequal treatment; tax imposed irrespective of gain or loss.
      2. Article 19(1)(g) (Right to Trade): Penalises the act of trading itself.
      3. Article 21 (Livelihood & Dignity): Non-refundable levy burdens small traders.
    • Double Taxation: Traders already pay Capital Gains Tax on profits; STT adds a second layer on the same transaction.
    • Arbitrariness / Lack of Proportionality: Taxing even unprofitable transactions violates the principle of reasonable classification and fiscal fairness.
    • No Refund or Adjustment Mechanism: Absence of provision similar to TDS refunds; creates permanent loss even when income is negative.
    • Changed Circumstances: With digital audit trails, PAN-linked demat accounts, and near-complete transparency, the original rationale (to curb evasion) may no longer hold.
    [UPSC 2009] Consider the following:

    1. Fringe Benefit Tax 2. Interest Tax 3. Securities Transaction Tax

    Which of the above is/are Direct Tax/Taxes?

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

     

  • [6th October 2025] The Hindu Op-ed: Treating employment as a national priority

    PYQ Relevance

    [UPSC 2022] Economic growth in the recent past has been led by increase in labour productivity. Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity

    Linkage: The article highlights that India needs consistent, job-oriented growth policies focusing on labour-intensive sectors like textiles, tourism, and MSMEs to ensure “growth with jobs” rather than jobless productivity gains — directly aligning with the UPSC 2022 question’s call for a balanced growth pattern.

    Mentor’s Comment

    Employment generation is not just an economic issue, it is the moral and strategic foundation of India’s long-term growth story. As India moves toward Viksit Bharat 2047, it must transform its demographic dividend into productive employment. This article explores why employment must be treated as a national mission, the urgent need for an integrated framework, and how inclusive job creation can become the cornerstone of equitable and resilient growth.

    Why in the News?

    India is standing at a historic demographic crossroads, poised to add 133 million people to its working-age population in the next 25 years, accounting for 18% of the global workforce addition. However, this window is closing fast, with the working population expected to peak by 2043. Despite multiple government schemes, India still lacks a unified national framework for employment and livelihoods. Sanjiv Bajaj, Past President of CII, argues for treating employment as a national priority through a coherent, multi-level policy that integrates growth, skilling, social protection, and mobility. This issue is not merely about job numbers; it’s about ensuring equity, inclusion, and sustainable economic resilience. In a consumption-driven economy like India, employment is both the driver and the outcome of growth.

    India’s Employment Challenge: The Demographic Window is Closing

    1. Demographic Dividend – India will add 133 million working-age individuals by 2047, nearly 18% of global addition, creating a unique window for productivity gains.
    2. Limited Timeframe – Worker population expected to peak by 2043, after which the demographic advantage will fade.
    3. Risk of Wasted Potential – Without large-scale, quality employment, India risks a demographic disaster rather than a dividend.
    4. Consumption Linkage – Quality jobs at scale broaden consumption, ensuring equitable and stable growth.

    Why a Unified Employment Policy is the Need of the Hour?

    1. Fragmented Efforts – Despite initiatives like Skill India, PMEGP, and social security schemes, India lacks an Integrated National Employment Policy (INEP).
    2. Need for Coordination – Employment generation spans multiple ministries — Labour, Skill Development, Industry, and Education — requiring unified planning and execution.
    3. Institutional Mechanism – Bajaj recommends an Empowered Group of Secretaries for oversight and District Planning Committees for implementation.
    4. Policy Alignment – Trade, industrial, education, and labour policies must be synchronised to ensure job-oriented growth.

    Bridging the Demand–Supply Divide in Labour Markets

    1. Demand-Side Drivers – Growth in high-employment-potential sectors like textiles, tourism, healthcare, agro-processing, real estate, and MSMEs.
    2. Supply-Side Gaps – Low employability of graduates, outdated curricula, and poor skilling alignment with emerging technologies (AI, robotics, green tech).
    3. Policy Reform – Curricula revamp, vocational training integration, and targeted skilling to meet industry needs.
    4. Mobility Barriers – Need for Centre–State cooperation on migration policies and worker support systems to promote “One India for Employment”.

    Labour Codes, Urban Employment, and MSME Empowerment

    1. Labour Code Implementation – Timely execution of the four Labour Codes is critical, with clear transition and business support guidelines.
    2. MSMEs as Job Engines – Employing over 25 crore people, MSMEs need enhanced access to finance, markets, and technology to drive “growth with jobs.”
    3. Urban Employment Guarantee – Piloting schemes in selected cities can address urban job distress, akin to MGNREGA for urban India.
    4. Regional Focus – Targeted interventions in 100 underdeveloped districts and rural internships for graduates can promote balanced employment.

    The Gig Economy Revolution

    1. Current Size – The gig economy currently employs 80 lakh–1.8 crore workers, expected to rise to 9 crore by 2030.
    2. Opportunity for Formalisation – With Tier-2 and Tier-3 cities participating, gig platforms can transform informal work into semi-formal, tech-enabled livelihoods.
    3. National Gig Policy – Should ensure worker protection, financial inclusion, and social security, supported by a centralised worker registry.
    4. Workplace Dignity – Ensure fair contracts, safety standards, and grievance redressal mechanisms.

    Enhancing Female Labour Force Participation

    1. Current Gaps – India’s female labour force participation (FLFP) remains among the lowest globally.
    2. Policy Incentives – Employment-Linked Incentive (ELI) schemes, childcare and eldercare infrastructure, and formalising Anganwadi and ASHA roles can improve participation.
    3. Societal Barriers – Campaigns must challenge gender norms restricting women’s economic mobility.
    4. Economic Multiplier – A 10% rise in FLFP could add up to $700 billion to India’s GDP by 2025 (McKinsey estimate).
    5. The Missing Link: Reliable Employment Data
      • Data Gaps – Existing surveys understate informal and rural employment realities.
      • Need for Real-Time Data – A dedicated task force must improve methodologies and reduce data publication lag.
    6. Policy Relevance – High-frequency data can guide interventions in dynamic sectors like gig work and MSMEs.

    Conclusion

    India’s demographic dividend offers a fleeting window to achieve inclusive and sustainable growth. Treating employment as a national priority through an integrated policy, labour reforms, skill alignment, and gender inclusion is essential. Generating growth with jobs will ensure equitable prosperity and long-term resilience. Employment, therefore, is not just an economic goal, it is the foundation of nation-building and social justice.

  • Niti Aayog proposes Presumptive Taxation for Foreign Companies

    Why in the News?

    NITI Aayog has released a working paper recommending the introduction of an optional presumptive taxation scheme for foreign companies operating in India.

    What is Presumptive Taxation?

    • Overview: Presumptive taxation allows taxpayers to declare income at a fixed percentage (presumed rate) of total turnover or receipts without maintaining detailed books of accounts.
    • Purpose: Simplifies taxation for small businesses or specific sectors by reducing compliance and administrative burden.
    • Domestic Example: Under the Income Tax Act, Sections 44AD, 44ADA, and 44AE permit presumptive taxation for small businesses, professionals, and transporters.
    • Key Feature:
      • Tax is levied on deemed profits instead of actual income.
      • Taxpayers opting for this scheme are exempt from detailed audits or complex record-keeping.

    What has NITI Aayog Proposed?

    • Scope: Extend the presumptive taxation concept to foreign companies operating in India.
    • Objective: To reduce litigation related to Permanent Establishment (PE) status and profit attribution in cross-border taxation.
    • Main Features:
      • Optional Scheme: Foreign companies can either choose the presumptive scheme for certainty or file regular returns if actual profits are lower.
      • Sector-Specific Rates: Different deemed profit rates for sectors such as manufacturing, digital services, and logistics.
      • Safe Harbour Clause: Once a company opts in, tax authorities cannot separately litigate the PE existence for that activity.
      • Alignment with Global Norms: Codify PE and attribution principles in domestic law consistent with OECD standards.
      • Administrative Reforms: Training of tax officials to ensure consistent application in digital and cross-border cases.

    Significance:

    • Provides tax certainty and simplicity for foreign investors.
    • Reduces disputes and promotes ease of doing business.
    • Balances India’s sovereign tax rights with the need for a predictable, investor-friendly regime.
    • Positions India as a more attractive FDI destination, aligned with its economic and tax reform agenda.
    [UPSC 2020] With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct?

    1. It is introduced as a part of the Income Tax Act.

    2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.

    Select the correct answer using the code given below:

    Options: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 *

     

  • [pib] BRO Project Swastik marks 65 years of service

    Why in the News?

    Border Roads Organisation (BRO) Project Swastik celebrated its 65th Raising Day on October 01, 2025.

    About Project Swastik:

    • Origin: Established in 1960 as Project DRAGON, renamed Project Swastik on 1 October 1963.
    • Organisation: A flagship initiative of the Border Roads Organisation (BRO) under the Ministry of Defence.
    • Mandate: Construction and maintenance of strategic roads, bridges, and tunnels in the high-altitude Himalayan terrain.
    • Area of Responsibility: Covers North and East Sikkim up to forward border areas, also parts of North Bengal. The region is prone to landslides, fragile geology (Phyllites, Schists), and extreme weather conditions.
    • Strategic Role: Provides vital support for Armed Forces mobility, disaster relief operations, and socio-economic connectivity for remote communities.

    Major Accomplishments:

    • Road & Bridge Network: Built and maintained over 1,412 km of roads and 80 major bridges since inception.
    • Recent Achievements: In the last decade, completed 350 km of new roads, 26 bridges, and 1 tunnel, ensuring year-round access to forward areas.
    • Key Road Links: Developed lifelines like the Gangtok–Chungthang and Gangtok–Nathula roads, critical for defence and civilian movement.
    • Disaster Response: Effectively restored connectivity after Glacial Lake Outburst Floods (GLOFs), cloudbursts, and Teesta River floods. Widely praised during the 2023 Sikkim flash floods.

  • More Women join the labour force, but are they really employed?

    Introduction

    The female labour force participation rate (FLFPR) is often viewed as a proxy for gender equality and economic dynamism. India’s FLFPR dropped from 31.2% in 2011-12 to 23.3% in 2017-18 but has dramatically risen to 41.7% in 2023-24. At first glance, this looks like a success story. However, closer scrutiny reveals that most women are being absorbed into agriculture, unpaid household enterprises, and low-paying self-employment, rather than formal or secure wage jobs. The paradox is clear: more women are being “counted” in the labour market, but their earnings and economic independence remain stagnant or declining.

    Why is female labour force participation in the news?

    1. Sharp rise in FLFPR: Jumped from 23.3% in 2017-18 to 41.7% in 2023-24.
    2. First-time reversal: After years of decline, the participation rate is rising again.
    3. Underlying concern: Despite more women “working,” earnings have fallen, and secure wage jobs remain elusive.
    4. Contradiction: Participation has grown, but instead of diversifying into services/industry, women are moving back into agriculture.

    What explains the rise in female participation?

    1. Rural women as drivers: Most of the rise is accounted for by women in rural India.
    2. Shift from domestic duties: Share of women reporting “domestic duties” fell from 57.8% (2017-18) to 35.7% (2023-24).
    3. Rise in unpaid helpers: Share of “helpers in household enterprises” rose from 9.1% to 19.6%.
    4. Self-employment increase: “Own account workers and employers” rose from 4.5% to 14.6%.

    Are women moving to better jobs?

    1. Agriculture dominance: Share of rural women in agriculture rose from 71.1% (2018-19) to 76.9% (2023-24).
    2. Decline in other sectors: Women’s share in both secondary (industry) and tertiary (services) sectors has fallen.
    3. Blurring boundaries: Women’s unpaid household work overlaps with helper roles in household enterprises, making it questionable whether this should count as “employment.”

    What about earnings and job quality?

    1. Declining real earnings: Except for casual workers, earnings have declined across categories—self-employed, salaried, and even employers.
    2. Vulnerability of self-employment: More women are reporting self-employment, but this has not translated into higher income.
    3. No wage expansion: Growth in FLFPR has not been accompanied by secure wage-based jobs.

    Why does this matter for India’s economy and gender equality?

    1. False signal of empowerment: Higher FLFPR without earnings security reflects distress-driven participation, not genuine empowerment.
    2. Economic vulnerability: Rising unpaid and low-paid work lowers household resilience and women’s autonomy.
    3. Policy challenge: Employment growth is not keeping pace with women’s entry into the workforce, pointing to structural issues in India’s labour market.

    Conclusion

    The sharp rise in India’s female labour force participation hides more than it reveals. Women are being pushed into unpaid or poorly paid work, especially in agriculture and household enterprises, while real earnings are falling. This suggests that India’s growth story is not translating into dignified employment for women. For true gender equality, the focus must shift from mere participation numbers to quality, security, and remuneration of women’s work. Only then will women’s economic empowerment become a reality.

    PYQ Relevance

    [UPSC 2023] Distinguish between ‘care economy’ and ‘monetized economy’. How can the care economy be brought into a monetized economy through women empowerment?

    Linkage: The article highlights women’s shift from domestic duties to unpaid helper roles, directly linking the care economy to the challenge of integrating it into the monetized economy through women’s empowerment.