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Subject: Economics

  • Concern over falling household savings in India – what can be done

    Why in the News?

    India’s household savings rate fell to 29.7% of GDP in 2022–23, the lowest level in 40 years, down from 34.6% in 2011–12.

    What led to the decline in household financial savings in India?

    • Rise in Consumption Expenditure: After the COVID-19 pandemic, households increased spending on consumer durables, travel, and lifestyle, reducing the capacity to save.
    • High Inflation: Persistent rise in prices of essentials like food, fuel, and healthcare eroded disposable income and limited savings.
    • Shift Towards Riskier Financial Assets: Investments in mutual funds and equities increased, with SIP contributions rising significantly, while traditional savings like fixed deposits declined.
    • Slow Income Growth and High Interest Rates (Fisher Effect): Stagnant wages and low nominal income growth, coupled with high interest rates and loan EMIs, reduced household savings potential.
    • Rising Household Debt: Household liabilities reached 6.4% of GDP in FY24, due to more borrowing for housing, education, and personal loans.
    • Reversal of COVID-Era Forced Savings: Savings spiked during lockdowns but dropped sharply as economic activity resumed and pent-up demand surged.

    Why is the shift to financial assets important for capital formation?

    • Improves Resource Mobilisation: Financial assets like deposits, mutual funds, and pension funds channel household savings into productive sectors, supporting investment and infrastructure growth.
    • Enhances Financial Intermediation and Efficiency: Financial institutions act as intermediaries, allocating savings to sectors with higher returns and productivity, ensuring efficient capital use. Eg: Banks mobilise savings into loans for MSMEs, which contribute significantly to employment and GDP.
    • Reduces Idle Capital and Boosts Formal Economy: Unlike physical assets (like gold and real estate), financial assets contribute to the formal economy, increasing credit availability and financial inclusion. Eg: Shift from gold to digital savings accounts increases liquidity and boosts credit growth in the economy.

    How has rising household debt impacted financial stability?

    • Increased Vulnerability to Economic Shocks: High debt levels reduce households’ ability to absorb income shocks (like job loss or medical emergencies), leading to loan defaults and stress on financial institutions. Eg: During the COVID-19 pandemic, many households defaulted on EMIs due to income loss, affecting NBFCs and banks.
    • Reduced Net Financial Savings: Growing liabilities shrink the net financial savings rate, limiting the funds available for productive investments and weakening domestic capital formation. Eg: In FY24, household liabilities rose to 6.4% of GDP while financial savings fell to 5.1%, a four-decade low.
    • Pressure on Banking and Credit Systems: High levels of unsecured loans (like personal and gold loans) increase credit risk, prompting regulatory tightening and affecting credit flow to the economy. Eg: RBI imposed stricter norms on personal loans in FY25 to prevent systemic risk from unsecured lending growth.

    What steps can improve savings among rural and low-income groups?

    • Promote Micro-Savings Products: Introduce low-ticket savings schemes tailored for daily or weekly contributions. Eg: The PM Jan Dhan Yojana encourages basic savings with zero-balance accounts.
    • Provide Government-Backed Guarantees and Incentives: Offer interest subsidies, insurance cover, or guaranteed returns to build trust among low-income savers. Eg: The Kisan Vikas Patra and Public Provident Fund (PPF) offer guaranteed returns with sovereign backing.
    • Expand Financial Literacy Campaigns: Run focused awareness drives on budgeting, saving, and investment options in local languages. Eg: RBI’s Financial Literacy Week and SEBI’s village workshops educate people on safe saving practices.
    • Leverage Digital and Fintech Solutions: Use mobile wallets, micro-investing apps, and digital payment systems to make saving more accessible. Eg: Platforms like Paytm Payments Bank and Airtel Payments Bank offer micro-savings and insurance.
    • Revamp and Strengthen Post Office Schemes: Modernise postal savings with better accessibility, digital interface, and doorstep banking. Eg: Rural Post Offices now offer core banking services, enabling safer and formal saving options.
    • Introduce Default Saving Options (Behavioral Nudges): Implement opt-out pension schemes or auto-enrollment in saving plans for informal workers. Eg: The Atal Pension Yojana encourages informal sector workers to save for retirement through auto-debits.

    Way forward: 

    • Develop a National Household Savings Strategy: Create a coordinated policy framework across ministries with clear targets, integrating financial literacy, product innovation, and social security measures for underserved populations.
    • Encourage Inclusive Fintech Innovations: Promote user-friendly micro-investing platforms, AI-driven financial guidance, and blockchain-based savings tools to enable secure, transparent, and accessible savings for rural and low-income households.

    Mains PYQ:

    [UPSC 2017] Among several factors for India’s potential growth, savings rate is the most effective one. Do you agree? What are the other factors available for growth potential?

    Linkage: The artilce explicitly state that India’s gross domestic savings rate fell to its lowest in four decades (29.7% of GDP in 2022-23). This question directly related to the importance of the savings rate for India’s growth, which aligns with the concern over falling household savings. 

  • International Treaty on Plant Genetic Resources for FAO

    Why in the News?

    India has expressed serious concerns over proposed changes to the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA)—popularly known as the Plant Treaty.

    About the Plant Treaty, 2001:

    • Adoption: It was adopted by the FAO on 3rd November 2001 and came into force in 2004.
    • Purpose: It governs the Multilateral System (MLS) for the access and benefit-sharing of Plant Genetic Resources for Food and Agriculture (PGRFA).
    • Key Features:
      • Coverage of Crops: The MLS currently includes 64 essential food crops and forages listed in Annex I, which together meet around 80% of the world’s plant-based food needs.
      • Access Mechanism: Access to these genetic materials is provided for research, breeding, and training purposes through a Standard Material Transfer Agreement (SMTA).
      • Benefit-Sharing Approach: The Treaty incorporates monetary and non-monetary benefit-sharing mechanisms, with a focus on supporting biodiversity in developing countries.
      • IP Restrictions: It prohibits any intellectual property claims over the raw genetic materials accessed under the system.
      • Recognition of Farmers’ Rights: It affirms farmers’ rights, such as the protection of traditional knowledge, equitable benefit-sharing, and participation in national decisions about PGRFA use and conservation.
    • India’s Participation: India is a signatory and active participant and implements the Treaty alongside domestic legislation like the Protection of Plant Varieties and Farmers’ Rights (PPV&FR) Act, 2001.

    Proposed Amendments:

    • Objective: The upcoming proposal aims to expand the scope of the MLS to include all PGRFA, not just those in Annex I.
    • New Inclusions: The expansion would bring in indigenous varieties, non-commercial crops, and community-protected heirloom seeds under the MLS framework.
    • Impact on India’s Obligations: If passed, the amendment would mandate countries like India to share all plant germplasm through the existing SMTA process.
    • No Change in Benefit Terms: The amendment retains current benefit-sharing mechanisms, which critics argue are often non-monetary or merely symbolic.
    • Concerns over IP Rights: The broadened scope may lead to intellectual property loopholes if traditional seeds are repackaged or genetically altered.
    • Allegations of Biopiracy: Critics argue the proposal enables “backdoor biopiracy”, especially of the Global South’s rich seed diversity.

    India’s Concerns:

    • Loss of Seed Sovereignty: India fears it will lose discretion over which seeds to share, weakening its ability to protect unique plant biodiversity.
    • Undermining of Farmers’ Rights: The proposal might override the rights granted to farmers under the Plant Treaty and India’s PPV&FR Act, which view them as custodians of seed heritage.
    • Erosion of National Authority: The expansion could violate Articles 10 and 11 of the Treaty, which grant countries sovereign control over their genetic resources.
    • Violation of Federal Principles: The lack of consultation with States is seen as a breach of India’s federal structure, as agriculture is a State subject under Schedule VII of the Constitution.
    • Marginalization of Biodiversity Boards: The role of State Biodiversity Boards may be diminished, despite their importance in regulating local germplasm and community rights.
    • Lack of Equitable Returns: India argues that the global system offers little real benefit, raising doubts about fairness and justice in benefit-sharing.
    [UPSC 2014] Consider the following international agreements:

    1. The International Treaty on Plant Genetic Resources for Food and Agriculture.

    2. The United Nations Convention to Combat Desertification.

    3. The World Heritage Convention. Which of the above has/have a bearing on the biodiversity?

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

     

  • Cease the cess Low GST collections speak to the need for structural reforms

    Why in the News?

    On July 1, 2025, India marked eight years since the launch of the Goods and Services Tax (GST), but the occasion came with worrying signs for the economy. GST collections in June dropped to ₹1.85 lakh crore, the lowest in four months, and grew by just 6.2% year-on-year, the slowest growth in four years.

    What do low GST collections reveal about the economy and system efficiency?

    • Sluggish Economic Activity: As GST is a consumption-based tax, low collections indicate reduced demand and consumption, reflecting a slowdown in economic growth.
    • Tax System Inefficiencies: The marginal growth in net collections (just 3.3% after refunds) points to loopholes in compliance, delayed refunds, and inefficiencies in enforcement and administration.
    • Weak Revenue Buoyancy: Revenue from domestic transactions rose only 4.6%, barely outpacing inflation, showing limited buoyancy in the tax system despite a stable tax base.

    Why is the exclusion of fuel from GST debated?

    • Revenue Autonomy for States: Fuel taxes are a major independent revenue source for State governments. Including fuel under GST would shift this revenue to the GST pool, which is shared with the Centre, reducing the States’ financial autonomy.  
    • Undermines ‘One Nation, One Tax’ Goal: Excluding key commodities like petrol and diesel creates fragmentation in the GST system, violating the principle of tax uniformity. Eg: A truck transporting goods across states pays different fuel taxes, adding to logistics costs and compliance burden.
    • Public Demand for Price Rationalisation: Including fuel under GST could reduce retail prices, as GST rates are lower than the combined excise + VAT. This is especially crucial during inflationary periods. Eg: If petrol (currently taxed ~100%) comes under the 28% GST slab, it could make fuel significantly cheaper for consumers.

    What does “fewer GST slabs” mean?

    • It means merging some of these tax rates to move toward a simpler, more uniform GST system, such as: Possibly combining 12% and 18% into a single standard rate.
    • Current GST Structure: India has multiple GST slabs: 5%, 12%, 18%, 28%. Plus 0% (exempt) and special rates on certain goods/services.

    How will fewer GST slabs improve tax efficiency?

    • Simplifies Compliance for Businesses: Fewer slabs reduce confusion, errors in tax calculation, classification, and filing, especially for small businesses. Eg: A product like packaged snacks currently attracts different GST rates depending on branding, merging slabs avoids such disputes.
    • Reduces Tax Evasion and Litigation: Multiple slabs create room for misclassification and disputes over applicable rates. Fewer rates lead to clearer guidelines and fewer loopholes. Eg: Footwear priced above ₹1,000 is taxed at 18%, while below ₹1,000 it’s 5%—leading to price manipulation.
    • Boosts Consumption and Revenue Predictability: A simplified rate structure improves consumer confidence, reduces cascading effects, and encourages spending, improving overall collections. Eg: Countries like Singapore (7%) or New Zealand (15%) with uniform GST systems report higher compliance and stable revenue.

    What is the future of the GST Compensation Cess?

    • Originally meant to compensate States for GST losses for 5 years, extended till March 2026 to repay COVID-related borrowings. With its purpose served, it should be phased out rather than absorbed into GST rates.
    • Removing the cess will restore trust, reduce tax burden, and may stimulate urban consumption.

    Why is fiscal responsibility crucial for GST reforms?

    • Ensuring fiscal sustainability: Sustainable subsidies and managing the compensation burden are essential for maintaining healthy public finances. Eg: During COVID-19, the Centre had to borrow extensively to compensate States, leading to a rise in debt levels.
    • Strengthening Centre–State trust: Responsible fiscal conduct by both the Centre and States builds trust, which is critical for cooperative federalism. The GST Council functions best when transparency is ensured and non-shareable cesses are minimized to allow a higher share of central taxes to States.
    • Enabling long-term tax reforms: Fiscal prudence enables the government to invest in long-term reforms such as rationalising GST slabs, strengthening IT infrastructure, and introducing compliance incentives. These efforts can improve tax buoyancy and offset short-term revenue losses.

    How can the Centre–State balance be ensured? (Way forward)

    • Enhancing States’ Share in Central Taxes: The Centre should increase devolved funds under the Finance Commission framework to compensate for GST-linked revenue losses, especially if fuel and alcohol are brought under GST. Eg: Raising the tax devolution share beyond the current 41% can empower States financially.
    • Strengthening GST Council’s Cooperative Mechanism: Regular, consensus-based decision-making in the GST Council can improve Centre-State trust and ensure shared ownership of reforms. Eg: Joint committees for rate rationalisation or revenue monitoring can enhance transparency and equity.

    Mains PYQ:

    [UPSC 2020] Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions?

    Linkage: The article explicitly states that the GST Compensation Cess was extended until March 2026 to repay loans taken by the Centre to compensate States, specifically due to COVID-19 having disrupted revenues. The question directly delves into the compensation mechanism, its impact due to the pandemic, and the resulting “federal tensions”, which aligns perfectly with the source’s discussion on the Centre-State fiscal relationship regarding GST.

  • WTO Agreement on Safeguards (AoS)

    Why in the News?

    Invoking the Agreement on Safeguards (AoS), India has notified the WTO of its plan to impose $724 million in retaliatory tariffs on the U.S. for breaching trade commitments through unilateral auto import duties.

    What is the Agreement on Safeguards (AoS)?

    • Overview: It is a World Trade Organization (WTO) treaty that allows countries to apply temporary trade barriers—called safeguard measures—when a domestic industry is harmed by a surge in imports.
    • Purpose in Practice: The agreement maintains global trade discipline, offering legal protection tools but with checks to avoid abuse.
    • Conditions for Use: Safeguards can only be used when there is clear evidence of serious injury or threat to domestic producers due to increased imports.
    • Rules-Based System: The agreement ensures safeguard actions are transparent, time-bound, and non-discriminatory, preventing misuse for permanent protectionism.
    • Key Rules:
      • Article 12.3: Before acting, a country must notify and consult with other WTO members who may be affected by the safeguard.
      • Article 8: If consultation fails, the affected country can retaliate by suspending trade benefits equal to the loss it suffered.
      • Ban on Informal Restrictions: AoS strictly prohibits voluntary export restraints or informal quotas that evade WTO rules, ensuring fairness.

    India’s Use of the AoS – The 2025 U.S. Tariff Case:

    • Trigger: The U.S. had imposed 25% tariffs on Indian-origin vehicles and parts in March 2025, which India claims are safeguard measures disguised as unilateral tariffs.
    • Violation of Rules: India alleges that the U.S. did not follow Article 12.3 (mandatory consultations) and thus violated both AoS and GATT 1994 rules.
    • Impact on Indian Exports: India estimates that $2.89 billion worth of exports have been affected and that the U.S. collected nearly $723.75 million in duties, matching India’s proposed retaliation.
    • India’s Justification: India asserts that this move is legal under WTO rules, not protectionist, and aims to defend its export interests while continuing trade talks with the U.S.

    India’s Changing Role in WTO Safeguard Policy:

    • Early Strategy (1995–2010): India was initially cautious at the WTO, accepting tough terms under TRIPS, GATS, and AoA, and rarely used legal tools like retaliation, focusing more on diplomatic solutions.
    • Recent Assertiveness (Post-2010): India now actively invokes WTO rules like AoS to protect its interests and has won key disputes—such as:
      • The solar panel case against the U.S.
      • Legal challenges to EU’s export restrictions on food.
    • Global Leadership Role: India has taken the lead among developing countries to protect food security rights and push for fairer global trade terms, especially at Bali (2013) and Nairobi (2015) WTO summits.

    Back2Basics: 

    TRIPS (Trade-Related Aspects of Intellectual Property Rights)

    • WTO agreement (1995) setting minimum standards for IPR protection (patents, copyrights, etc.).
    • Enforced 20-year patent protection; India amended its Patent Act in 2005 to comply.
    • Allows compulsory licensing in emergencies (e.g., for medicines).

    GATS (General Agreement on Trade in Services)

    • WTO treaty covering international trade in services like IT, banking, and tourism.
    • Operates through 4 Modes of Supply:
      1. Mode 1 – Cross-border supply (e.g., online consulting)
      2. Mode 2 – Consumption abroad (e.g., medical tourism)
      3. Mode 3 – Commercial presence (e.g., foreign bank branch in India)
      4. Mode 4 – Movement of natural persons (e.g., Indian professionals working overseas)
    • India strongly supports Mode 4 for its skilled labour force.

     

    [UPSC 2015] The terms ‘Agreement on Agriculture’, ‘Agreement on the application of Sanitary and Phytosanitary Measures’ and ‘Peace Clause’ appear in the news frequently in the context of the affairs of the:

    Options: (a) Food and Agricultural Organization (b) United Nations Framework Conference on Climate Change (c) World Trade Organization* (d) United Nations Environment Programme

     

  • Oil Exploration in the Andaman Basin

    Why in the News?

    The Union Minister for Petroleum has revealed that India is on the brink of a Guyana-like oil discovery in the Andaman Sea

    Do you know?

    Guyana, now a major oil-producing nation, has seen 47% average real GDP growth since 2022, driven by offshore oil.

     

    Oil Exploration in the Andaman Basin

    About the Oil Exploration in Andaman Basin:

    • Location & Scale: It lies in the southeastern Bay of Bengal and covers about 2.25 lakh sq. km, making it one of India’s largest underexplored offshore sedimentary basins.
    • Geological Importance: It shares tectonic and structural similarities with nearby hydrocarbon-rich basins in North Sumatra (Indonesia) and Irrawaddy-Margui (Myanmar).
    • Historical Restrictions: The area was long considered a ‘No-Go’ zone due to environmental and strategic reasons, preventing oil exploration until recently.
    • Scientific Breakthrough: In 2020, Oil India Ltd launched the Deep Andaman Offshore Survey, which discovered mud volcanoes and Baratang formations — signs of hydrocarbon activity.
    • Data Entry into National Records: The survey findings were added to the National Data Repository (NDR) in 2023, making crucial geological data available to investors.
    • Rising Strategic Interest: The basin is now seen as vital for India’s energy security due to its deepwater potential and ability to cut down oil imports.
    • Recent Collaborations: Companies like ONGC partnered with TotalEnergies (France) in 2023 to explore deepwater blocks in the basin.

    Policy Shift that Enabled Exploration:

    • Introduction of HELP: The Hydrocarbon Exploration and Licensing Policy (HELP) was introduced in 2016, replacing the older NELP system with a more industry-friendly framework.
    • Licensing Reform: HELP provides a single license for all hydrocarbons — oil, gas, shale, and coal bed methane — removing the need for separate permits.
    • Revenue Sharing System: Instead of auditing costs, the government now receives a fixed share of revenue, simplifying financial compliance and reducing disputes.
    • OALP and Investor Flexibility: The Open Acreage Licensing Policy (OALP) allows companies to bid for exploration blocks of their own choosing throughout the year, encouraging customized investment.
    • Use of Geological Data: The National Data Repository (NDR) helps companies make informed decisions using extensive geological and seismic information.
    • Market Freedom: Under HELP, companies have the freedom to price and market their oil and gas, which boosts competitiveness and attracts private players.
    • Royalty Incentives: A graded royalty system reduces rates for deepwater and ultra-deepwater blocks, offsetting high-risk exploration like in the Andaman.
    [UPSC 2006] Which one of the following companies is associated with the exploration and commercial production of oil in Barmer Sanchore basin of Rajasthan?

    Options: (a) Cairn Energy * (b) Unocal Corporation (c) Reliance Energy Ventures (d) ONGC

     

  • What is India Energy Stack?

    Why in the News?

    The Union Ministry of Power announced the formation of a task force to design the India Energy Stack (IES) — a new Digital Public Infrastructure (DPI) for the energy sector.

    What is India Energy Stack?

    About India Energy Stack (IES):

    • Overview: IES is a Digital Public Infrastructure (DPI) initiative by the Ministry of Power.
    • Objective: It aims to create a unified, secure, and interoperable digital backbone for India’s entire energy ecosystem, including producers, grid operators, discoms, consumers, regulators, and markets.
    • Task Force: It is led by a 17-member task force with Nandan Nilekani as Chief Mentor, and RS Sharma as Chairperson, supported by REC Ltd as the nodal agency.
    • Implementation: A 12-month proof of concept (PoC) will pilot key components like the Utility Intelligence Platform (UIP) in states like Delhi, Gujarat, and Maharashtra.
    • Larger Impact: It is expected to support India’s transition to Net Zero, manage increasing renewable energy share, and enable consumer participation in energy trading.

    Key Features of India Energy Stack:

    • Scalability and Integration: It supports the integration of smart meters, real-time analytics, and battery storage systems, aligning with India’s energy digitisation goals.
    • Unique IDs: Provides digital identification for consumers, assets, and energy transactions, enabling seamless tracking and verification.
    • Real-Time Data Sharing: Consent-based, standardised data exchange mechanisms between stakeholders improve efficiency and transparency.
    • Open APIs: Allows integration of third-party solutions, encouraging innovation and energy fintech ecosystems.
    • Interoperability: Facilitates communication between currently fragmented digital platforms used by different state utilities and regulators.
    • Utility Intelligence Platform (UIP): A modular analytics layer to enable grid monitoring, load forecasting, demand-response, and consumer insights.
    • Peer-to-Peer Energy Trading: Empowers prosumers (producers + consumers) to buy, sell, or store energy using a digital marketplace.
    • Carbon Offset Tracking: Supports environmental compliance through transparent and verifiable emission reduction accounting.
    • Decentralised Energy Management: Enables small-scale producers and communities to participate in energy markets via smart contracts and virtual power plants.
    [UPSC 2016] Which one of the following is a purpose of ‘UDAY’, a scheme of the Government?

    (a) Providing technical and financial assistance to start-up entrepreneurs in the field of renewable sources of energy

    (b) Providing electricity to every household in the countries by 2018

    (c) Replacing the coal-based power plants with natural gas, nuclear, solar, wind and tidal power plants over a period of time

    (d) Providing for financial turnaround and revival of power distribution companies*

     

  • GST reform and unfinished business in tobacco control

    Why in the News?

    As India completes eight years of implementing the Goods and Services Tax (GST), the focus has moved from its economic benefits to its problems, especially in public health, like the poor taxation of tobacco.

    What are GST’s major achievements and gaps after eight years?

    Achievements: 

    • Unified Tax System: Replaced multiple indirect taxes with one national tax, promoting the “One Nation, One Tax” concept.
    • Increased Revenue Collection: GST collections reached ₹22.08 lakh crore in 2024–25, showing consistent growth.
    • Improved Ease of Doing Business: Simplified compliance through harmonised tax rates and digital processes.
    • Boosted Logistics Efficiency: Removal of inter-State checkpoints reduced transport time and costs.
    • Reduced Tax Cascading: The Input Tax Credit mechanism lowered production costs for businesses and prices for consumers.

    Gaps:

    • Ineffective Public Health Taxation: Tobacco taxation remains weak under GST, despite high health and economic burdens.
    • Decline in Specific Excise Duties: Over-reliance on ad valorem GST weakened price control on harmful products like bidis and cigarettes.
    • Inadequate Tax on Bidis: Bidis, widely consumed by low-income groups, are under-taxed and not covered under the GST compensation cess.
    • Loss of Revenue Post-Cess Expiry: The GST compensation cess (a major source of tobacco tax) will expire in 2026, risking affordability and public health.
    • Weak Deterrent Against Tobacco Use: Unlike pre-GST years, tax stagnation has failed to reduce tobacco consumption, ignoring WHO’s 75% tax recommendation.

    Why is GST ineffective in curbing tobacco use?

    • Lack of Significant Tax Hikes Post-GST: Since the introduction of GST in 2017, there have been no major tax increases on tobacco products. In contrast, during the pre-GST era (2009–17), regular hikes in excise and VAT contributed to a 17% decline in tobacco use.
    • Low Overall Tax Burden: The total tax on tobacco remains below the WHO-recommended 75% of retail price — only 22% for bidis, 54% for cigarettes, and 65% for smokeless tobacco. This allows tobacco products to remain affordable, especially for youth and low-income groups.
    • Under-Taxation of Harmful Products like Bidis: Bidis, the most consumed smoked tobacco product, are exempt from the GST compensation cess. Despite causing harm similar to cigarettes, they generate very low tax revenue and are widely used by low-income populations, reducing the deterrent effect of taxation.
    • Reduced Price Deterrence:  After GST, the share of excise duty fell sharply (e.g., from 54% to 8% for cigarettes), weakening the price-based disincentive for tobacco use.
    • Industry Manipulation of Ad Valorem Taxes: GST relies heavily on ad valorem taxes (based on product price), which are easier for the tobacco industry to manipulate through pricing strategies. Without specific excise duties, companies can keep prices low, making harmful products like bidis and cheap cigarettes affordable to the masses.

    What reforms can align tobacco taxes with health goals? (Way forward)

    • Introduce or Increase Specific Excise Duties: Add a fixed per-unit tax (specific excise) on tobacco products along with GST. Eg: Countries like the Philippines combine ad valorem and specific taxes, leading to higher prices and lower consumption.
    • Raise GST and Cess to Statutory Limits: Increase GST on tobacco to the legal ceiling of 40% and expand the GST Compensation Cess to include under-taxed products like bidis. Eg: Bidis, used by the poor and causing major health harm, are not covered under the cess, reducing their tax burdenand health deterrence.
    • Link Tax Policy with Inflation and Income Growth: Regularly update tobacco taxes to offset rising incomes and inflation, preventing increased affordability over time. Eg: WHO recommends adjusting taxes annually so that tobacco doesn’t become more affordable even if incomes rise.

    Mains PYQ:

    [UPSC 2019] Enumerate the indirect taxes which have been subsumed in the goods and services tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017.

    Linkage: The article talks about the GST replaced many older taxes like VAT and excise duty, helping create a single national market. Although GST collections have steadily grown—reaching ₹22.08 lakh crore in 2024–25—the revenue from tobacco (about ₹551 billion a year) is much less than the huge cost of tobacco-related health problems, which is ₹2,340 billion every year.

  • What are Strategic Petroleum Reserves (SPR)?

    Why in the News?

    India is planning to establish six new Strategic Petroleum Reserve (SPR) sites to boost energy security amid rising global oil risks.

    About Strategic Petroleum Reserves (SPR):

    • Overview: SPRs are emergency stockpiles of crude oil maintained by the government to manage supply disruptions caused by events like wars, embargoes, or price shocks.
    • Purpose: To ensure national energy security and reduce vulnerability to external supply shocks.
    • Historical Context: India realised the need for SPRs after the 1990 Gulf War, which caused supply cuts and spiking oil prices and ultimately the Balance of Payment (BoP) Crisis.
    • Foundation: The SPR project began in the early 2000s based on advice from the Planning Commission’s Integrated Energy Policy.
    • Governing Body: In 2004, the government set up Indian Strategic Petroleum Reserves Limited (ISPRL) as a Special Purpose Vehicle under the Oil Industry Development Board (OIDB).
    • India’s three-pronged oil security framework:
      1. Commercial oil stocks by public and private oil marketing companies (OMCs).
      2. Strategic reserves by ISPRL for emergencies.
      3. Equity oil assets abroad through companies like ONGC Videsh Ltd. (OVL).
    • Storage: Unlike commercial stocks, SPRs are stored in underground rock caverns, which are safer, more secure, and suited for long-term preservation.

    Current SPR Infrastructure:

    • SPR Locations: India has three active SPR sites:
      • Visakhapatnam (Andhra Pradesh)
      • Mangaluru (Karnataka)
      • Padur (Karnataka)
    • Total Capacity: The combined SPR capacity is 5.33 MMT or roughly 39 million barrels.
    • Coverage Duration: This reserve can meet about 9.5 days of India’s daily oil requirement (≈5.5 million barrels/day).
    • Distinction from OMC Stocks: These strategic stocks are separate from commercial stocks held by companies like IOCL, HPCL, and BPCL.

    Planned Expansion of SPRs in India:

    • Goal: India aims to double SPR capacity due to rising geopolitical risks and import dependence.
    • New Facilities Planned:
      • Chandikhol (Odisha) – 4 MMT (in two phases)
      • Padur Phase II (Karnataka) – 2.5 MMT
    • 6 new SPR locations are being planned at various sites, including Mangalore SEZ (Karnataka) and salt caverns in Bikaner (Rajasthan).
    • Future Capacity: After expansion, India’s total SPR stock will be 11.83 MMT, covering around 22 days of national demand.
    • Strategic Vision: The long-term objective is to build up 90 days of oil reserves, in line with International Energy Agency (IEA) guidelines.

  • [pib] Price Support Scheme (PSS) for Moong and Urad

    Why in the News?

    The Union Ministry of Agriculture has approved the procurement of Moong and Urad in Madhya Pradesh and Urad in Uttar Pradesh under the Price Support Scheme (PSS).  

    Back2Basics:

    Moong (Green Gram):

    • Moong is a high-protein pulse grown mainly in the Kharif season (June–July) and also in summer (March–April) and limited Rabi areas.
    • It thrives in well-drained loamy to sandy-loam soils with a temperatures of 25–35°C.
    • Fits well into crop rotations like Moong–Wheat or Summer Moong–Kharif Moong–Raya due to its short duration (60–75 days).
    • Major producers are Rajasthan, Maharashtra, MP, Andhra Pradesh, and UP.

    Urad (Black Gram):

    • Urad is grown mainly in the Kharif season (June–July) and also as a Rabi crop in southern India, needing a warm, humid climate.
    • Prefers well-drained loamy soils, unsuitable for waterlogged or saline areas; ideal temperature is 25–35°C.
    • Often sown in rotations with cereals like rice or wheat and widely used in intercropping/mixed cropping systems.
    • Key producing states include UP, MP, Andhra Pradesh, and Tamil Nadu.

    About Price Support Scheme (PSS):

    • Overview: PSS is a component of the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA), launched in 2018 to ensure remunerative prices for farmers.
    • Objective: It ensures procurement at the Minimum Support Price (MSP) for oilseeds, pulses, and cotton when market prices fall below MSP.
    • Nodal Agency:  It is implemented by the Department of Agriculture & Cooperation through:
      • National Agricultural Cooperative Marketing Federation of India (NAFED) (Central nodal agency)
      • Food Corporation of India (FCI) (in specific cases)
    • How PSS Works:
      • MSPs are announced before each cropping season based on recommendations from the Commission for Agricultural Costs and Prices (CACP).
      • If the market price falls below MSP, central and state nodal agencies procure the produce directly from farmers.
      • Only crops meeting the Fair Average Quality (FAQ) standards are procured.
      • Procurement continues until market prices stabilise at or above MSP.
    • Eligibility and Access:
      • All farmers cultivating notified crops are eligible to benefit under PSS.
      • They must sell their produce at designated procurement centres, such as APMCs.
      • Government employees are typically excluded from the scheme’s benefits.

    What is the PM-AASHA Scheme?

    • Launch: PM-AASHA, launched in September 2018, is an umbrella scheme by the Government of India designed to ensure fair prices for farmers’ produce, specifically for pulses, oilseeds, and copra.
    • Goal: It complements the government’s policy of setting MSP at 1.5 times the cost of production.
    • Components: The scheme aims to translate increased MSPs into actual income gains through three implementation pathways:
      1. Price Support Scheme (PSS): Physical procurement at MSP by central agencies like NAFED.
      2. Price Deficiency Payment Scheme (PDPS): Farmers receive the difference between MSP and actual selling price directly into their bank accounts; no physical procurement.
      3. Private Procurement and Stockist Scheme (PPSS): Pilot scheme allowing private players to procure at MSP to supplement government efforts.
    • Nodal Agency: It is implemented by the Ministry of Agriculture and Farmers Welfare, with procurement agencies operating at both central and state levels.

     

    [UPSC 2020] With reference to pulse production in India, consider the following statements:

    1. Black gram can be cultivated as both kharif and rabi crop. 2. Green-gram alone accounts for nearly half of pulse production. 3. In the last three decades, while the production of kharif pulses has increased, the production of rabi pulses has decreased. Which of the statements given above is/are correct?

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

     

  • India breaks into top 100 of SDG Index for the first time

    Why in the News?

    In a major milestone, India has ranked 99th out of 167 countries in the 2025 edition of the Sustainable Development Report (SDR), released by the UN Sustainable Development Solutions Network.

    What are Sustainable Development Goals (SDGs)?

    • Definition: SDGs are 17 global goals adopted by all UN member states in 2015 to end poverty, protect the planet, and promote peace and prosperity by 2030.
    • Core Focus: They balance economic growth, social inclusion and environmental sustainability for a better future.
    • Scope: The goals cover health, education, gender equality, clean water, economic growth, climate action, and governance.
    • Global Framework: They are part of the 2030 Agenda for Sustainable Development adopted by the UN.

    About Global SDG Rankings:

    • Report Publisher: The Sustainable Development Report is released annually by the UN Sustainable Development Solutions Network, led by Jeffrey Sachs.
    • Methodology: It ranks 167 countries using an SDG Index score out of 100 based on performance across all 17 goals.
    • Score Interpretation: A score of 100 means full achievement of all SDGs; lower scores show partial or poor implementation.
    • Data Sources: Rankings are based on a mix of social, economic, environmental, and governance indicators.
    • Global Patterns: European countries dominate top ranks; countries with conflict or debt rank lower.
    Note: In India, we also have our own SDG India Index released by NITI Aayog.

    Key Highlights of the Rankings:

    • India’s Rank 2025: India ranks 99th with a score of 67—its first time in the top 100.
    • Major Countries’ Ranking: China ranks 49th (74.4); the US ranks 44th (75.2) but is 193rd in SDG policy support.
    • Neighbourhood Comparison: Bhutan ranks 74th (70.5), Nepal 85th (68.6), Bangladesh 114th (63.9), Pakistan 140th (57), Sri Lanka 93rd, and Maldives 53rd.
    • Top Performers: Finland, Sweden, and Denmark lead the world in SDG achievement.
    • Areas of Progress: Global gains include access to electricity, mobile broadband, internet, and lower child mortality.
    • Major Setbacks: Challenges include rising obesity, declining press freedom, biodiversity loss, and growing corruption.
    • Target Gaps: Only 17% of SDG targets are on track to be achieved by 2030.
    [UPSC 2016] Consider the following statements:

    1. The Sustainable Development Goals were first proposed in 1972 by a global think tank called the ‘Club of Rome’.

    2. The Sustainable Development Goals have to be achieved by 2030.

    Which of the statements given above is/are correct?

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