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Subject: Economics

  • [pib] Credit Guarantee Scheme for Startups (CGSS)

    Why in the News?

    The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, has announced the expansion of the Credit Guarantee Scheme for Startups (CGSS).

    About Credit Guarantee Scheme for Startups (CGSS):

    • The CGSS was launched on October 6, 2022, as part of the Startup India Action Plan.
    • The scheme is designed to provide collateral-free credit to eligible startups through recognized financial institutions.
    • It offers credit guarantee cover for loans extended by Scheduled Commercial Banks, All India Financial Institutions (AIFIs), Non-Banking Financial Companies (NBFCs), and SEBI-registered Alternative Investment Funds (AIFs).
    • The guaranteed coverage is available in 2 formats:
      1. Transaction-based (for individual borrowers) and
      2. Umbrella-based (for Venture Debt Funds).
    • The scheme helps startups access funding through instruments such as working capital, term loans, and venture debt.
    • The DPIIT is responsible for the oversight and implementation of the scheme.
    • The scheme is operated by the National Credit Guarantee Trustee Company Limited (NCGTC).
    • A Management Committee (MC) and a Risk Evaluation Committee (REC) have been constituted to supervise and review the operations of the scheme.
    • It aligns with the objective of encouraging innovation, supporting early-stage entrepreneurship, and driving economic self-reliance.

    Key Changes in the Expanded CGSS:

    • Guarantee ceiling increased from ₹10 crore to ₹20 crore per borrower.
    • Guarantee cover enhanced to:
      • 85% for loans up to ₹10 crore.
      • 75% for loans exceeding ₹10 crore.
    • Annual Guarantee Fee (AGF) reduced from 2% to 1% p.a. for startups in 27 Champion Sectors.
    • The Champion Sectors are identified under the ‘Make in India’ initiative to strengthen domestic manufacturing and services.
    [UPSC 2023] Consider the following statements with reference to India:

    1. According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006’, the ‘medium enterprises’ are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.

    2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.

    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

     

  • Competition Commission issues norms to assess Predatory Pricing

    Why in the News?

    The Competition Commission of India (CCI) has introduced new Cost Regulations 2025 to check if companies are selling below cost to unfairly drive out competitors.

    About Competition Commission of India (CCI):

    • The CCI was established on 14 October 2003 and became fully operational in May 2009.
    • It aims to eliminate anti-competitive practices, prevent abuse of dominant positions, and promote fair competition.
    • It was formed under the Competition Act, 2002, later amended in 2007, replacing the Monopolies and Restrictive Trade Practices Act, 1969 based on Raghavan Committee recommendations.
    • The headquarters is located in Kidwai Nagar (East), New Delhi, and the Commission includes 1 Chairperson and up to 6 Members, all appointed by the Central Government.
    • Members must have at least 15 years of experience in areas such as law, economics, business, finance, or public administration.
    • Jurisdiction of CCI:
      • It is a quasi-judicial statutory body under the Ministry of Corporate Affairs.
      • It has the authority to initiate cases suo motu or respond to public/institutional complaints, and can impose penalties for violations.
      • Its jurisdiction spans all sectors across India, and it is empowered to frame its own regulations under the Act.

    New Cost Definitions under Cost Regulations, 2025:

    • Under the Cost Regulations 2025, Average Variable Cost (AVC) is used to measure cost, calculated by dividing total variable costs by total output.
    • Variable cost excludes fixed costs and overheads and varies with production.
    • Although a sector-specific approach was considered, the CCI adopted a case-by-case evaluation after stakeholder feedback.
    • The new framework is sector-agnostic, allowing flexibility for diverse industries, including the digital economy, and supports better adaptation to market dynamics.
    [UPSC 2020] With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?

    1. Quantitative restrictions on imports by foreign investors are prohibited. 2. They apply to investment measures related to trade in both goods and services. 3. They are not concerned with the regulation of foreign investment.

    Select the correct answer using the code given below:

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

     

  • [pib] Cabinet approves Revised SHAKTI Policy 

    Why in the News?

    The Cabinet Committee on Economic Affairs (CCEA) has approved a proposal under the Revised SHAKTI (Scheme to Harness and Allocate Koyla Transparently in India) Policy to enhance coal availability for Central/State Sector Thermal Power Plants and Independent Power Producers (IPPs).

    About the SHAKTI Policy:

    • The SHAKTI Policy, launched in 2017 by the Ministry of Power, created a transparent mechanism to allocate coal linkages to thermal power plants lacking Fuel Supply Agreements (FSAs).
    • It replaced the earlier nomination-based system with auction-based and tariff-based bidding, enhancing fairness and transparency.
    • While government-owned plants continue receiving coal through nominations, private power producers must obtain coal via competitive bidding.
    • The policy aimed to reduce coal imports, promote the domestic coal industry, and improve energy self-sufficiency.
    • It also intended to revive stressed assets in the power sector, indirectly supporting public sector banks and infrastructure growth.

    Key Features of the Revised SHAKTI Policy (2024):

    • The revised 2024 policy simplifies the system by merging eight criteria into just two windows, enhancing the ease of doing business.
    • Window-I allocates coal at notified prices to central and state government utilities, their joint ventures, and subsidiaries, including those with PPAs under Section 62 of the Electricity Act.
    • Window-II permits coal and imported coal-based producers to acquire coal through premium-based auctions for 12 to 25 years, without requiring a PPA.
    • The policy encourages pithead plants, supports new capacity planning, and allows Imported Coal-Based (ICB) plants to transition to domestic coal, reducing import reliance.
    • Existing FSA holders can now purchase coal beyond 100% of their Annual Contracted Quantity (ACQ) during periods of peak demand.
    • Unrequisitioned surplus electricity can be sold on power exchanges, boosting plant utilization.
    • The policy imposes no additional financial burden on coal companies.
    • Beneficiaries include thermal power plants, Coal India, SCCL, railways, state governments, and end consumers.
    [UPSC 2023] With reference to coal-based thermal power plants in India, consider the following statements:

    1. None of them uses seawater.

    2. None of them is set up in water-stressed district.

    3. None of them is privately owned.

    How many of the above statements are correct?

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

     

  • Food vs fuel: Surge in ethanol blending and its impacts

    Why in the News?

    India now aims to increase ethanol blending in petrol to 30% to reduce the use of fossil fuels, after reaching its earlier target of 20% for 2025 ahead of time.

    What factors have contributed to the decline in sugarcane production in India since 2022?

    • Red-Rot Disease: A major fungal infection that affects the stalk and reduces crop health and yield. Eg. In Uttar Pradesh and Maharashtra, outbreaks of red-rot significantly reduced sugarcane productivity post-2022.
    • Deficient Rainfall: Inadequate monsoon rains have led to water stress in sugarcane-growing regions. Eg. In Maharashtra and Karnataka, below-normal rainfall in 2023 led to poor crop growth and lower yields.
    • Flowering Issues: Disruption in the natural flowering cycle affects cane maturity and sugar content. Eg. In southern India, unseasonal weather affected flowering patterns, resulting in underdeveloped canes.
    • Soil Depletion (Soil Fatigue): Continuous sugarcane monocropping depletes soil nutrients, lowering productivity. Eg. In western Uttar Pradesh, repeated sugarcane cultivation without crop rotation has led to reduced soil fertility.
    • Crop Diversion: Farmers are shifting to other crops due to uncertain returns and rising input costs. Eg. In Tamil Nadu and Andhra Pradesh, farmers moved to pulses and cotton, reducing the area under sugarcane.

    Why has the Indian government approved a hike in the Fair Remunerative Price for sugarcane?

    • Support for Farmer Income: The hike in FRP is intended to ensure that farmers receive a fair price for their produce, thus supporting their income. Eg: The increased FRP of ₹355 per quintal (up from ₹340) ensures that farmers are adequately compensated, especially as input costs have risen. This makes sugarcane cultivation more attractive to farmers.
    • Addressing Rising Input Costs: The costs of farming inputs, such as fertilizers, labor, and irrigation, have increased, and the FRP hike helps mitigate these expenses for farmers.
      Eg: With the rise in fertilizer prices, the government’s decision to raise the FRP ensures that farmers can continue cultivating sugarcane without facing financial distress due to high input costs.
    • Incentivizing Sugarcane Production: A higher FRP encourages farmers to cultivate more sugarcane, addressing concerns over declining sugarcane production in India.
      Eg: In regions like Maharashtra and Uttar Pradesh, where production has been affected due to reduced farmer interest, the FRP increase motivates farmers to maintain or increase their sugarcane acreage.
    • Ensuring Steady Sugar Supply: Maintaining sugarcane production through higher FRP ensures a stable sugar supply for the domestic market. Eg: With India being one of the world’s largest sugar producers, ensuring adequate sugarcane production is vital to prevent sugar shortages and price hikes, as seen in previous years.
    • Timely Payments to Farmers: The FRP hike ensures that sugar mills can afford to make timely payments to farmers, thus reducing arrears. Eg: In the past, many farmers faced delayed payments from mills. The higher FRP is expected to make it financially feasible for mills to pay farmers on time.

    Which alternatives is the government considering to offset the sugarcane shortfall for ethanol?

    • B-Heavy Molasses: The government has lifted restrictions on B-heavy molasses for ethanol production, increasing supply without extra sugarcane cultivation. Eg: 750,000 metric tons of B-heavy molasses are now available for ethanol production.
    • Cane Juice and Syrup: Sugar mills can now use cane juice and syrup for ethanol, boosting production capacity. Eg: Policy change allows sugar mills to divert more resources into ethanol production from sugarcane juice.
    • Grain-Based Ethanol: The government is encouraging the use of grains like maize and rice for ethanol, diversifying feedstocks. Eg: India has turned to maize for ethanol production, though it has led to increased corn imports.
    • Food vs. Fuel Balance: The government has adjusted policies to prioritize sugar production when needed. Eg: Restrictions were imposed on ethanol production in December 2023 to ensure sufficient sugar supply.
    • Molasses-Based Ethanol Procurement Price: The government has increased the procurement price for molasses-based ethanol to incentivize production. Eg: The procurement price was raised by 3% to ₹58 per liter to boost ethanol supply.

    Way forward: 

    • Promote Crop Diversification and Sustainable Practices: Encourage farmers to adopt crop rotation and diversified farming practices, alongside promoting resilient sugarcane varieties, to reduce dependency on sugarcane monocropping and mitigate soil depletion.
    • Strengthen Ethanol Supply Chain and Support Alternative Feedstocks: Enhance infrastructure for processing alternative feedstocks like maize and rice for ethanol production, while incentivizing the use of B-heavy molasses and cane juice to ensure a steady supply of ethanol without further straining sugarcane resources.

    Mains PYQ:

    [UPSC 2024] What are the causes of persistent high food inflation in India? Comment on the effectiveness of the monetary policy of the RBI to control this type of inflation.

    Linkage: The rise in sugar price, partly due to diversion for ethanol blending, is “pinching the pockets of consumers”. This question directly addresses the causes of high food inflation, which is a significant impact of the “food vs fuel” dynamic where increased demand for crops for fuel can drive up food prices.

  • UK-India Free Trade Agreement (FTA) signed

    Why in the News?

    India and the United Kingdom signed a Free Trade Agreement (FTA), ending nearly 3 years of negotiations, with an aim to boost trade and investment between the two nations.

    Free Trade Agreement

    What is Free Trade Agreement (FTA)?

    • An FTA is an agreement between two or more countries to reduce or eliminate customs tariffs and non-tariff barriers on trade between them.
    • Objective: To promote trade by making it easier and more cost-effective for businesses to import and export goods and services.
    • FTAs can cover goods, services, investment, and intellectual property rights.
    • By reducing trade barriers, FTAs also benefit consumers by offering a wider range of products at lower prices.
    • FTAs play a key role in boosting economic growth and job creation by facilitating trade between countries.
    • India’s FTAs:
      • India has signed FTAs with 16 countries or regional blocs as of May 2025. 
      • These FTAs cover major partners such as Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, South Korea, Japan, Australia, UAE, Mauritius, ASEAN (10 countries), and EFTA (4 countries).

    Key terms of the UK-India FTA:

    • Trade Growth: Expected to boost bilateral trade by £25.5 billion annually by 2040.
    • Whisky and Gin Tariffs: Tariffs reduced from 150% to 75%, eventually to 40% over 10 years.
    • Automobile Tariffs: India to reduce automotive tariffs from over 100% to 10%.
    • Other Goods: Tariffs reduced on cosmetics, aerospace, medical devices, chocolate, and more.
    • Services and Work Permits: Increased quotas for Indian workers in IT and healthcare, with 100 new visas annually for professionals.
    • Carbon Tax: Dispute over UK’s proposed carbon tax on metal imports.
    • Supply Chain Resilience: FTA aims to reduce reliance on China and improve supply chain security.
    [UPSC 2017] The term ‘Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and:

    Options: (a) European Union* (b) Gulf Cooperation Council (c) Organization for Economic Cooperation and Development (d) Shanghai Cooperation Organization.

     

  • Hydrogen versus Battery: The Cost of Clean Public Transport

    Why in the News?

    In India, a study published in The Lancet found that between 2008 and 2019, breathing in high levels of PM2.5 air pollution for short periods caused around 30,000 deaths each year in 10 major cities—making up about 7.2% of all deaths in those areas.

    What are the major health impacts of urbanisation-related air pollution in Indian cities, as reported by the Lancet study?

    • High Mortality Due to PM2.5 Exposure: Short-term exposure to fine particulate matter (PM2.5) caused nearly 30,000 deaths annually across 10 major Indian cities from 2008 to 2019.
    • Significant Share of Urban Deaths: These pollution-related deaths represented about 7.2% of all deaths in these cities, indicating a severe public health burden directly linked to air quality.
    • City-Specific Impact – Mumbai: Mumbai recorded the highest number of annual deaths due to PM2.5, with approximately 5,100 deaths each year attributed to air pollution.
    • Severe Effects in Eastern and Southern Metropolises: Kolkata and Chennai also showed worrying trends, with 4,678 deaths/year in Kolkata and 2,870 deaths/year in Chennai due to polluted air.
    • Urbanisation Intensifies Health Risks: Rapid urban growth increases traffic congestion and emissions, compounding the effects of air pollution and increasing the risk of respiratory and cardiovascular diseases.

    Why are Fuel Cell Electric Vehicles (FCEVs) considered more suitable for long-distance travel and extreme conditions despite their low adoption?

    • Longer Driving Range: FCEVs offer greater range than battery electric vehicles (BEVs) due to the higher energy density of hydrogen fuel. Eg: Hydrogen-powered vehicles can travel 500–700 km on a single tank, ideal for intercity transport.
    • Quick Refuelling Time: FCEVs can be refuelled in just 5–15 minutes, similar to petrol or diesel vehicles, unlike BEVs which may take hours to recharge. Eg: Hydrogen buses can be quickly refuelled during breaks, making them suitable for continuous long-haul operations.
    • Better Performance in Cold Weather: FCEVs are less affected by cold temperatures, which often reduce the efficiency and range of battery-powered vehicles. Eg: FCEVs are more reliable in regions with harsh winters like high-altitude or Himalayan areas.
    • Lighter Vehicle Weight: Hydrogen fuel cells are generally lighter than large lithium-ion battery packs, improving efficiency and payload capacity. Eg: Fuel cell trucks can carry more cargo weight over rugged terrain compared to heavier BEVs.
    • Ideal for Heavy-Duty and Rugged Use: Due to their durability and efficiency, FCEVs are well-suited for buses, trucks, and long-range vehicles on varied terrains. Eg: Countries like Japan and South Korea are deploying hydrogen buses for public transport in hilly and industrial regions.

    Which countries and regions are leading in global electric car sales and how does India compare?

    Country/Region 2023 EV Sales Market Share Key Highlights
    China 9.05 million 37% of total car sales World’s largest EV market; accounts for ~58% of global EV consumption
    Europe 3.02 million 24% of total car sales Strong adoption in countries like Norway, Germany, and the Netherlands
    United States 1.39 million 9.5% of total car sales Third-largest EV market globally
    India 80,000 ~5% of total car sales Rapid growth; EV sales nearly doubled in 2023; leading in electric three-wheeler sales

    When will hydrogen vehicle costs match battery-electric vehicles?

    • Cost Convergence Expected by 2030: Experts predict that the initial purchase cost of hydrogen Fuel Cell Electric Vehicles (FCEVs) will match that of BEVs by around 2030, due to advancements in hydrogen fuel cell technology and mass production. Eg: A hydrogen-powered bus may cost the same as a battery-electric bus by 2030, narrowing today’s 20–30% cost gap.
    • Technology and Manufacturing Scale-Up: As production scales up, the cost of fuel cells, hydrogen storage systems, and related components is expected to fall significantly. Eg: Mass production of hydrogen tanks and cheaper catalysts could lower vehicle costs similar to how lithium-ion battery costs declined over time.
    • Infrastructure Development and Government Support: Increased investment in hydrogen refuelling infrastructure and government subsidies are crucial for cost parity. Eg: Japan and South Korea are funding hydrogen highways and offering tax incentives to make hydrogen cars more affordable.
    • Operational Costs to Remain High: While initial costs may match BEVs by 2030, running costs are expected to remain significantly higher beyond that due to fuel prices. Eg: Operating a green hydrogen bus currently costs around $0.91/km, compared to $0.17/km for electric buses.
    • Limited Market Segments for Parity: Cost matching is likely only in specific segments like heavy-duty transport, not across all vehicle categories. Eg: Long-haul hydrogen trucks may achieve cost parity with electric trucks sooner than passenger cars due to their high utility.

    What are the steps taken by the Indian Government? 

    • FAME India Scheme: Launched in 2015, it offers financial incentives for EV adoption and charging infrastructure development. Phase II (2019) focuses on public transport EVs and charging stations.
    • PLI Scheme: A ₹26,000 crore initiative to boost domestic EV and hydrogen vehicle manufacturing, reduce imports, create jobs, and support ‘Make in India.’
    • Customs Duty Reduction: Import duties on EVs above $35,000 have been reduced from up to 100% to 15%, with a cap of 8,000 vehicles annually for five years, provided manufacturers commit to local production.
    • NEMMP: The 2013 National Electric Mobility Mission Plan aims to boost EV and hybrid vehicle adoption through technology, infrastructure, and demand generation.
    • State-Level Initiatives: States like Uttar Pradesh, Tamil Nadu, and Delhi have implemented various EV policies, including subsidies, tax waivers, and electric auto rickshaw programs to promote adoption.

    Way forward: 

    • Enhance R&D and Subsidies: Support innovation and provide financial incentives to reduce the cost of hydrogen vehicles and fuel.
    • Build Targeted Infrastructure: Develop hydrogen refuelling stations along key freight corridors and urban hubs.

    Mains PYQ:

    [UPSC 2024] How do electric vehicles contribute to reducing carbon emissions and what are the key benefits they offer compared to traditional combustion engine vehicles?

    Linkage: Electric vehicles (which often implies BEVs) and their role in reducing carbon emissions, aligning with the “clean public transport”.

  • Kaleshwaram Lift Irrigation Project (KLIP)

    Why in the News?

    The National Dam Safety Authority (NDSA) has reported major structural and operational defects in Telangana’s Kaleshwaram Lift Irrigation Project (KLIP), citing “irreparable damage” to three key barrages, including Medigadda.

    Kaleshwaram Lift Irrigation Project (KLIP)

    About Kaleshwaram Lift Irrigation Project (KLIP)

    • KLIP, located on the Godavari River in Telangana, is the world’s largest multi-stage lift irrigation project, inaugurated on June 21, 2019.
    • The project aims to irrigate 45 lakh acres, supply drinking water to Hyderabad, and support industrial use.
    • It plans to lift 240 TMC of water, with 195 TMC from Medigadda, 20 TMC from Sripada Yellampalli, and 25 TMC from groundwater.
    • The infrastructure includes 7 links, 28 packages, a 500 km span, 1,800+ km canal network, 20 reservoirs, and Asia’s largest pump house at Ramadugu.
    • Estimated cost: ₹80,000 crore to ₹1.2 lakh crore.

    Issues with the Project

    • In October 2023, Pillar No. 20 of the Medigadda barrage sank, causing flood-related damages.
    • NDSA’s April 2024 report identified structural distress in all 3 barrages (Medigadda, Annaram, Sundilla) due to poor design, lack of geotechnical studies, and inadequate safety protocols.
    • Overloading of barrages (10 TMC water stored instead of 2 TMC) caused foundation damage.
    • The state incurs ₹16,000 crore annually in loan and interest repayments, despite the project being criticized as a “man-made disaster.”

    Back2Basics: Godavari River

    • The Godavari, also known as Dakshin Ganga, is the largest peninsular river in India.
    • Originates from Trimbakeshwar in Maharashtra, flowing 1465 km to the Bay of Bengal.
    • Its basin spans: Maharashtra, Telangana, Andhra Pradesh, Chhattisgarh, Odisha, and parts of Madhya Pradesh, Karnataka, and Puducherry.
    • Right bank tributaries include Pravara, Manjira, and Maner; Left bank tributaries include Purna, Pranhita, Indravati, and Sabari.

     

    [UPSC 2024] Recently, the term “pumped-storage hydropower” is actually and appropriately discussed in the context of which one of the following?

    Options: (a) Irrigation of terraced crop fields (b) Lift irrigation of cereal crops (c) Long duration energy storage* (d) Rainwater harvesting system

     

  • [5th May 2025] The Hindu Op-ed: Shaping the port of the future

    PYQ Relevance:

    [UPSC 2021] Investment in infrastructure is essential for more rapid and inclusive economic growth.” Discuss in the light of India’s experience.

    Linkage: Vizhinjam Port is seen as a major infrastructure project that can bring big economic benefits and boost growth in the region. This “port of the future” is a clear example of how building key infrastructure can help speed up development and strengthen India’s role in global sea trade.

     

    Mentor’s Comment:  The town of Vizhinjam in Kerala has been an important part of global sea trade since ancient times. Inscriptions from the Pandya-Chola period (1129 AD) refer to it as Rajendra Chola Pattinam, a key port in Kerala. Some historians believe that Vizhinjam was earlier known as Balita, a port mentioned in the 1st-century travel book The Periplus of the Erythraean Sea. Over time, however, Vizhinjam lost its importance when colonial powers began to focus on developing other ports like Cochin and Madras.

    Today’s editorial analyses the first deep-water container transhipment port at Vizhinjam. This content would help in the GS Paper II (International Relations) and GS Paper III (Port & Infrastructure).

    _

    Let’s learn!

    Why in the News?

    India’s first deep-water container transshipment port at Vizhinjam has been officially opened by the Prime Minister.

    What historical records highlight Vizhinjam’s ancient maritime significance?

    • Inscriptions from the Pandya-Chola Era (1129 AD): Vizhinjam was referred to as Rajendra Chola Pattinam, highlighting its importance under Chola rule. Eg: Inscriptions found in Tamil Nadu indicate Vizhinjam was a maritime outpost under Rajendra Chola I.
    • Mention in The Periplus of the Erythraean Sea (1st century AD): Scholars correlate Vizhinjam with Balita, a port listed in this Greco-Roman navigational text. Eg: The Periplus details trade with South Indian ports exporting spices, pearls, and textiles.
    • Vital Node in the Ancient Spice Route: Vizhinjam facilitated trade in pepper and aromatics between India and the Greco-Roman world. Eg: Goods from Kerala were shipped to Alexandria and further into Europe via this port.
    • Geographic Advantage as a Natural Port: Vizhinjam’s deep-sea location and sheltering coastline made it ideal for anchorage and monsoon navigation. Eg: Sailors preferred Vizhinjam for docking during the southwest monsoon season.
    • Decline Due to Colonial Maritime Reorientation: Colonial interests bypassed Vizhinjam in favor of Cochin and Madras, leading to its historical obscurity. Eg: The British East India Company developed Cochin, reducing Vizhinjam’s strategic relevance.

    Why is Vizhinjam Port crucial for India’s transshipment strategy?

    • Proximity to International Shipping Routes: Vizhinjam lies just 10 nautical miles from the busy east–west international sea route, reducing diversion time for vessels. Eg: Ships plying between the Persian Gulf and the Malacca Strait can easily access Vizhinjam without significant deviation.
    • Natural Deep-Draft Port: It has a natural depth of over 20 meters, allowing large container ships (like Ultra Large Container Vessels) to dock without dredging. Eg: Unlike ports such as Chennai or Kolkata, Vizhinjam can handle Mother Vessels directly.
    • Reduces India’s Dependence on Foreign Ports: India currently transships ~75% of its cargo through ports like Colombo, Singapore, and Jebel Ali. Vizhinjam aims to internalize this traffic. Eg: Container traffic from Kochi or Tuticorin often goes to Colombo first—Vizhinjam can bypass this.
    • Strategic Location for Regional Hub Development: Located on the southern tip of India, it can serve as a transshipment hub for South Asia and East Africa. Eg: Ports in Maldives, Seychelles, and even parts of the African east coast could be serviced via Vizhinjam.
    • Boosts Sagarmala and Atmanirbhar Bharat Goals: It aligns with India’s vision to develop port-led development and reduce logistic costs under the Sagarmala Programme. Eg: Vizhinjam complements other projects like Vadhavan and Paradip in creating an integrated maritime network.

    Who are the main stakeholders in the Vizhinjam Port project?

    • Government of Kerala: Owns the port infrastructure and plays a key role in policy, land acquisition, and facilitating local support. Eg: Kerala State Industrial Development Corporation (KSIDC) is involved in project coordination.
    • Adani Ports and SEZ Ltd (APSEZ): The main private developer and operator of the port under a Public-Private Partnership (PPP) model. Eg: APSEZ is responsible for design, build, finance, operate, and transfer (DBFOT) of the port.
    • Central Government of India: Provides financial assistance and regulatory approvals via the Ministry of Ports, Shipping and Waterways. Eg: The project received viability gap funding (VGF) from the Centre to make it commercially feasible.
    • Local Community and Fisherfolk: Crucial stakeholders impacted by land use, fishing access, and environmental changes. Eg: Protests by fishing communities in 2022 highlighted concerns over displacement and livelihood loss.
    • Environmental and Regulatory Bodies: Ensure compliance with Coastal Regulation Zone (CRZ) norms, environmental clearances, and sustainable development. Eg: The Ministry of Environment, Forest and Climate Change (MoEFCC) granted conditional clearance after EIA studies.

    How can Vizhinjam’s economic potential mirror global models like Shenzhen?

    • Strategic Coastal Location for Global Trade: Like Shenzhen, Vizhinjam lies close to major global shipping routes, enabling it to become a vital logistics hub. Eg: Vizhinjam is just 10 nautical miles from the international east-west shipping corridor, ideal for transshipment.
    • Integrated Industrial and Port Development: Shenzhen’s success came from combining port infrastructure with export-oriented industrial zones; Vizhinjam can follow suit with Special Economic Zones (SEZs). Eg: Planned industrial corridors around Vizhinjam can attract electronics, pharmaceuticals, and marine processing units.
    • Private Sector-Led Infrastructure Expansion: Like Shenzhen’s model of leveraging private investment for rapid development, Vizhinjam is being developed under PPP with Adani Ports. Eg: Adani Ports has experience in developing Mundra Port as an integrated commercial port ecosystem.
    • Tech-Driven, Green Port Initiatives: Shenzhen is a pioneer in using smart and sustainable technologies; Vizhinjam can adopt automation, renewable energy, and green logistics. Eg: Vizhinjam’s deep draft allows handling of mega ships with less dredging, reducing ecological footprint.
    • Employment and Urban Transformation: Shenzhen evolved from a fishing village to a global metropolis; Vizhinjam can drive local employment, urbanisation, and socioeconomic growth. Eg: Development of port-linked infrastructure is expected to boost tourism, services, and real estate in the Trivandrum region.

    What are the challenges for the ports in India? 

    • Labor Disputes and Industrial Actions: Indian ports have experienced significant disruptions due to labor strikes and protests. Eg: In August 2024, approximately 20,000 port workers initiated a strike demanding wage revisions and improved pension benefits. This industrial action threatened to halt operations across major ports, causing delays in cargo handling and impacting global trade.
    • Inadequate Last-Mile Connectivity: Despite improvements in port infrastructure, many Indian ports suffer from poor last-mile connectivity. Eg: The Jawaharlal Nehru Port in Navi Mumbai often faces delays due to inefficient road networks and underdeveloped transport links, affecting overall port efficiency.
    • Port Congestion and Operational Inefficiencies: Indian ports are grappling with congestion issues, leading to delays in cargo handling and increased turnaround times for vessels. Eg: Factors like outdated cargo tracking systems and regulatory bottlenecks have forced some shipping lines to skip Indian port calls to maintain schedules.

    Way forward: 

    • Improve Port Infrastructure and Last-Mile Connectivity: Enhance road, rail, and port connectivity to streamline cargo movement and reduce congestion. Investments in modernizing transport networks and implementing smart technologies can ensure smoother operations and quicker turnaround times.
    • Strengthen Labor Relations and Efficiency: Resolve labor disputes through better communication and negotiations, ensuring worker welfare while maintaining productivity. Implementing automation and improving operational processes can also reduce dependency on manual labor and improve efficiency.

  • Temporary respite: on GST, India’s manufacturing 

    Why in the News?

    Since the Goods and Services Tax (GST) system started in 2017, India’s GST collections every April have regularly reached new record highs.

    What was the GST collection in April and its year-on-year growth?

    • Record High Collection: In April 2025, India collected ₹2.37 lakh crore in gross GST, marking the highest ever monthly collection since the GST regime began in 2017. Example: This was up from ₹2.10 lakh crore in April 2024.
    • Strong Year-on-Year Growth: This represented a 12.6% growth over the previous year’s April figures, showing improved compliance and economic activity. Example: After refunds, the net collection for the Centre rose by 9.1% compared to April 2024.

    How has GST compliance and fintech adoption boosted tax collection?

    • Higher Tax Filing Discipline: Increased awareness and digital tracking have improved GST compliance among businesses. Eg: The consistent rise in GST collections every April since 2018 from ₹1.03 lakh crore to ₹2.37 lakh crore indicates better adherence to filing norms.
    • Faster Refunds Encourage Participation: Swift processing of refunds, especially for small businesses, has encouraged timely and accurate GST filing. Eg: Refunds to exporters rose by 86% in April 2025, indicating improved trust in the system.
    • Fintech Integration Supports MSMEs: With 87% fintech adoption in India, MSMEs have better access to formal banking and invoicing systems, helping them meet compliance requirements. Eg: Digital invoicing apps and GST-ready accounting tools have simplified filings for small traders and manufacturers.
    • Digital Audit Trails Enhance Enforcement: Fintech tools enable real-time tracking of transactions, reducing scope for tax evasion. Eg: E-invoicing and auto-generated returns allow tax authorities to detect discrepancies quickly.
    • COVID-19 Accelerated Formalization: The pandemic years pushed many informal businesses into the digital and formal economy, making tax compliance a necessity. Eg: Many first-time filers from the MSME sector were onboarded via digital platforms during 2020–21, increasing the taxpayer base.

    What led to the 86% rise in refunds to exporters?

    • Improved GST Processing Systems: The government has streamlined refund procedures with faster digital approvals and reduced delays. Eg: Automation of refund claims has enabled quicker credit settlements to exporters within defined timelines.
    • Higher Volume of Export Orders: A surge in international demand led to increased export activity, resulting in more refund claims under GST. Eg: Orders from regions like Africa, Asia, and the Americas rose significantly in April 2025, boosting GST refund outflow.
    • Greater GST Compliance by Exporters: Better record-keeping and digital documentation encouraged more businesses to file refund claims accurately and on time. Eg: Exporters using fintech platforms for e-invoicing were able to submit error-free refund claims swiftly.

    What is HSBC India PMI? 

    The HSBC India PMI refers to the Purchasing Managers’ Index compiled by HSBC in partnership with S&P Global to track the economic health of India’s manufacturing and services sectors.

    What is Purchasing Managers’ Index (PMI)? 

    • Purchasing Managers’ Index (PMI) is an economic indicator that measures the health and performance of a country’s manufacturing and services sectors. It is based on surveys of purchasing managers across various industries.
    • Index Scale:
      • Above 50: Indicates expansion in economic activity
      • Below 50: Indicates contraction
      • Exactly 50: No change

    Why did the HSBC India PMI show a 10-month high in April?

    • Surge in New Business Orders: Domestic and international demand for Indian-manufactured goods increased, boosting factory activity. Eg: Indian companies saw the largest increase in overseas orders in over 14 years.
    • Export Growth from Global Demand: Strong demand from key regions like Africa, Asia, Europe, West Asia, and the Americas fueled export-oriented production. Eg: Exporters rushed to fulfill orders before the U.S. tariff pause on Chinese goods ends in July.
    • Positive Business Sentiment: Companies expanded production and hiring in response to growing order books and market optimism. Eg: Firms ramped up manufacturing capacity to take advantage of global supply chain shifts toward India.

    How has the U.S. tariff pause on China affected India’s manufacturing sector?

    • Increased Export Orders to India: Global buyers are shifting orders from China to India to avoid potential U.S. tariffs. Eg: Indian manufacturers received a surge in foreign orders, especially from the U.S., ahead of the July 9 tariff deadline.
    • Realignment of Supply Chains: India is emerging as an alternative manufacturing base due to U.S.–China trade tensions. Eg: Apple announced plans to source ‘most of its iPhones’ for the U.S. market from India.
    • Short-Term Boost in Manufacturing Activity: Anticipated U.S. tariffs on Chinese goods have created temporary opportunities for Indian exporters. Eg: India’s manufacturing sector saw a sharp rise in April output, contributing to a 10-month high in the HSBC PMI.

    Way forward: 

    • ​​Strengthen Fintech-GST Integration: Deepen digital infrastructure and incentivize e-invoicing adoption among small businesses to sustain high compliance and broaden the tax base.
    • Enhance Export Ecosystem: Build long-term trade resilience through export incentives, logistics upgrades, and faster refund systems to capitalize on shifting global supply chains.

    Mains PYQ:

    [UPSC 2019] Explain the salient features of the constitution(One Hundred and First Amendment) Act, 2016. Do you think it is efficacious enough ‘to remove cascading effect of taxes and provide for common national market for goods and services’?

    Linkage:  The article shares the latest information on how much money the government collected through GST and how well people are following GST rules. The question is asking about which earlier taxes were included under GST and how GST has affected government income.

  • “China Plus One” Strategy

    Why in the News?

    Japanese companies, along with other global players, are increasingly turning to India under the China Plus One strategy, aiming to diversify supply chains and reduce overdependence on China.

    About China Plus One Strategy:

    • It is a global business model introduced in 2013 to reduce dependence on China by adding another country to the manufacturing or sourcing base.
    • It emerged due to concerns about geopolitical risks, trade tensions, and regulatory unpredictability in China.
    • The strategy gained momentum after the US–China trade war, China’s Zero-Covid policy, and increasing labour and compliance costs.
    • Its goal is to create resilient and diversified supply chains by operating in China and one or more alternative countries.
    • Vietnam, Mexico, and Taiwan have become early beneficiaries in sectors like machinery, electronics, and transport.

    Benefits for India:

    • India offers a large market, skilled labor, and cost advantages, making it an attractive destination for diversification.
    • The growing digital infrastructure and industrial corridors support the relocation of manufacturing, with government schemes like PLI and Make in India aligning with the China Plus One goals.
    • Challenges:
      • India faces limited integration into global value chains, logistics inefficiencies, and regulatory bottlenecks.
      • Historical protectionist trade policies and lack of participation in trade agreements like RCEP hinder its full potential.
      • To compete with nations like Vietnam or Mexico, India needs labour reforms, improved ease of doing business, and better trade facilitation.
    [UPSC 2021] Consider the following:

    1.Foreign currency convertible bonds 2.Foreign institutional investment with certain conditions 3.Global depository receipts 4.Non-resident external deposits Which of the above can be included in Foreign Direct Investments?

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