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Subject: Economics

  • Rishikesh-Karnaprayag Railway Tunnel

    Why in the News?

    India has marked a significant achievement in its railway infrastructure development with the “tunnel breakthrough” of Tunnel No. 8 on the Rishikesh-Karnaprayag Railway Line.

    Rishikesh-Karnaprayag Railway Tunnel

    About Rishikesh-Karnaprayag Railway Tunnel:

    • Tunnel No. 8 is a major part of the Rishikesh-Karnaprayag railway project, spanning 14.58 km, making it the longest transport tunnel under construction in India.
    • The tunnel is the first railway tunnel in the Himalayan region to use a Tunnel Boring Machine (TBM) (combining with the New Austrian Tunneling Method (NATM)) which reduces environmental disruption and increases efficiency compared to traditional blasting methods.
    • It is located on the Devprayag to Janasu stretch, which is part of the larger Rishikesh-Karnaprayag railway line project in Uttarakhand.
    • It is part of a larger plan to build a 125.20 km rail link, with 83% of the line to be tunnelled.
    • It will feature 12 new stations, 16 tunnels, and 19 bridges across five districts of Uttarakhand.
    • Safety measures include 12 escape tunnels and 7.05 km of cross passages to ensure passenger safety in case of emergencies.
    • This link will significantly improve connectivity to Uttarakhand’s hilly areas, reduce travel time, and boost economic activity in the region.
    [UPSC 2005] Consider the following statements concerning the Indian Railways:

    1. The Head Quarters of the North Western Railway are located at Jodhpur.

    2. ‘Indrail pass’ – a travel-as-you-please ticket has been created especially for freedom fighters and sportspersons who have represented India in any game/sport.

    3. Fairy Queen is a train using the world’s oldest working engine and the Indian Railways conduct a journey of wildlife and heritage sites on it.

    Which of the statements given above is/are correct?

    Options: (a) 2 only (b) 3 only (c) 1 and 2 (d) None*

     

  • New pathways for India’s creative economy 

    Why in the news?

    India has a rich history of creativity across fields like art, science, and medicine. To achieve its $5 trillion goal, it must refresh its innovation approach by encouraging creativity everywhere.

    What is the creative economy?

    The creative economy includes industries driven by creativity, culture, knowledge, and innovation, like art, design, media, software, and research, generating income, jobs, and exports through intellectual and cultural capital.

    What is the situation of the Global creative Economy? 

    • Global Creative Economy (2022): Creative services exports reached $1.4 trillion (29% rise since 2017), goods at $713 billion, together generating over $2 trillion annually and supporting 50 million jobs.
    • Key Sectors (UNCTAD 2024): Software services (41.3%), research and development (30.7%), and advertising, market research, and architecture (15.5%) are major contributors to the global creative economy.
    • India’s Contribution: In 2019, India’s creative exports totaled $121 billion, with services making up $100 billion. As of 2024, the sector is valued at $30 billion, employs 8% of the workforce, and saw a 20% growth in exports.

    What factors drive India’s growing creative economy and its $5 trillion ambition?

    • Diverse Creative Sectors: India has a rich tradition of creativity across various fields such as arts, design, science, medicine, and technology. This diverse pool of creativity serves as a foundation for innovation. Eg: The design sector, accounting for 87.5% of India’s creative goods exports, showcases India’s global leadership in design innovation.
    • Increasing Global Demand for Creative Goods and Services: The global market for creative services has surged, and India’s growing export of creative goods and services is capitalizing on this demand. Eg: In 2022, India’s creative exports grew by 20%, reaching over $11 billion, indicating the sector’s expanding international reach.
    • Technological Advancements: Investment in technology and software services is one of the primary contributors to India’s creative economy. As technology integrates into creative fields, it opens up new possibilities for innovation. Eg: Software services make up 41.3% of the global creative economy, positioning India as a leader in IT and creative technological services.
    • Grassroots Innovations: India’s grassroots innovations, often solving local challenges, are a significant driver of the creative economy. These innovations have the potential to scale up and contribute to economic growth. Eg: Innovations like the “mitti cool clay refrigerator” and pedal-operated washing machines showcase India’s strength in developing frugal, sustainable innovations that can be scaled.
    • Government Initiatives and Investments: The Indian government’s support for creative industries, such as through initiatives like “One District One Innovation,” helps nurture local creativity and turn it into large-scale economic impact. Eg: The government’s focus on intellectual property protection and encouraging local creative ideas through programs like GIAN (Grassroots Innovations Augmentation Network) enables broader commercialization of grassroots innovations.

    Why is bridging the gap between creativity and innovation essential in India?

    • Ideas to Scalable Products: Creativity generates ideas, but innovation turns them into products. Bridging the gap ensures ideas are transformed into commercially viable solutions. Eg: The “mitti cool clay refrigerator” needs innovation for mass production.
    • Maximizing Economic Impact: Bridging the gap helps scale innovations, creating jobs and boosting economic growth. Eg: The pedal-operated washing machine requires innovation to reach larger markets.
    • Enhancing Global Competitiveness: Converting creative ideas into innovative products boosts India’s global market presence. Eg: India’s design sector can thrive by innovating creative concepts into market-ready products.

    What are the steps taken by the Indian government? 

    • One District One Product (ODOP) & One District One Innovation (ODOI): Promotes unique local products and innovations from each district to boost local economies and generate employment. Eg: ODOP has helped districts like Bhadohi in Uttar Pradesh gain recognition for carpet weaving, integrating traditional creativity with global markets.
    • Startup India and Atal Innovation Mission (AIM): These initiatives foster innovation by supporting startups with funding, mentorship, and infrastructure. Eg: AIM’s Atal Tinkering Labs in schools promote problem-solving and innovation from a young age, nurturing future innovators.
    • Support for Intellectual Property Rights (IPR): Government has simplified patent filing, reduced fees for startups, and launched awareness programs to protect grassroots innovations. Eg: The National IPR Policy 2016 encourages creators, especially in rural India, to safeguard and monetise their innovations.

     

    How can grassroots innovations be scaled up for commercial success? (Way forward)

    • Improved Manufacturing Processes: To scale grassroots innovations, cost-effective and efficient manufacturing processes must be developed to meet larger market demands. Eg: The “mitti cool clay refrigerator” needs affordable mass production techniques to reduce costs and increase accessibility.
    • Protection of Intellectual Property: Innovators need intellectual property (IP) protection to prevent replication and ensure fair returns from their ideas. Eg: IP protection for local innovations like the “amphibious bicycle” ensures exclusive market rights and encourages investment.
    • Market Research and Consumer Feedback: Conducting market research and incorporating consumer feedback helps tailor grassroots innovations to meet the needs of a broader audience. Eg: The “mitti cool” refrigerator could be adapted to different regional needs based on customer feedback.
    • Government Support and Policy Frameworks: Government policies and initiatives can help create an ecosystem for scaling grassroots innovations by providing infrastructure, legal support, and incentives for innovation. Eg: Programs like “One District One Innovation” could support scaling local innovations like sustainable farming tools across regions.

    Mains PYQ: 

    [UPSC 2018] What is the significance of Industrial Corridors in India? Identify industrial corridors, explain their main characteristics.

    Linkage: The concept of industrial corridors emphasizes infrastructure development and sector-specific growth. Similarly, developing robust ecosystems and infrastructure for creative industries is a crucial pathway for the growth of India’s creative economy, aligning with the need for support and formalization discussed in the article.

     

     

     

  • When governments disagree with the central bank: the Fed in the US and the RBI in India

    Why in the News?

    US President Donald Trump once threatened to remove Jerome Powell, whom he had appointed as the head of the Federal Reserve in 2018. Such disagreements between leaders and central banks have happened before in both the US and India, but they usually don’t turn into major problems.

    What triggered Trump’s criticism of Fed Chair Jerome Powell?

    • Disagreement Over Interest Rate Policy: Trump criticized Powell for raising interest rates, especially during times of economic uncertainty like the COVID-19 pandemic. He believed higher rates would hurt economic growth and his re-election prospects. Eg: In December 2018, Trump reportedly said Powell would “turn [him] into Hoover,” referencing Herbert Hoover, who led during the Great Depression.
    • Fed’s Caution on Trump’s Tariffs: Powell warned that Trump’s trade tariffs could increase inflation and impact the labour market, which contradicted the President’s economic stance. Trump saw this as “playing politics.” Eg: On April 17, 2025, Trump posted online that Powell’s “termination cannot come fast enough!” and mocked him as “Too Late Jerome Powell.”

    Who in U.S. history challenged the Fed’s independence, and why?

    • Milton Friedman’s Influence (1970s–80s): The Nobel laureate economist argued that the Fed should be less discretionary and more rules-based, believing it often worsened economic cycles. Eg: Arthur Burns told Volcker that Friedman “wants to abolish the Fed (and) replace you with a computer.”
    • Ronald Reagan’s Administration (1980s): Reagan’s advisers questioned the Fed’s independence, urging more accountability and clearer monetary targets due to high inflation and unemployment. Eg: In 1981, Reagan asked Fed Chair Volcker why the U.S. needed the Federal Reserve, reflecting pressure to align with government priorities.
    • Donald Trump (2018–2025): Trump repeatedly attacked Fed Chair Jerome Powell for raising interest rates and criticized the Fed’s caution over his tariff policies, claiming they hindered economic growth. Eg: In December 2018, Trump expressed a desire to fire Powell, blaming him for risking a downturn like the Great Depression.

    When was Section 7(1) of the RBI Act invoked, and why was it significant?

    • Invoked in 2018 during Centre-RBI tensions: The Union Government reportedly invoked Section 7(1) for the first time in independent India amid differences with the RBI over issues like liquidity, lending to MSMEs, and the use of RBI reserves. Eg: The Finance Ministry sent at least three letters to RBI citing Section 7(1), asking the central bank to consult with the government.
    • Significance – Questioned RBI’s autonomy: This move raised concerns about the erosion of the central bank’s independence, as the section allows the government to issue binding directions to the RBI in public interest. Eg: Critics saw it as a way to force the RBI to align with the government’s fiscal agenda, undermining its role as an independent regulator.
    • Led to public fallout and resignation: The conflict led to the resignation of RBI Governor Urjit Patel, who stepped down citing personal reasons amid speculation of pressure from the government. Eg: Patel’s abrupt resignation in December 2018 came soon after Deputy Governor Viral Acharya warned of the dangers of compromising central bank independence.

    How have Indian governments handled RBI conflicts in the past?

    • Through backchannel negotiations and compromise: Successive governments have often resolved tensions with RBI through informal dialogue rather than confrontation. Eg: During the 1991 economic crisis, Finance Minister Manmohan Singh worked closely with RBI Governor S. Venkitaramanan to navigate reforms despite some policy disagreements.
    • Avoiding use of Section 7(1) until 2018: Even in times of serious disagreement, governments historically refrained from invoking Section 7(1) of the RBI Act to respect the central bank’s autonomy. Eg: In 2008–09, during the global financial crisis, the government and RBI had different views on stimulus, but maintained cooperation.
    • Occasional public spats but resolution behind closed doors: Disagreements sometimes came into the public domain but were eventually settled through internal discussions. Eg: In 2013, Raghuram Rajan’s monetary tightening clashed with the Finance Ministry’s push for growth, but no formal confrontation occurred.
    • Appointments as a tool to align RBI’s stance: Governments have sometimes appointed RBI governors who are seen as more aligned with their economic philosophy. Eg: The appointment of Y.V. Reddy and later Raghuram Rajan was seen in part as reflecting the government’s evolving monetary and financial strategy.
    • Post-conflict policy adaptations: After major conflicts, governments have occasionally adjusted policies or created frameworks to reduce future friction. Eg: Following the 2018 rift, the government and RBI set up a framework for the transfer of surplus reserves to avoid ad-hoc confrontations in future.

    Way forward: 

    • Institutionalise a Conflict Resolution Mechanism: Establish a formal consultative framework between the Finance Ministry and RBI to address policy differences before they escalate. This could include regular high-level meetings and joint committees to ensure transparency and trust. Eg: A permanent Finance-RBI Coordination Council with defined terms could pre-empt confrontations like the 2018 episode.
    • Clarify Autonomy Boundaries Through Legislation or Protocols: Amend or supplement existing laws like the RBI Act to define the scope of government intervention (like Section 7) and ensure it is used only under extraordinary circumstances. Eg: Introduce a statutory guideline requiring parliamentary review or expert panel consultation before invoking Section 7.

    Mains PYQ:

    [UPSC 2023] Explain the significance of the 101st Constitutional Amendment Act. To what extent does it reflect the accommodative spirit of federalism?

    Linkage: Constitutional amendments affecting fiscal matters can have implications for the central bank’s role and its relationship with the government.

  • [18th April 2025] The Hindu Op-ed: Are Indian startups not scaling up on innovation?

    PYQ Relevance:

    [UPSC 2024] What are the challenges in the commercialisation and diffusion of indigenously developed technologies? Although India is second in the world in filing patents, still only a few have been commercialised. Explain the reasons behind this less commercialisation.

    Linkage: The challenge of scaling up the impact of innovation by focusing on the commercialisation of patents, which is a crucial aspect for startups aiming to grow.

     

    Mentor’s Comment:  Startups in India have seen significant growth, especially with government initiatives like Startup India. However, Union Minister highlighted that many of these startups are focusing on repetitive ideas, like grocery delivery, rather than pushing the boundaries of innovation. He emphasized the need for more groundbreaking, science-based solutions to address broader challenges and drive sustainable growth.

    Today’s editorial looks at startups in India, focusing on factors that help them grow, challenges like lack of innovation and funding, and the need to move beyond grocery delivery for long-term success.. This content would help in GS paper 3 mains.

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    Let’s learn!

    Why in the News?

    Recently, at the Startup Mahakumbh in New Delhi, Union Commerce and Industry Minister Piyush Goyal said that many startups are not focusing enough on real innovation and are mostly sticking to ideas like grocery delivery.

    What challenges do deep tech startups in India face when it comes to scaling up?

    • High Initial Capital Requirement: Deep tech startups, especially in sectors like AI, biotech, or semiconductors, require significant funding in the early stages for R&D and prototyping. Eg: A startup working on quantum computing may need years of research before any commercial product is viable.
    • Lack of Follow-up Funding: Government seed funds like the Startup India Seed Fund provide limited support (~₹50 lakh), but large-scale funding is often unavailable, especially from domestic sources. Eg: A robotics startup may struggle to find Series A or B investors willing to back them after the seed stage.
    • Longer Time-to-Market and Uncertain Returns: Deep tech innovations take longer to reach the market and generate revenue, which deters many investors focused on quick returns. Eg: Healthtech firms developing diagnostic devices may take years to pass regulatory approvals before commercialization.

    Why is private sector follow-up funding considered crucial after initial government support for startups?

    • Bridges the Capital Gap: Government funds are limited and mainly support early-stage needs. Scaling requires much higher investment. Eg: A biotech startup receiving ₹50 lakh from a seed fund may need ₹10 crore for clinical trials.
    • Enables Long-Term Growth: Startups need sustained funding over multiple stages (Series A, B, etc.) to expand, hire talent, and enhance products. Eg: An electric mobility startup may require continuous investment to build charging infrastructure.
    • Signals Market Validation: Private investment shows that the startup idea has commercial potential, encouraging more stakeholders to engage. Eg: A deep tech startup attracting VC funding is more likely to gain customer and partner interest.
    • Brings Strategic Guidance and Networks: Private investors often provide mentorship, access to global markets, and business connections. Eg: A startup funded by a top VC firm might get access to international accelerator programs.
    • Reduces Dependence on Government: Encourages a self-sustaining innovation ecosystem and reduces reliance on public funds. Eg: Startups backed by private capital scale faster without waiting for bureaucratic processes.

    How do venture capitalists define innovation while deciding to invest in a startup?

    • User Impact and Experience: VCs assess whether the product/service offers a significant improvement in user experience or solves a real problem. Eg: A fintech app that reduces loan approval time from days to minutes is seen as innovative.
    • Market Potential and Demand: Innovation must address a need in a large or fast-growing market to be attractive to investors. Eg: An edtech startup targeting affordable online education in Tier-II/III cities taps into a large unmet demand.
    • Sustainable Competitive Advantage: Startups should have something unique that competitors can’t easily copy, like patents or proprietary tech. Eg: A healthtech startup with patented diagnostic AI software has a stronger edge.
    • Commercial Viability: Innovation must eventually lead to profitability and returns. VCs look for feasible business models. Eg: A SaaS platform with recurring revenue from subscriptions is more viable than a one-time product sale model.
    • Scalability and Replicability: The innovation should be scalable across geographies or customer segments. Eg: A logistics startup using AI route optimization can be scaled across different cities and industries.

    Which factors have contributed to the rise in the number of startups under the Startup India initiative?

    • Policy Support and Government Incentives: Multiple ministries and state governments have launched startup-friendly policies, funding schemes, and incubation support. Eg: The Startup India Seed Fund Scheme provides up to ₹50 lakh for early-stage startups.
    • Improved Access to Funding: Capital inflow through both equity and debt has increased, with growing interest from banks and private investors. Eg: SIDBI’s Fund of Funds supports venture capital firms that, in turn, invest in Indian startups.
    • Changing Mindset and Entrepreneurial Culture: A cultural shift among youth toward entrepreneurship, driven by success stories and digital exposure. Eg: Companies like Flipkart and Freshworks have inspired a new generation to build their own ventures.

    Where does India lag behind in comparison to countries like China and the U.S. in building a thriving startup ecosystem?

    • Lower Per Capita Income and Consumption Capacity: India’s lower GDP per capita limits domestic consumer spending, which affects the growth of digital and tech-driven startups. Eg: India’s per capita GDP is around $3,500, while China’s is over $12,000—boosting China’s digital economy faster.
    • Limited Domestic Risk Capital Availability: India relies heavily on foreign capital for startup funding, unlike the U.S. or China, which have strong domestic investor bases. Eg: Most VC funding in India comes from the U.S., while China has state-backed venture funds.
    • Bureaucratic Hurdles and Complex Regulations: Regulatory bottlenecks and lack of smooth implementation hinder startup operations and scalability. Eg: Despite policy support, startups still face delays in government clearances and compliances.

    Way forward: 

    • Strengthen Domestic Funding Ecosystem: Promote domestic VC funds, corporate venture arms, and pension fund investments in startups to reduce dependency on foreign capital. Eg: Incentivize Indian institutional investors to back deep tech ventures.
    • Simplify Regulatory Processes: Establish single-window clearances and reduce compliance burdens to foster ease of doing business for startups. Eg: Fast-track approvals for sectors like biotech, fintech, and healthtech.

  • [16th April 2025] The Hindu Op-ed: India, rising power demand and the ‘hydrogen factor’

    PYQ Relevance:

    [UPSC 2018] With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy.

    Linkage: India growing energy needs and the role of a specific low-carbon source, which is relevant in the broader context of exploring other low-carbon alternatives like hydrogen for industrial use.

     

    Mentor’s Comment:  To achieve a net-zero economy, we need to significantly increase the use of electricity in various sectors. Currently, fossil fuels are used not only to generate electricity but also to provide heat and raw materials for industries. For example, carbon from coal is used in steel production, and hydrogen from natural gas is used to make ammonia for fertilizers. In the steel industry, hydrogen can replace carbon. So, a net-zero economy would involve using more electricity and hydrogen in industrial processes.

    Today’s editorial discusses the important role of hydrogen fuel in industries to help achieve a net-zero economy. This content is relevant for GS Paper 3 in the mains exam.

    _

    Let’s learn!

    Why in the News?

    To achieve a net-zero economy, which requires more use of hydrogen, hydrogen production and electricity storage need to work together efficiently.

    What is hydrogen’s role in achieving net-zero emissions, particularly in industry?

    • Replacement for Carbon in Steel-making: Hydrogen can replace carbon (from coal) to reduce iron ore in the steel industry, enabling low-emission steel production. Eg: Jindal Steel is implementing hydrogen-based Direct Reduced Iron (DRI) processes in its steel plants in Angul, India.
    • Feedstock for Fertilizer Industry: Hydrogen is used to produce ammonia, a key input for fertilizers. Currently sourced from natural gas, it can be replaced with green hydrogen to cut emissions. Eg: Green hydrogen is being utilized in ammonia plants to decarbonize agricultural inputs. ​
    • Energy Carrier for Hard-to-Electrify Sectors: Hydrogen provides high-temperature heat and energy where direct electrification is not feasible, such as in cement and chemical industries. Eg: Hydrogen-powered kilns are being explored in cement production to reduce carbon emissions.​
    • Storage and Use of Surplus Renewable Energy: Surplus electricity from solar and wind can produce hydrogen via electrolysis, storing energy for industrial use. Eg: Electrolysers operating during solar peak hours produce hydrogen for later industrial use, aiding in grid balancing.​
    • Enabler of Circular and Low-Carbon Economy: Hydrogen supports closed-loop industrial systems and enables the transition to a low-carbon industrial ecosystem. Eg: Industrial parks are utilizing shared hydrogen infrastructure for multiple processes, promoting sustainability.​

    Why is nuclear vital for meeting India’s future power needs?

    Reason Explanation Example
    Reliable Base Load Power Provides continuous, 24/7 electricity, unlike intermittent solar and wind. Kakrapar Atomic Power Station in Gujarat supplies stable power, reducing reliance on coal.
    Low-Carbon Energy Source Emits very low greenhouse gases, essential for India’s net-zero targets. One nuclear plant avoids millions of tonnes of CO₂ compared to coal-fired plants of similar capacity.
    High Energy Density & Land Efficiency Produces large energy output from a small land area, ideal for land-scarce regions. A 700 MW PHWR needs far less space than an equivalent-capacity solar farm.
    Energy Security & Indigenous Capability Indigenous PHWR tech reduces import dependency, boosting self-reliance. Bharat Small Reactors (BSRs) initiative supports local nuclear plants for industrial use.
    Supports Industrial & Developmental Goals Meets growing electricity demand from industries, EVs, and digital infrastructure. Indian Railways is exploring nuclear power to sustainably meet part of its future electricity requirements.

    How do electrolysers help avoid flexing nuclear plants?

    • Utilize Surplus Electricity: Electrolysers consume excess electricity (especially during low demand or high renewable generation), preventing wastage. Eg: During off-peak hours, nuclear plants continue running at full power, and electrolysers convert surplus electricity into hydrogen.
    • Avoids Technical Challenges of Flexing Nuclear: Flexing (ramping up/down) nuclear plants is technically complex and not cost-effective. Electrolysers provide a flexible load instead. Eg: Countries like France prefer operating electrolysers over reducing nuclear output to balance grid load.
    • Reduces Need for Electricity Storage: By producing hydrogen instead of storing electricity in batteries, electrolysers lower reliance on expensive energy storage systems. Eg: A hybrid system with electrolysers and minimal battery backup is more economical than large-scale battery-only setups.
    • Creates Industrial Value from Surplus Power: Hydrogen produced by electrolysers can be used directly in industries like steel and fertilizer, giving value to otherwise curtailed energy. Eg: Surplus nuclear power at night is used to produce hydrogen for ammonia production, supporting the fertilizer sector.
    • Maintains Economic Efficiency of Nuclear Plants: Electrolysers help nuclear plants operate at full capacity, maximizing their economic return by avoiding part-load inefficiencies. Eg: Operating a 700 MW PHWR continuously at full load ensures lower per-unit cost and higher return on investment.

    Which policy changes improve the synergy between hydrogen generation and electricity storage?

    • Redefining Green Hydrogen as Low-Carbon Hydrogen: Broaden the definition to include hydrogen from nuclear and other low-carbon sources, not just solar/wind. Eg: If hydrogen from nuclear is included under “low-carbon,” it becomes eligible for government incentives and boosts its adoption.
    • Integrated Planning for Hydrogen and Storage Infrastructure: Encourage policies that promote co-location of electrolysers and battery storage to optimize power use. Eg: A hybrid facility that stores electricity when prices are low and runs electrolysers when solar/wind generation is high.
    • Incentives for Grid-connected Electrolyser Projects: Offer financial and regulatory support to industries that install grid-responsive electrolysers. Eg: Time-of-use electricity pricing policies that make hydrogen production cheaper during surplus power hours.
    • Mandating Industrial Use of Green/Low-Carbon Hydrogen: Introduce mandates for sectors like steel and fertilizers to shift partially to low-carbon hydrogen. Eg: A policy requiring steel plants to use 10% green hydrogen by 2030 encourages investment in electrolysers.
    • Support for Hybrid Hydrogen-Storage Business Models: Develop regulations that allow joint operation and revenue models for battery storage and hydrogen production. Eg: A private power developer earns incentives both for stabilizing the grid (via battery) and producing green hydrogen.

    Where has the NPCIL planned the deployment of new 700 MW Pressurized Heavy Water Reactors (PHWRs) in India?

    • Kakrapar Atomic Power Station (KAPS), Gujarat: KAPS is already home to two operational 700 MW PHWR units (KAPS-3 and KAPS-4), with plans for further expansion. The successful commissioning of these units has demonstrated the robustness of the 700 MW PHWR design.
    • Rajasthan Atomic Power Station (RAPS), Rajasthan: RAPS-7, India’s third indigenously designed 700 MW PHWR, achieved first criticality in September 2024. RAPS-8 is under construction and is expected to be operational by 2026.
    • Gorakhpur Haryana Anu Vidyut Pariyojana (GHAVP), Haryana: GHAVP is set to host four 700 MW PHWR units, with GHAVP-1 and GHAVP-2 under construction and expected to be operational by 2028 and 2029, respectively.

    Way forward: 

    • Accelerating Infrastructure Development: India should fast-track the construction of 700 MW PHWR units across key sites like KAPS, RAPS, and GHAVP, ensuring timely completion to meet future energy demands and reduce reliance on coal.
    • Policy Support for Hydrogen and Nuclear Synergy: Government policies should incentivize the integration of nuclear power with hydrogen production, promoting hybrid systems that can utilize surplus nuclear energy for green hydrogen generation and enhance industrial decarbonization efforts.

  • India’s retail inflation slips to over 5-year low, opens door to more rate cuts

    Why in the News?

    The decline in food prices is seen as a major reason for the drop in inflation. After two rate cuts by the RBI, inflation is expected to stay below 4% in the coming months, which might lead to another rate cut of 50 basis points.

    What was India’s retail inflation rate in March?

    • March 2025 Retail Inflation Rate: India’s retail inflation eased to 3.34% in March 2025, marking the lowest rate since August 2019.
    • Comparison to Previous Month: This rate represents a decrease from February’s 3.61%, indicating a continued downward trend in inflation.
    • Primary Contributors to the Decline: The significant drop in food prices, particularly vegetables, eggs, and pulses, contributed to the decline. Eg, vegetable prices fell by 7.04% year-on-year in March.

    Why have food prices been a major factor in the decline of retail inflation?

    • Sharp Decline in Vegetable Prices: Vegetable prices saw a significant drop of 7.04% year-on-year in March 2025, compared to a small increase of 1.07% in February. This sharp fall in vegetable prices helped lower overall food inflation.
    • Lower Pulses Prices: Pulses prices fell by 2.73% in March, after a smaller 0.35% decrease in February, contributing to reduced food inflation.
    • Moderation in Overall Food Inflation: Food inflation in March 2025 decreased to 2.69% from 3.75% in February. This marked the lowest food inflation since November 2021, indicating a significant reduction in food price pressures.
    • Improved Farm Output: The moderation in food prices is partly due to better farm output, which led to a more stable supply of food items, especially vegetables and pulses, easing inflationary pressures.
    • Government and Central Bank Support: The government’s expectations for above-average monsoon rains in 2025 are likely to boost farm output further, maintaining lower food prices, which will continue to moderate overall inflation.

    How did the Reserve Bank of India respond to the easing inflation trend?

    • Second Consecutive Rate Cut: On April 9, 2025, the RBI reduced the key policy repo rate by 25 basis points to 6.00%, marking its second consecutive rate cut aimed at stimulating economic growth amid moderating inflation.
    • ​Shift to Accommodative Stance: The RBI changed its monetary policy stance from “neutral” to “accommodative,” signaling a more supportive approach to economic growth while maintaining vigilance over inflation.
    • ​Revised Inflation Forecast: The central bank projected the Consumer Price Index (CPI) inflation to average 4% for the fiscal year 2025–26, down from the previous forecast of 4.2%, reflecting improved inflation dynamics.
    • ​Lowered GDP Growth Estimate: The RBI revised its GDP growth forecast for the fiscal year to 6.5%, down from 6.7%, acknowledging the challenges posed by global uncertainties and trade tensions.

    What risks did the RBI highlight that could impact the inflation outlook?

    • Global Market Uncertainties: The RBI noted that ongoing global uncertainties, such as trade tensions (like the U.S.-China trade war), could disrupt supply chains and impact inflationary pressures in India. Eg, any further escalation in global trade disputes could lead to higher import costs.
    • Adverse Weather Conditions: The RBI pointed out that unpredictable weather events, such as unseasonal rains or droughts, could lead to food supply disruptions and push up food prices, affecting overall inflation. Eg, a poor monsoon could lead to shortages in key agricultural products.
    • Rising Global Commodity Prices: The central bank warned that fluctuations in global commodity prices, including oil and metals, could lead to higher domestic prices, contributing to inflation. Eg, a rise in global crude oil prices could increase transportation and fuel costs in India.
    • Supply Chain Disruptions: The RBI highlighted the risk of supply-side bottlenecks, especially due to external factors like geopolitical conflicts or supply chain disruptions caused by the COVID-19 pandemic. These could raise prices for imported goods and affect domestic inflation. Eg, disruptions in global electronics supply chains could lead to higher prices for tech products.
    • Core Inflation Pressures: The RBI also noted that core inflation, which excludes volatile items like food and fuel, remained persistently high at 4.1%, signaling that inflationary pressures could be more entrenched in the economy, which poses a risk to the inflation outlook. Eg, rising demand for services could contribute to sustained core inflation.

    Way forward: 

    • Strengthen Supply Chain Resilience: The government and RBI should work together to improve supply chain infrastructure and reduce vulnerabilities to global disruptions. This includes addressing logistical bottlenecks, improving domestic production capabilities, and diversifying import sources to mitigate the impact of geopolitical tensions and climate events.
    • Focus on Sustainable Agricultural Practices: To ensure stable food prices, long-term investments in sustainable farming techniques, irrigation systems, and better farm management practices are crucial. This will not only help stabilize food prices but also contribute to higher farm output and lower volatility in food inflation.

    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: Food inflation and the RBI’s role in controlling it, which is a key aspect of the scenario described in the article.

  • Urban consumers are worried about their income levels

    Why in the News?

    In March, while many urban consumers were hopeful about job opportunities, many were still negative about their income levels.

    What does the gap between job optimism and income pessimism among urban consumers imply?

    • Jobs Are Available, But Income Growth Is Stagnant: In March 2025, 35.5% of urban respondents reported improved job opportunities compared to a year ago, but only 23.8% reported an increase in income.  
    • Rising Cost of Living Without Corresponding Wage Increases: Over 90% of urban respondents indicated that commodity prices have increased over the past year, but income increases remain minimal.  
    • Negative Economic Outlook Despite Employment Optimism: Despite optimism regarding job opportunities, only 34.7% of urban respondents believed the overall economic situation improved compared to the previous year, the lowest share in over a year.  

    Why are rural respondents more pessimistic about income than urban ones?

    • Dependence on Agriculture and Seasonal Employment: Rural areas heavily depend on agriculture, which is subject to seasonal fluctuations and external factors like weather conditions. Eg: A farmer in a rural area may experience low income during a poor harvest season, while urban workers with more stable jobs may not face similar income volatility.
    • Limited Access to Formal and High-Paying Jobs: Urban areas offer more formal employment opportunities with better wages and benefits, while rural areas often lack access to well-paying jobs and may have higher rates of informal employment. Eg: A rural resident working as a daily wage laborer may earn less compared to an office worker in the city with a regular salary, even if both are employed.
    • Lower Economic Diversification: Rural economies are less diversified compared to urban areas, which can lead to fewer job opportunities and economic growth. Eg: A rural worker may be reliant on local industries like agriculture or small-scale manufacturing, while an urban worker has access to a variety of sectors like technology, finance, and services, which tend to offer higher income prospects.

    How have rising prices affected urban spending?

    • Increased Spending on Essential Goods: With rising commodity prices, urban consumers are spending more on essential goods such as food, transportation, and utilities, leading to higher overall expenditures. Eg: An urban resident may see their grocery bills rise significantly due to inflation, causing them to spend more on basic food items like vegetables and grains, even if their income remains unchanged.
    • Shifting Spending Priorities: As prices rise, urban consumers are prioritizing necessary expenses, often cutting back on discretionary spending like entertainment, travel, and luxury goods. Eg: A family in an urban area may reduce spending on dining out or vacations to allocate more money towards rent and daily commuting costs, adjusting their lifestyle to account for increased living expenses.
    • Financial Strain Despite Employment Stability: Urban residents may continue to hold jobs, but the combination of stagnant incomes and rising costs puts financial pressure on them, leading to a higher sense of economic uncertainty. Eg: An office worker may retain their job but find it increasingly difficult to cover monthly expenses like rent and school fees for children, as inflation causes prices to rise faster than their salary increases.

    What was the main factor behind the decline in positive sentiment about the economy among urban consumers in March 2025?

    • Rising Commodity Prices Without Income Growth: In March 2025, over 90% of urban respondents reported that commodity prices had increased over the past year, while only 23.8% saw an increase in their income. Eg: With income levels largely stagnant and prices rising, 80% of urban respondents reported increased spending, leading to a more pessimistic view of the economy.
    • Stagnant Income and Higher Spending Pressures: The survey revealed that 34.7% of urban respondents felt the overall economic situation had improved, the lowest share in over a year, indicating dissatisfaction with the broader economic outlook. Eg: An office worker might retain their job but face higher living costs (such as rent, utilities, and groceries), contributing to the sense of financial strain and a decline in positive economic sentiment, despite job availability.

    Way forward: 

    • Focus on Wage Growth and Inflation-Linked Salary Adjustments: To address stagnant incomes, policies should ensure that wage growth keeps up with inflation, potentially through salary adjustments linked to cost-of-living indices, reducing financial strain for urban consumers.
    • Boost Rural Economic Diversification and Job Creation: Improve access to diverse, high-paying jobs in rural areas through skill development programs, infrastructure improvements, and incentives for non-agricultural industries, fostering economic resilience and reducing income pessimism.

    Mains PYQ:

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

    Linkage: If people in cities are worried that their incomes are not growing even though jobs are available, it shows a gap between growth driven by higher worker productivity and actual rise in people’s earnings. This is an important point discussed in this previous year’s question.

  • [pib] Electronics Components Manufacturing Scheme

    Why in the News?

    The Ministry of Electronics and Information Technology (MeitY) has notified the Electronics Components Manufacturing Scheme to expand the manufacturing capabilities of passive electronic components in India.

    About Electronics Components Manufacturing Scheme:

    • The scheme is designed to promote the manufacturing of select electronic components in India, such as resistors, capacitors, relays, switches, sensors, and connectors.
    • It focuses particularly on passive electronic components, while active components like semiconductors fall under the India Semiconductor Mission (ISM).
    • The scheme has a tenure of 6 years, with a 1-year gestation period.
    • The scheme offers 3 types of incentives:
      1. Turnover-linked incentive: Based on revenue.
      2. Capex-linked incentive: For investments in plants and machinery.
      3. Hybrid incentive model: A combination of both turnover and capex incentives.

    Achievements and Growth in the Electronics Sector:

    • Domestic Production Growth: India’s electronics production has grown from ₹1.90 lakh crore in FY 2014-15 to ₹9.52 lakh crore in FY 2023-24, at a compound annual growth rate (CAGR) of over 17%.
    • Export Growth: Electronics exports have increased from ₹0.38 lakh crore in FY 2014-15 to ₹2.41 lakh crore in FY 2023-24, reflecting a CAGR of over 20%. India is now the second-largest mobile phone producer globally.
    • Future Projections: By 2026, India’s electronics production is projected to reach USD 300 billion.

    Government Initiatives for Electronics Growth:

    • Make in India (2014): Aimed at boosting India’s manufacturing sector and transforming it into a global hub for design and manufacturing.
    • Phased Manufacturing Programme (2017): Focused on increasing domestic value addition in mobile phones and their parts.
    • Production Linked Incentive (PLI) Scheme (2020): Aimed at boosting domestic manufacturing in mobile phones, electronic components, and semiconductor packaging, offering 3-6% incentives on incremental sales.
    • Semicon India Program (2021): With a financial outlay of ₹76,000 crore, this scheme promotes the domestic semiconductor industry.
    • Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) (2021): Provides a 25% financial incentive for capital expenditure in electronic goods manufacturing.
    • Increased Budget for 2025-26: The allocation for electronics manufacturing has been raised from ₹5,747 crore in FY 2024-25 to ₹8,885 crore in FY 2025-26.
    [UPSC 2016] Recently, India’s first ‘National Investment and Manufacturing Zone’ was proposed to be set up in:

    (a) Andhra Pradesh (b) Gujarat (c) Maharashtra (d) Uttar Pradesh

     

  • [pib] Periodic Labour Force Survey (PLFS), 2024

    Why in the News?

    The latest Annual Report of the Periodic Labour Force Survey (PLFS) for the year 2024, covering the period from January to December, was released on April 8, 2025.

    About the Periodic Labour Force Survey (PLFS):

    • Launched by the National Statistics Office (NSO) in April 2017, the PLFS provides frequent data on labour force indicators to track employment trends.
    • It estimates employment and unemployment indicators in rural and urban areas quarterly and annually, using Current Weekly Status (CWS) and Usual Status (ps+ss).
    • The PLFS Annual Reports offer national estimates on employment and unemployment, broken down by rural and urban areas.
    • The survey tracks indicators like Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and Unemployment Rate (UR), helping policymakers understand employment dynamics.

    Key Terminologies Used:

    • Labour Force Participation Rate (LFPR): LFPR is the percentage of the population that is either working or actively seeking work. It measures the active engagement of the population in the labour market.
    • Worker Population Ratio (WPR): WPR is the percentage of the population that is employed. It indicates the proportion of the population that is engaged in productive work.
    • Unemployment Rate (UR): UR is the percentage of individuals in the labour force who are unemployed. It provides insights into the efficiency of the labour market and the availability of employment opportunities.
    • Usual Status (ps+ss): This approach calculates a person’s employment status based on the activities they pursued over the past 365 days. It includes both their principal and subsidiary economic activities.
    1. Principal Status (ps): The main activity a person engaged in during the reference period.
    2. Subsidiary Status (ss): Any additional economic activities undertaken by a person for at least 30 days during the reference period.
    • Current Weekly Status (CWS): CWS measures a person’s employment status based on the activities they pursued in the past 7 days. It focuses on short-term employment fluctuations.

    Key Highlights of the Recent Report (2024):

    Details
    Sample Size and Survey Coverage Surveyed 12,749 Field Survey Units (FSUs) across 6,982 villages and 5,767 urban blocks with 1,01,957 households and 4,15,549 individuals.

    Labour Force Indicators (CWS)
    LFPR (Urban)
    • Urban male LFPR increased from 74.3% to 75.6%, and female LFPR from 25.5% to 25.8%, resulting in an overall increase from 50.3% to 51.0%.
    • Shows gradual improvement in workforce participation, especially among males.
    WPR (Urban)
    • Urban WPR increased from 47.0% to 47.6%, while national WPR remained stable at 53.4% to 53.5%.
    • Indicates a slight improvement in the share of employed people in urban areas.
    Unemployment Rate (UR)
    • Rural unemployment decreased from 4.3% to 4.2%, and urban female unemployment decreased from 8.9% to 8.2%.
    • Indicates small improvements in employment opportunities, especially in rural and female urban sectors.
    Decline in Unpaid Helpers
    • Reduced number of unpaid helpers in rural households led to a decline in WPR and LFPR for rural females.
    • Fewer women are engaged in unpaid family work, which may indicate an increase in formal employment.

    Labour Force Indicators (PS+SS)
    LFPR (National)
    • National LFPR slightly decreased from 59.8% in 2023 to 59.6% in 2024.
    • Shows a slight decrease in overall workforce participation at the national level.
    WPR (National)
    • National WPR slightly decreased from 58.0% to 57.7%, indicating a small drop in employment despite stable participation rates.
    • Reflects a slight decline in the proportion of the population employed.
    Unemployment Rate (UR)
    • National UR slightly increased from 3.1% to 3.2%, reflecting a small rise in unemployment.
    • A minor increase in unemployment, suggests potential challenges in creating enough jobs for the growing population.

     

    [UPSC 2013] Disguised unemployment generally means:

    (a) large number of people remain unemployed (b) alternative employment is not available (c) marginal productivity of labour is zero (d) productivity of workers is low

     

  • [pib] 10 years of the Pradhan Mantri MUDRA Yojana (PMMY)

    Why in the News?

    April 8, 2025, marks the 10th anniversary of Pradhan Mantri MUDRA Yojana (PMMY), launched to fund micro and small enterprises.

    About the Pradhan Mantri MUDRA Yojana (PMMY)

    • The PMMY, launched in 2015 is a Central Sector Scheme designed to provide financial support to non-corporate, non-farm small and micro-entrepreneurs previously excluded from the formal financial system.
    • MUDRA stands for Micro Units Development & Refinance Agency Ltd., a financial institution established to support the development and refinancing of micro-enterprises
    • It aims to foster grassroots entrepreneurship and remove barriers to accessing loans, especially for businesses that lack collateral.

    Loan Categories:

      1. Shishu: Loans up to ₹50,000 for new or small businesses.
      2. Kishore: Loans ranging from ₹50,000 to ₹5 lakh for growing enterprises.
      3. Tarun: Loans from ₹5 lakh to ₹10 lakh for more established businesses with greater capital needs.
      4. TarunPlus: Loan limit up to ₹20 lakh for more established and larger businesses (since July 2024).

    Key Features:

    • Collateral-Free Loans: PMMY loans do not require any collateral, making them accessible to those without assets.
    • Member Lending Institutions (MLIs): These include Public Sector Banks, Private Sector Banks, Regional Rural Banks, Micro Finance Institutions (MFIs), Non-Banking Financial Companies (NBFCs), and Small Finance Banks (SFBs).
    • Credit Guarantee: Loans are backed by the Credit Guarantee Fund for Micro Units (CGFMU), which was established in 2015 to provide security to financial institutions offering loans under PMMY.
    • MUDRA Card: A MUDRA card is issued to manage the working capital portion of the loan, providing convenience to the borrower.

    MUDRA 2.0:

    • MUDRA 2.0 (launched in Union Budget 2024) is an upgraded version of the original PMMY, designed to extend its outreach, particularly in rural and semi-urban areas.
    • This version introduces additional services such as financial literacy programs, business mentorship, and comprehensive business support, aiming to improve the overall impact of the scheme.
    • Enhanced Credit Guarantee Scheme (ECGS) is a new feature introduced to encourage more lending to small and microenterprises by reducing the risk for financial institutions.

    Successes of PMMY:

    • Massive Loan Disbursement: Over ₹32.61 lakh crore disbursed through 52 crore loans, benefitting millions.
    • Inclusivity: 69% of loans are held by women, 51% by SC/ST and OBC entrepreneurs.
    • Job Creation: Promoted self-employment and business growth in rural and semi-urban areas.
    • MSME Credit Growth: Lending increased from ₹8.51 lakh crore in FY14 to ₹27.25 lakh crore in FY24.
    • International Recognition: Praised by IMF for expanding financial access, especially for women-led businesses.

    Challenges:

    • Increase in NPAs: Rising defaults due to lack of collateral.
    • Disbursement Delays: Some banks face challenges in meeting loan targets.
    • Fraud Risk: Collateral-free loans are susceptible to misuse and fraud.
    • Larger Loan Limits: Higher limits under TarunPlus raise default risks for banks.
    • Default Risk: Some borrowers exploit the system through “evergreening” tactics.
    [UPSC 2016] Pradhan Mantri MUDRA Yojana is aimed at

    (a) bringing small entrepreneurs into the formal financial system.

    (b) providing loans to poor farmers for cultivating particular crops.

    (c) providing pensions to old and destitute persons.

    (d) funding the voluntary organizations involved in the promotion of skill development and employment generation.