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Subject: Economics

  • [18th December 2024] The Hindu Op-ed: Lighten the pollution burden of thermal power States

    PYQ Relevance:

    Q) Describe the benefits of deriving electric energy from sunlight in contrast to the conventional energy generation. What are the initiatives offered by our government for this purpose? (UPSC CSE 2020)

     

    Mentor’s Comment: UPSC mains have always focused on major issues like conventional energy generation (2020) and coal-fired thermal plants (2014).

    In August 2022, India updated its climate plan to the UNFCCC, promising to follow a cleaner, environmentally friendly path for growth. The country aims to cut emissions per unit of GDP by 45% by 2030 compared to 2005 levels. It also plans to get 50% of its electricity from non-fossil fuels by 2030, while keeping thermal power at 50% of the energy mix.

    Today’s editorial addresses issues related to thermal power plants. This topic will be useful for GS Paper 2 and 3 in the Mains exam.

    _

    Let’s learn!

    Why in the News?

    States that produce thermal power should be fairly compensated for handling the pollution caused while generating electricity for other states.

    What is the extent of the pollution burden caused by thermal power plants in certain states?

    • High Concentration of Polluting Power Plants: States like Chhattisgarh, Odisha, Jharkhand, and Uttar Pradesh are home to a large share of India’s thermal power plants, contributing significantly to the country’s carbon emissions. These states face disproportionate pollution as they generate much of the power consumed across India but do not benefit equally in terms of electricity consumption.
      • For example, Chhattisgarh produces large amounts of electricity from thermal plants, but its per capita electricity consumption remains much lower than that of economically better-off states like Gujarat and Maharashtra.
    • Disproportionate Emissions and Air Pollution: Thermal power generation is a major source of carbon dioxide (CO2) and particulate matter (PM), contributing heavily to air pollution. States like Chhattisgarh and Odisha, with a high density of coal-based plants, suffer from severe air quality deterioration, leading to health hazards like respiratory diseases.
    • Externalities from Power Exporting States: States such as Chhattisgarh, Madhya Pradesh, and Odisha are significant net exporters of electricity. Despite being the source of much of India’s thermal power, these states bear the brunt of the pollution without receiving adequate compensation or benefits. Chhattisgarh was the highest net exporter of electricity in 2022-23, yet it continues to face the negative environmental impacts without direct benefits.
    • Impact on Local Health and Environment: The local populations near thermal power plants suffer from air pollution-induced health issues like COPD, asthma, and lung cancer. Additionally, the local environment is negatively impacted due to thermal pollution and the disposal of coal ash.
      • In Bihar, which generates most of its electricity from thermal plants, residents face health risks due to pollutants emitted by nearby plants, such as NTPC‘s plants.
    • Water and Soil Contamination: Thermal power plants contribute to thermal pollution in water bodies, affecting aquatic life, and displace harmful chemicals into soil, which degrades agriculture. In coal-rich states like Odisha and Jharkhand, this leads to long-term environmental damage.
      • For instance, the coal ash from thermal plants in Odisha has been found to pollute the soil, reducing agricultural productivity and harming local ecosystems.

    What are the environmental and health impacts of this pollution on local populations?

    • Respiratory and Cardiovascular Diseases: The emission of particulate matter (PM), sulfur dioxide (SO₂), and nitrogen oxides (NOₓ) from thermal power plants significantly degrades air quality. This leads to an increase in respiratory problems such as asthma, bronchitis, and Chronic Obstructive Pulmonary Disease (COPD).
      • For example, in Chhattisgarh, where thermal plants are concentrated, residents face high rates of respiratory illnesses due to prolonged exposure to air pollution from coal-fired power plants.
    • Water and Soil Contamination: The disposal of toxic coal ash and wastewater from thermal power plants pollutes local water bodies and soil, leading to contamination of drinking water sources and agricultural land. This can cause long-term harm to both human health and local ecosystems.
      • In Odisha, coal ash from thermal plants has been found to seep into nearby rivers and groundwater, impacting drinking water quality and agricultural productivity.
    • Climate Change and Extreme Weather Events: The carbon dioxide (CO₂) emitted by thermal power plants contributes to global warming, leading to more frequent and severe extreme weather events like heatwaves, floods, and droughts. These events directly affect public health by increasing mortality rates, particularly among vulnerable populations like the elderly and children.
      • For example, states like Uttar Pradesh and Odisha face heightened vulnerability to heatwaves and flooding, worsened by the cumulative impact of pollution from nearby thermal power plants.

    What steps can be taken to mitigate the pollution caused by thermal power plants? (Way forward)

    • Adoption of Cleaner Technologies: Implementing advanced technologies such as Flue Gas Desulfurization (FGD), Electrostatic Precipitators (ESP), and Selective Catalytic Reduction (SCR) can significantly reduce emissions of sulfur dioxide (SO₂), particulate matter (PM), and nitrogen oxides (NOₓ). These technologies capture pollutants before they are released into the atmosphere, improving air quality.
    • Switching to Cleaner Fuels and Renewable Energy Sources: Gradually transitioning from coal to cleaner energy sources like natural gas, biomass, or renewable energy (solar, wind, and hydro) can help reduce carbon emissions and other pollutants.
      • The Solar power initiatives in states like Rajasthan and Gujarat, which have vast renewable energy capacities, can be expanded to replace coal-based power generation, reducing reliance on thermal plants.
    • Improved Waste Management and Pollution Control Regulations: Establishing strict regulations for the management of coal ash and waste from thermal plants can help prevent contamination of water bodies and soil. The use of ash for brick-making and cement production, or proper disposal in landfills, can mitigate environmental hazards.

  • Prime Minister Dhan-Dhaanya Krishi Yojana (PMDKY)

    Why in the News?

    Finance Minister while presenting the Union Budget announced the launch of the Prime Minister Dhan-Dhaanya Krishi Yojana (PMDKY).

    About the Prime Minister Dhan-Dhaanya Krishi Yojana (PMDKY):

    • The PMDKY aims to enhance agricultural productivity, crop diversification, storage infrastructure, irrigation, and credit access.
    • Key Features
      • Identifies 100 districts with low productivity, moderate cropping intensity, and below-average credit access.
      • Develops panchayat/block-level storage and expands irrigation coverage.
      • Ensures affordable short-term & long-term loans for farmers.
      • Uses data-driven governance & district rankings.
    • Structural Mandate:
      • Implementation: Jointly executed by Central & State Governments.
      • Funding: Drawn from existing schemes under the Ministry of Agriculture & Farmers’ Welfare and the Ministry of Fisheries, Animal Husbandry & Dairying.
      • Evaluation: Assessed based on yield improvements, credit flow, and irrigation expansion.

    PYQ:

    [2015] ‘Pradhan Mantri Jan-Dhan Yojana’ has been launched for:

    (a) providing housing loan to poor people at cheaper interest rates

    (b) promoting women’s Self-Help Groups in backward areas

    (c) promoting financial inclusion in the country

    (d) providing financial help to the marginalized communities

     

  • India introduces new HS code for GI-recognised Rice Varieties

    Why in the News?

    India has introduced a Harmonised System (HS) code for geographical indication (GI) recognised rice exports under an amendment to the Customs Tariff Act, 1975 announced by Finance Minister Nirmala Sitharaman in the 2025-26 Union Budget on February 1, 2025.

    About Harmonised System (HS) Code

    • HS Code is an internationally recognized classification system for traded goods, developed by the World Customs Organization (WCO).
    • It is used to standardize the identification of products in global trade, ensuring uniformity in customs procedures, tariffs, and trade policies.
    • The HS Code is a six-digit numerical code, categorized as follows:
      • First two digits: Represent the chapter of goods (e.g., “10” for cereals).
      • Next two digits: Indicate the heading (e.g., “06” for rice).
      • Last two digits: Define the subheading (e.g., “30” for semi-milled or wholly milled rice).
    • Countries can extend the HS Code beyond six digits to accommodate specific national requirements (e.g., India uses an 8-digit system).

    Impact of HS Code on GI Rice Exports:

    Trade experts believe that the introduction of an HS code will:

    • Facilitate GI rice exports, even when general rice exports are restricted.
    • Ensure better market access for specialty rice varieties in global markets.
    • Differentiate GI-tagged rice from conventional rice exports to prevent mislabelling.

    About the World Customs Organization (WCO):

    • The WCO is an intergovernmental organization responsible for overseeing and standardizing global customs regulations.
    • It was established in 1952 as the Customs Co-operation Council (CCC) and later renamed the WCO in 1994.
    • Key Functions of the WCO:
      • Develops and maintains the HS Code, used by over 200 countries and territories.
      • Regulates customs procedures, trade facilitation, and enforcement of trade laws.
      • Supports the fight against illegal trade, smuggling, and counterfeit goods.
    • The organization works closely with the World Trade Organization (WTO) and United Nations (UN) to promote global trade efficiency.
    • India is a member of the WCO and follows its HS classification system for trade regulations.
    • The WCO’s Revised Kyoto Convention (RKC) serves as a blueprint for India’s customs modernization efforts.

    PYQ:

    [2017] Consider the following statements:

    1. India has ratified the Trade Facilitation Agreement (TFA) of WTO.
    2. TFA is a part of WTO’s Bali Ministerial Package of 2013.
    3. TFA came into force in January 2016.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 1 and 3 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

     

  • What has the Budget offered scientists?

    Why in the News?

    The Union Budget highlights science, technology, and innovation (STI) as important drivers of the country’s progress, supporting CSIR’s goal of making India more self-reliant and globally competitive.

    How will the 2025 budget impact scientific research funding?

    • Increased Funding for R&D: The Ministry of Science and Technology’s allocation sees a major boost due to a Rs 20,000 crore allocation for the R&D fund, increasing the total allocation from Rs 8,029 crore to Rs 28,508 crore.
    • Support for Deeptech Startups: An additional Rs 10,000 crore will be allocated to the Small Industries Development Bank of India Fund for Startups, aimed at enhancing the “deep tech ecosystem,” particularly for startups focusing on AI, biotech, and space technology.
    • Focus on Mission-Mode Projects: Funding is heavily directed towards specific mission-mode programs such as nuclear energy, AI, and the Jal Jeevan Mission, potentially at the expense of curiosity-driven research.
    • CSIR’s Role in National Missions: The budget aligns CSIR’s various missions (Aroma, Floriculture, Millets, Cotton, Green Hydrogen, etc.) with national initiatives, emphasizing value-added farming, self-reliance, and sustainable development.
    • Concerns Regarding Basic Science and Education: Concerns exist regarding reduced funding for institutions like IISc and IISERs, a lower percentage increase in funding for Central Universities compared to IITs, and the overall low allocation for education as a percentage of GDP.

    What specific allocations are being made for science and technology in the 2025 budget?

    • Ministry of Electronics and Information Technology (MeitY) Funding Increase: The budget for MeitY has been increased by 48%, totalling over ₹26,000 crores. This substantial boost is directed towards initiatives such as the IndiaAI Mission and expanded Production-Linked Incentive (PLI) schemes for semiconductors, large-scale electronics, and IT hardware.
    • IndiaAI Mission: The IndiaAI Mission has received an allocation of ₹2,000 crore for FY25, marking an almost 11-fold increase from the previous year’s revised estimate of ₹173 crore. This funding aims to enhance artificial intelligence research and development across various sectors.
    • Semiconductor and Electronics Manufacturing Support: Allocations for the modified scheme to establish compound semiconductors, silicon photonics, sensor fabs, and semiconductor assembly and testing facilities have risen from ₹2,500 crore to ₹3,900 crore. Additionally, the scheme for setting up semiconductor fabs has seen an increase from ₹1,200 crore to ₹2,499.96 crore.
    • Research and Development Fund: A dedicated fund of ₹20,000 crore has been established to promote research, development, and innovation, particularly supporting private-sector-led initiatives. This fund underscores the government’s commitment to advancing technological progress and fostering innovation.
    • Research Fellowships and Deep Tech Support: The government plans to offer 10,000 research fellowships over the next five years under the Prime Minister’s Research Fellowship scheme, focusing on advancing research in technology at premier institutions like IITs and IISc.

    Are there any new initiatives for scientific research in the 2025 budget?

    • Increased Focus on Health Research: There’s a greater emphasis on health research and biomedical devices, driven by concerns identified in the Economic Survey regarding the harms of ultra-processed foods. This suggests new initiatives and funding to address these health challenges through scientific research.
    • Deeptech Startup Boost: The expansion of the SIDBI Fund for Startups with an additional Rs 10,000 crore specifically targets deeptech startups in AI, biotech, and space technology. This indicates a new initiative to foster innovation and entrepreneurship in these advanced technology areas.
    • AI Education Push: The allocation of funds towards a Centre of Excellence in AI education signifies a new initiative to develop expertise and talent in artificial intelligence. The hope is that this center will also set benchmarks for the beneficial adoption of AI in Indian society.
    • Green Hydrogen Mission: Spearheaded by CSIR, this mission supports research and development towards clean energy transition.
    • Alignment of CSIR Missions: While not entirely new initiatives, the strategic alignment and emphasis on CSIR’s existing missions (like Aroma, Floriculture, Millets, Cotton, etc.) with national goals represents a renewed focus and coordinated effort that will likely drive scientific research in those specific areas.

    Way forward: 

    • Balanced Research Funding: Ensure a more balanced allocation between mission-driven projects and fundamental research to sustain long-term scientific innovation and discovery.
    • Strengthening Scientific Workforce: Expand research fellowships, enhance funding for premier institutions, and create stronger industry-academia collaborations to develop a skilled workforce in emerging technologies.

  • Economic Capital Framework (ECF) of the RBI

    Why in the News?

    The Reserve Bank of India (RBI) has initiated an internal review of its Economic Capital Framework (ECF) to assess the contingency risk buffer (CRB) and overall capital reserves.

    What is Economic Capital Framework (ECF)?

    • The ECF is the risk management policy used by the RBI to determine:
    1. How much capital and reserves the central bank should maintain for financial stability.
    2. How much surplus the RBI can transfer to the government under Section 47 of the RBI Act, 1934.
    • Key Components
    1. Contingency Risk Buffer (CRB): A financial safeguard for monetary, fiscal, credit, and operational risks.
    2. Total Economic Capital: Includes capital, reserves, risk provisions, and revaluation balances.
    • Surplus Transfers:
      • FY24: ₹2.11 lakh crore (highest-ever surplus).
      • FY23: ₹87,416 crore | FY22: ₹30,307 crore | FY21: ₹99,122 crore.

    Review of ECF and Its Significance

    • The Bimal Jalan Committee’s recommendations (valid till June 2024) required a periodic reassessment.
    • As of March 31, 2024, the CRB stands at 6.5%, and the RBI is evaluating whether changes are needed.
    • Potential Impact
      • Higher CRB → More financial stability, but lower surplus transfers to the government.
      • Lower CRB → More funds available for government spending, but with potential financial risks.
    • Impact on Budget: RBI’s surplus plays a major role in fiscal planning for infrastructure & welfare programs.
    • The RBI must ensure financial resilience while also supporting economic development.

    About Bimal Jalan Committee (2018)

    • Objective: To review RBI’s reserve management and surplus transfer policy.
    • Key Recommendations:
      • CRB should be between 5.5% – 6.5% of the balance sheet.
      • Periodic ECF review every 5 years.
      • Only realized surplus (net income) should be transferred to the government.
      • Revaluation reserves should not be used for operational losses.
    • Impact:
      • Led to higher surplus transfers and a structured capital policy.
      • Strengthened transparency & financial governance in RBI’s operations.

     

    PYQ:

    [2017] Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)?

    1. It decides the RBI’s benchmark interest rates.
    2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
    3. It functions under the chairmanship of the Union Finance Minister.

    Select the correct answer using the code given below:

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

     

  • [pib] SASCI Scheme

    Why in the News?

    The Government of India has sanctioned 40 projects across 23 states, allocating ₹3295.76 crore under the ‘Special Assistance to States for Capital Investment (SASCI) Scheme for the Financial Year 2024-25.

    What is the SASCI Scheme?

    • The SASCI Scheme was launched in FY 2020-21 to support state capital expenditure and drive economic growth.
    • Initially introduced as a post-COVID recovery measure, it has been expanded in FY 2023-24 with an allocation of ₹1.3 lakh crore.
    • The scheme funds infrastructure projects, urban reforms, tourism development, and sustainability initiatives.
    • Structural Mandate: The scheme has eight parts based on states’ share of central taxes:
    1. General Capital Assistance (₹1 lakh crore): Allocated based on states’ share of central taxes.
    2. Vehicle Scrappage & Testing Facilities:  Incentives for phasing out old vehicles & setting up automated testing centers.
    3. Urban Planning Reforms: Encourages modern land-use planning & governance improvements.
    4. Urban Finance Reforms:  Strengthens municipal revenue models & financial sustainability.
    5. Housing for Police Personnel: Funds residential units for police & their families.
    6. Cultural & Economic Development (Unity Malls):  Promotes One District One Product (ODOP), Make in India & local entrepreneurship.
    7. Digital Libraries at Panchayat/Ward Levels: ₹5,000 crore for library infrastructure & digital learning access.
    8. Development of Iconic Tourist Centres:  Global-scale branding & infrastructure for major tourism hubs.

    Features & Significance:

    • Boosts capital investment to stimulate demand and job creation.
    • Encourages reforms in urban governance, infrastructure, and sustainability.
    • Promotes responsible tourism and global branding of iconic destinations.
    • Strengthens local industries through One District One Product (ODOP).
    • Improves public services like policing, water supply, and rural roads.

    PYQ:

    [2016] Which of the following is/are included in the capital budget of the Government of India?

    1. Expenditure on acquisition of assets like roads, buildings, machinery, etc.
    2. Loans received from foreign governments
    3. Loans and advances granted to the States and Union Territories

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

  • What does the Budget offer Railways?

    Why in the News?

    The Railway Budget was once a major event before the Union Budget. Since merging with the general Budget in 2017, Indian Railways has lost prominence, with no mention in the July 2024 or February 2025 Budgets.

    What specific safety measures are planned for the Railways?

    • Enhanced Safety Budget – ₹1,16,514 crore allocated for safety-related initiatives, including infrastructure upgrades and accident prevention.
    • Kavach Train Protection System – No new expansion beyond the initial 1,465 km; implementation delays remain a concern.
    • Grade Separation & Track Upgrades – Elimination of level crossings, doubling of railway lines, and gauge conversion to reduce congestion and accidents.
    • Modern Signaling & Electrification – Upgrading signaling systems and achieving 95% electrification to improve train control and safety.
    • Station & Train Modernization – Redevelopment of key stations and introduction of new Vande Bharat and Amrit Bharat trains with better safety features.

    Which states will benefit the most from the railway budget allocations?

    • Uttar Pradesh – Major railway station redevelopments (e.g., Ayodhya, Varanasi), new Vande Bharat trains, and increased connectivity through high-speed rail projects.
    • Maharashtra – Mumbai-Ahmedabad High-Speed Rail (Bullet Train), Western Dedicated Freight Corridor, and urban railway modernization projects.
    • Gujarat – High investment in freight corridors, bullet train project, and Amrit Bharat station redevelopment.
    • West Bengal – Expansion of railway network, doubling of tracks, electrification, and modernization of key stations like Howrah and Sealdah.
    • Tamil Nadu – Focus on gauge conversion, station redevelopment (e.g., Chennai), and enhanced connectivity with new semi-high-speed trains.
    • Bihar & Jharkhand – Increased railway line expansion and connectivity improvements, particularly for freight movement and passenger services.
    • Rajasthan & Madhya Pradesh – Dedicated freight corridor benefits, track doubling, and station upgrades for better passenger services.

    How will the new Amrit Bharat trains improve connectivity?

    • Infrastructure Development & New Tracks: Expansion of railway lines to extend connectivity to new areas to ensure broader access to transportation. Example: Increased track laying to enhance regional rail access.
    • Modernization of Stations: Upgrading stations to improve passenger experience and integrate different modes of transport. Example: Redevelopment projects enhancing station facilities and efficiency.
    • Expansion of Rail Network to Underserved Areas: The introduction of Amrit Bharat trains will improve connectivity to tier-2 and tier-3 cities, bridging gaps in regional transportation. Example: Faster and more frequent services to cities like Hubli, Gorakhpur, and Siliguri.
    • Faster Travel Between Major Economic Hubs: These trains will operate at semi-high speeds, reducing travel time between key business and industrial centers. Example: Quicker connectivity between Mumbai–Surat and Bengaluru–Hyderabad, supporting trade and commerce.
    • Boost to Religious & Tourism Circuits: The new trains will enhance access to religious and tourist destinations, promoting cultural and economic growth. Example: Improved rail access to Ayodhya, Varanasi, Puri, and Rameswaram for pilgrimage travelers.
    • Better Regional Connectivity in the Northeast & Border Areas: Amrit Bharat trains will strengthen rail links in remote and border regions, enhancing security and development. Example: Enhanced rail connectivity in Arunachal Pradesh, Manipur, and Mizoram to integrate them with the national rail network.

    What are the challenges? 

    • Underwhelming Returns on Investment: Despite a ₹13 lakh crore investment in modernization and freight traffic is growing at just over 2%, failing to match India’s economic growth.
      • Passenger revenue is increasing, but ridership remains below pre-COVID levels, limiting overall gains.
    • Slow Implementation & Execution: Major projects like the New Delhi station redevelopment have been delayed for nearly a decade due to repeated re-tendering.
      • Safety initiatives like Kavach have seen no expansion beyond the initial 1,465 km rollout near Secunderabad.
    • Financial and Sustainability Concerns: Expenses are exceeding earnings, raising doubts about maintaining new infrastructure under the EPC model.
      • The aggressive electrification push has left 5,000 diesel locomotives worth ₹30,000 crore idle or underutilized, questioning cost-effectiveness.

    Way forward: 

    • Prioritize Efficient Implementation & Safety Expansion – Expedite key infrastructure projects, expand Kavach beyond the initial 1,465 km, and streamline bureaucratic approvals to prevent further delays.
    • Enhance Financial Sustainability & Asset Utilization – Optimize freight revenue growth, repurpose idle diesel locomotives strategically, and adopt a phased electrification approach to balance costs and efficiency.

    Mains PYQ:

    Q Why is Public Private Partnership (PPP) required in infrastructural projects? Examine the role of PPP model in the redevelopment of Railway Stations in India. (UPSC IAS/2022)

  • How has the Budget allocated funds for urban development?

    Why in the News?

    The 2025 Budget has set up a ₹1 lakh crore Urban Challenge Fund to help cities grow and develop.

    What was the allocation for urban India?

    • Increased Allocation but Underutilization: The Housing and Urban Affairs Ministry received ₹96,777 crore for FY 2025-26, a 17% increase from the previous year. However, the Revised Estimate for 2024-25 stood at ₹63,669.93 crore, indicating significant underutilization of funds.
    • Urban Challenge Fund and PMAY Focus: A ₹1 lakh crore Urban Challenge Fund has been proposed for city redevelopment and water & sanitation projects, with ₹10,000 crore allocated for FY 2025-26. Additionally, ₹78,126 crore has been allocated to both rural and urban PMAY for housing development.
    • Support for Urban Workers and Street Vendors: The government aims to uplift urban workers through PM SVANidhi, which has benefited 68 lakh street vendors. The scheme will be revamped with enhanced bank loans, UPI-linked credit cards (₹30,000 limit), and capacity-building support to reduce reliance on informal sector loans.

    How has the reduction happened?

    • Decline in Direct Transfers to Urban Local Bodies (ULBs): With the abolition of octroi and the implementation of GST, ULBs lost a key revenue source, expecting compensation through central devolution. However, the central share for ULBs declined from ₹26,653 crore (last year) to ₹26,158 crore in 2025-26, increasing financial pressure on local bodies.
    • Cuts in Key Centrally Sponsored Schemes (CSS):
      • PMAY (Urban) faced a drastic cut, with its allocation reduced from ₹30,170.61 crore to ₹13,670 crore in the Revised Estimate (RE) for 2024-25.
      • AMRUT and Smart Cities Mission allocations fell below ₹10,400 crore, with almost no new funds for the Smart Cities Mission.
      • Swachh Bharat Mission (Urban) retained ₹5,000 crore, but RE shows only ₹2,159 crore was spent—a 56% underutilization.
    • Shift in Priorities Toward Capital-Intensive Metro Projects: While many urban development schemes saw cuts, metro rail projects received increased funding.
      • Metro projects’ allocation rose from ₹21,335.98 crore to ₹24,691.47 crore in RE (2024-25) and is further proposed to increase by 46% to ₹31,239.28 crore in 2025-26.
      • This shift prioritizes large infrastructure over comprehensive urban mobility, employment generation, and local governance funding.

    Does the Union Budget focus on capital-intensive projects? 

    • Priority to Large Infrastructure Projects: The budget significantly increases funding for metro rail projects (₹31,239.28 crore, up 46%), while allocations for urban schemes like PMAY (Urban), AMRUT, and Smart Cities Mission have been reduced or underutilized.
    • Reliance on Private Investment for Urban Development: The ₹1 lakh crore Urban Challenge Fund requires 50% private sector participation, which may slow implementation, shifting focus from government-driven urban welfare programs to capital-intensive projects.

    What next?

    • Urban Challenge Fund Implementation Risks: The government has introduced a ₹1 lakh crore Urban Challenge Fund, but 50% of the funding is expected from private investments.
      • Given the limited private sector participation in past urban initiatives like the Smart Cities Mission, relying on private funding could slow implementation.
    • Balancing Infrastructure with Livability and Sustainability: The budget favors metro expansion but lacks a broader focus on comprehensive urban mobility, employment generation, and sustainable urban planning.
      • Future policies must integrate green jobs, affordable housing, and local governance empowerment to create more inclusive cities.
    • Strengthening Financial Autonomy for Urban Local Bodies (ULBs): The decline in direct transfers and devolution post-GST has weakened ULB finances, forcing cities to raise taxes or cut essential services.
      • Strengthening municipal revenue sources, revising property tax frameworks, and ensuring timely fund disbursal can help cities plan better for growth.

    Conclusion: Need to Strengthen municipal revenue sources through property tax reforms, land monetization, and timely fund transfers, reducing dependency on central allocations. The government should ensure equitable investment in metro expansion, affordable housing, sanitation, and employment generation, fostering livable, sustainable, and inclusive urban growth.

    Mains PYQ:

    Q What are ‘Smart Cities’? examine their relevance for urban development in India. Will it increase rural-urban differences? Give arguments for ‘Smart Villages’ in the light of PURA and RURBAN Mission. (UPSC IAS/2018)

  • SEBI proposed Retail Algo Trading Framework

    Why in the News?

    Initially exclusive to institutional investors, Securities and Exchange Board of India (SEBI) now has proposed to allow retail participation in Algorithmic trading (algo trading) to ensure market stability and allow retail participation.

    What is Algo Trading?

    • Algo Trading, or Algorithmic Trading, is the process of using computer programs and pre-defined rules to execute financial market trades at high speed and efficiency.
    • It eliminates human intervention and emotions, allowing trades based on mathematical models, historical data, and market conditions.
    • How Does Algo Trading Work?
      • It follows pre-coded algorithms to identify trading opportunities and execute orders.
      • It uses technical indicators, price movements, volume, and other data to determine trade entry and exit points.
      • The system can scan multiple markets simultaneously and execute trades in milliseconds.
      • High-Frequency Trading (HFT) is a subset of algo trading that involves executing thousands of trades per second.
      • It reduces market impact, transaction costs, and slippage compared to manual trading.

    Key Highlights of Regulatory Framework:

    • Broker Responsibility: Only registered brokers can offer algo trading services to retail investors. Direct retail algo trading without broker approval is not permitted.
    • Market Surveillance: Exchanges must monitor algorithmic trades to prevent market manipulation and excessive order placement.
    • Latency and Co-location Rules: SEBI has set rules to ensure fair access to low-latency trading infrastructure and avoid unfair advantages.
    • Risk Management: Traders must maintain adequate margins, and there are circuit breakers to prevent excessive market volatility.
    • Pre-Approval for Strategies: Algo trading strategies must be tested and approved before deployment to minimize market disruption.
    • Algo vs. Non-Algo Identification: SEBI mandates separate tagging of algo trades for better transparency and oversight.
    • Ban on Self-Trading: Algorithms must not execute self-trades to manipulate market prices.

    PYQ:

    [2019] Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?

    (a) Certificate of Deposit

    (b) Commercial Paper

    (c) Promissory Note

    (d) Participatory Note

     

  • 10 New Agricultural Commodities added to the E-NAM platform

    Why in the News?

    The Agriculture Ministry has allowed trading of 10 additional commodities on the electronic-National Agriculture Market (E-NAM), taking the total number of tradable items on the platform to 231.

    About the 10 new commodities:

    The newly added commodities include dried Tulsi leaves, Besant (Chickpea flour), wheat flour, chana sattu (Roasted Chickpea Flour), water Chestnut flour, asafoetida, dried fenugreek leaves, baby corn, dragon fruit and water Chestnut, the ministry said in a statement.

    Current Status of E-NAM (As of December 2024):

    • 1,410 mandis connected across 22 states and Union Territories.
    • Inter-state trade worth ₹5,022 crore has been recorded.
    • ₹6,831 crore e-payments made across 948 mandis.
    • Trade in 1.44 lakh metric tonnes of grains and 3.4 crore units of perishable commodities such as bamboo, betel leaves, coconuts, and lemons.

    What is E-NAM?

    • E-NAM is a pan-India electronic trading platform launched by the Government of India on April 14, 2016.
    • It integrates existing Agriculture Produce Market Committees (APMCs) to create a unified national market for agricultural commodities.
    • The Small Farmers Agribusiness Consortium (SFAC), under the Ministry of Agriculture and Farmers’ Welfare, is the implementing agency for e-NAM.
    • The platform enables farmers, traders, and buyers to trade agricultural commodities online, across states, ensuring better price discovery and transparency.

    Objectives of e-NAM

    • Improve market efficiency by integrating APMC mandis into a unified online platform.
    • Enhance price discovery through a competitive bidding process, ensuring fair market prices for farmers.
    • Promote inter-state trade by removing barriers and unifying agricultural markets across India.
    • Reduce dependency on middlemen, ensuring direct benefits to farmers.
    • Facilitate e-payments to ensure quick and transparent financial transactions for farmers.

    What is E-NAM 2.0?

    • E-NAM 2.0 is an upgraded version of the Electronic National Agriculture Market (e-NAM), launched to improve inter-state agricultural trade, logistics, and digital accessibility for farmers.
    • It integrates logistics service providers, allowing farmers to sell produce directly from their farms using a farm-gate module.
    • Key features include real-time price discovery, Aadhaar-based e-KYC, warehouse-based trading, and direct online payments.
    • The platform enhances transparency, efficiency, and access to a nationwide market, reducing dependence on middlemen.
    • It aims to boost farmer incomes, minimize wastage, and create a unified digital agricultural ecosystem across India.

     

    PYQ:

    [2017] What is/are the advantage/advantages of implementing the ‘National Agriculture Market’ scheme?

    1. It is a pan-India electronic trading portal for agricultural commodities.
    2. It provides the farmers access to nationwide market, with prices commensurate with the quality of their produce.

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2