This

comprehensive
document
covers core
economy topics
for UPSC 2025,
including
naJonal income,
fiscal policy,

ECONOMY
monetary policy,
internaJonal
trade, poverty,
employment,
skilling, and key
PRAYAAS MODULE FOR ECONOMY AND ECONOMIC economic terms
DEVELOPMENT FOR PRELIMS 2025 with visual aids.
ADITYA SIR
KARMAYOGI IAS
KARMAYOGI IAS
📚 Index: Economy Notes
1 Basics of Economy 🧩 • ⚖ Objec?ves & Instruments of Monetary
Policy
• 🌍 Understanding Economy (Open, Closed, • 📉 Repo Rate, Reverse Repo, CRR, SLR
Mixed) • 📊 Infla?on – Types (Cost Push, Demand Pull),
• 🏦 Sectors of Economy: Primary, Secondary, Causes, Measures
Ter?ary • 📑 CPI vs WPI – Differences
• 📊 Key Economic Indicators • 📈 Core Infla?on, Headline Infla?on
• 🏦 Monetary Policy Commi]ee (MPC) –
Structure and Role

2 National Income Accounting (NIA) 💰

• 📊 GDP, GNP, NDP, NNP - Concepts and 6 Government Budgeting and Fiscal Policy 💼
Calcula?on Methods
• 🏷 Market Price vs Factor Cost • 📃 Budget Structure – Revenue vs Capital,
• 🏭 Sectoral Composi?on of GDP Receipts vs Expenditure
• 📈 Base Year and Changes Over Time • ⚖ Fiscal Deficit, Revenue Deficit, Primary
• 🌐 Limita?ons of GDP as a Measure of Deficit
Development • 📊 FRBM Act – Targets and Devia?ons
• 📑 Direct and Indirect Taxes
• 💰 Tax Buoyancy and Elas?city
• 🏛 Types of Budgets – Zero-Based, Outcome-
3 Economic Planning 📈 Based
• 🌱 Green Budge?ng
• 🗺 History of Planning in India (Five Year
Plans)
• 🏛 NITI Aayog – Func?ons and Structure
• 🎯 Objec?ves of Economic Planning – Growth, 7 Insurance and Pension Sector in India 🛡
Equity, Moderniza?on, Self-Reliance
• 🧩 Types of Planning: Indica?ve, Impera?ve, • 🏥 Life and General Insurance – LIC, GIC
Perspec?ve Planning • 📜 IRDAI – Regulator and Mandate
• 🏡 Key Schemes – PMJJBY, PMSBY, Ayushman
Bharat
• 🧓 Pension Reforms – NPS, EPFO
4 Money and Banking 🏦 • 📈 Insurance Penetra?on and Density
• 🔄 Digital Insurance – Account Aggregators,
• 💵 Defini?on & Func?ons of Money Digital Claims Processing
• 🏛 Evolu?on of Banking in India
• 🔗 Types of Banks: Commercial, Coopera?ve,
Regional Rural Banks (RRBs)
• 🏦 Structure of Banking System in India 8 Balance of Payments, Foreign Exchange and
• ⚖ Asset Quality – NPA, Stressed Assets International Financial Institutions 🌍
• 🏦 Role of RBI – Regulator and Monetary
Authority • 🏦 Components of BoP – Current Account,
• 🔄 Financial Inclusion & Digital Banking Capital Account
• 🔄 Exchange Rate Systems – Fixed, Floa?ng,
Managed
• 📊 RBI’s Role in Forex Market
5 Monetary Policy and Inflation 📊 • 🏛 IMF – Func?ons, Condi?onali?es
• 🌏 World Bank – IBRD, IDA
• 💰 Special Drawing Rights (SDR)
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9 International Organisations 🌐 13 LPG Reforms and Service Sector 📈

• 🏛 WTO – Agreements (AoA, TRIPS, GATS) • 📜 Liberaliza?on, Priva?za?on, Globaliza?on –

• 🌍 UNCTAD – Focus on Developing Economies Defini?ons & Outcomes
• 🏦 BRICS Bank (NDB) • 🏛 Role of WTO in Trade Liberaliza?on
• 🏛 G20 – India’s Presidency (2023) • 🏥 Services Sector Growth – IT, Tourism,
• 🏞 OECD and FATF Healthcare
• 🌱 Sustainable Development Goals (SDGs) • 📈 Financial Services – Banking, Insurance,
FinTech

🔟 Financial Market 💹
14 Human Capital, Unemployment, Skilling and
• 📊 Money Market vs Capital Market Poverty and Related Topics 👨🎓👩🏭
• 💵 Instruments – Treasury Bills, CPs, CDs
• 📈 SEBI – Powers & Func?ons • 🧑🎓 Human Capital Forma?on – Educa?on &
• 🏛 Stock Exchanges – BSE, NSE Health
• 📊 Deriva?ves – Op?ons, Futures • 📊 Skilling & Voca?onal Training – PMKVY,
• 🏦 FPI vs FDI – Differences NAPS
• 📉 Corporate Bond Market – Challenges & • 📈 Unemployment Types – Cyclical, Structural,
Reforms Fric?onal
• 🌍 Labour Market Reforms – Labour Codes
(2020)
• 🏚 Poverty Es?ma?on – Tendulkar,
11 Historical Background of Indian Economy and Rangarajan, MPI (2023 Update)
Agriculture & Allied Sector 🌾 • 🏛 Poverty Allevia?on Schemes – MGNREGA,
DAY-NULM
• 📑 Mul?dimensional Poverty – NITI Aayog
• 🏛 Pre-Colonial vs Colonial Economy
Report 2023
• 📈 Post-Independence Structural Changes
• 🌾 Green Revolu?on – Achievements &
Cri?cism
• 🏡 Agriculture Reforms – MSP, APMC, Contract
15 Important Economy Terms for CSP 2025 📚
Farming
• 📊 Agri Exports & Food Processing
• 📈 GDP Deflator, Gini Coefficient, Laffer Curve
• 🌱 PM-KISAN, PMFBY – Key Schemes
• 🌍 Challenges – Climate Change, Small
• 📊 Kuznets Curve, Phillips Curve, IS-LM
Holdings, Low Produc?vity Model
• 💵 Twin Deficit, Base Erosion Profit
ShiFing (BEPS)
• 🏦 Green Bonds, Masala Bonds, InvITs
12 Industry, Manufacturing and Infrastructure 🏭 • 🌐 Tax-GDP RaKo, Primary Deficit,
Revenue Deficit
• 📊 Industrial Policies – 1956, 1991, PLI Scheme • 📉 Core InflaKon vs Headline InflaKon
• 🏗 Infrastructure Development – Roads, Rail, • 💹 Angel Tax, Climate Bonds IniKaKve
Ports, Airports
• 📜 RetrospecKve TaxaKon
• 💡 Power Sector Reforms – DISCOM Issues
• 🏘 Housing – PMAY, Affordable Housing Fund
• 📈 MSME Sector – Contribu?on & Challenges
• 🚀 Make in India, Startup India, Stand-Up
India
 BASICS OF ECONOMY
Meaning of Economy & Economics

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Economy A system where production, distribution, and consumption 🔹 Defined by interdependence
of goods & services occur to fulfill human wants through of various economic activities.
optimal allocation of scarce resources. (UPSC Prelims 🔹 Classified into Capitalist,
2020) Socialist, and Mixed economies.
Central 1. Allocation of Resources – What to produce? 🔹 Scarcity leads to economic
Problems of an 2. Utilization of Resources – How to produce? choices.
Economy 3. Growth of Resources – For whom to produce? (UPSC 🔹 These problems arise due to
Prelims 2015) limited resources vs unlimited
human wants.
Sectors of - Primary: Natural resource extraction (Ex: Agriculture, 🔹 Tertiary sector contributes
Economy Mining). the highest to India's GDP
- Secondary: Manufacturing & industry (Ex: Steel, (~55%).
Textiles). 🔹 India is shifting from
- Tertiary: Services sector (Ex: Banking, Tourism). (UPSC agriculture to services
Prelims 2022) (Structural transformation).
- Quaternary: Knowledge-based services (Ex: IT,
Research).
- Quinary: Decision-making sector (Ex: CEOs,
Government Officials).
Economics The study of how individuals, firms, and governments 🔹 Lionel Robbins defined
allocate scarce resources to maximize satisfaction. (UPSC economics as “Science of
Prelims 2016) Scarcity”.
🔹 Wealth Definition by Adam
Smith, Welfare Definition by
Alfred Marshall.
Branches of 1. Microeconomics – Studies individual consumer & firm 🔹 Micro = Small Units, Macro
Economics behavior (Ex: Demand-Supply, Price Determination). = Whole Economy.
2. Macroeconomics – Studies aggregate economy-wide 🔹 Key macro indicators: GDP,
trends (Ex: GDP, Inflation). (UPSC Prelims 2019) Inflation, Unemployment Rate.

Types of Economies

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Market Prices & production are determined by supply & demand. 🔹 Also called Capitalist Economy
Economy The private sector drives economic activities with minimal (Laissez-Faire model).
government intervention. (UPSC Prelims 2021) 🔹 Adam Smith’s “Invisible
Example: The price of bread depends on consumer demand Hand” theory supports market
& producer supply. economy.
Command The government controls major economic decisions, 🔹 Karl Marx advocated for
Economy including production & distribution, aiming for social command economy to reduce
welfare over profit. (UPSC Prelims 2019) inequality.
Example: Govt allocates resources for essential goods like 🔹 Can lead to inefficiency & lack
healthcare over luxury items. of innovation due to absence of
competition.
Mixed Blend of market & command economy where both 🔹 Indian economy = Mixed
Economy private sector & government influence economic decisions Economy Model, blending
for efficiency & social welfare. (UPSC Prelims 2020) socialism & capitalism.
🔹 Nehruvian Model (1950s)
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Example: India follows a mixed economy model with emphasized state-led
public & private enterprises. industrialization.

Theory of Consumer Behavior

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Utility Satisfaction derived from consuming 🔹 Cardinal Utility Theory
goods/services. (UPSC Prelims 2017) (Alfred Marshall) assumes utility is
Total Utility (TU): Overall satisfaction from measurable.
consumption. 🔹 Ordinal Utility Theory (Hicks
Marginal Utility (MU): Extra satisfaction from one & Allen) uses Indifference Curve
more unit. Analysis.
Law of Diminishing As more units of a good are consumed, the MU 🔹 Explains downward-sloping
Marginal Utility decreases. (UPSC Prelims 2018) demand curve.
Example: First slice of pizza gives high satisfaction, 🔹 Water-Diamond Paradox
but additional slices provide lesser satisfaction. (Adam Smith) relates to MU
concept.
Budget Set & Budget Set: All possible combinations of goods a 🔹 Slope of Budget Line = Price
Budget Line consumer can buy within their income. (UPSC Ratio (P1/P2).
Prelims 2016) 🔹 Changes with price & income
Budget Line: Shows combinations of two goods that variations.
exhaust the budget.
Indifference Curve Indifference Curve (IC): Shows combinations of 🔹 IC is convex due to
& MRS two goods giving the same satisfaction. (UPSC Diminishing MRS.
Prelims 2019) 🔹 Higher IC = Higher Utility.
Marginal Rate of Substitution (MRS): Rate at
which a consumer substitutes one good for another
while maintaining utility.

Law of Demand & Elasticity

Concept Details (Including UPSC PYQ Year & Facts to Remember for UPSC Prelims
Examples)
Law of As price increases, demand decreases (inverse 🔹 Exceptions: Giffen Goods, Veblen Goods.
Demand relationship). (UPSC Prelims 2015) 🔹 Demand curve slopes downward (left to
Example: If smartphone prices drop, demand right).
rises.
Types of Inferior Goods: Demand falls as income rises 🔹 Giffen Goods violate the Law of Demand.
Goods (Ex: Cheap cereals). (UPSC Prelims 2021) 🔹 Veblen Goods (Luxury goods) – Higher
Giffen Goods: Demand rises when price rises price = Higher demand due to status symbol.
(Ex: Staple foods like rice).
Substitutes: Tea & Coffee (Price of one ↑,
demand for other ↑).
Complements: Car & Petrol (Price of one ↑,
demand for other ↓).
Elasticity of 1. Price Elasticity: Sensitivity of demand to 🔹 Elastic Demand (>1): Luxury goods.
Demand price change. (UPSC Prelims 2018) 🔹 Inelastic Demand (<1): Necessities like
2. Income Elasticity: Change in demand due to salt, rice.
income change.
3. Cross Elasticity: Change in demand due to
price change of related goods.

Law of Supply & Production

KARMAYOGI IAS
Concept Details (Including UPSC PYQ Year & Facts to Remember for UPSC Prelims
Examples)
Law of Supply As price increases, quantity supplied increases 🔹 Supply curve slopes upward (left to
(direct relationship). (UPSC Prelims 2016) right).
Example: Higher coffee bean prices lead farmers 🔹 Elasticity of Supply = Responsiveness
to increase coffee production. to price change.
Production Relationship between input factors (Labour & 🔹 Short Run: At least one input is fixed.
Function Capital) and output. (UPSC Prelims 2017) 🔹 Long Run: All inputs are variable.
Formula: Q = f(L, K) (Output is a function of
Labour & Capital).
Returns to 1. Increasing Returns: Output > Input (Ex: 🔹 Long-run concept, different from
Scale Automation). (UPSC Prelims 2019) Diminishing Marginal Product.
2. Constant Returns: Output = Input (Ex:
Balanced growth).
3. Decreasing Returns: Output < Input (Ex:
Overcrowding in production).
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NATIONAL INCOME ACCOUNTING (NIA)

Introduc*on to Macroeconomics
Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Macroeconomics A branch of economics focusing on aggregate 🔹 Keynesian Economics emphasizes
economic variables like GDP, infla?on, and government interven?on in economic
employment. (UPSC Prelims 2017) downturns.
Developed by John Maynard Keynes in response to 🔹 Macroeconomic indicators include
the Great Depression (1930s). GDP, infla*on, fiscal deficit, trade
It examines households, firms, government, and balance.
the external sector in a circular flow.
Economic 1. Firms: Private en??es producing goods & 🔹 Govt acts as a regulator & producer
Players services for profit. (UPSC Prelims 2019) (Ex: PSU sectors in India).
2. Government: Regulates, provides infrastructure, 🔹 Households are the primary savers
and undertakes public produc?on. in the economy (~60% of India’s gross
3. Households: Consume goods & services, save, savings).
and pay taxes.

Basic Concepts of Macroeconomics

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Final Goods Goods meant for final consump?on, not for 🔹 Final Goods = Consump*on Goods
resale or further processing. (UPSC Prelims + Capital Goods.
2018)
Example: Tea leaves bought by households,
cars, mobile phones.
Intermediate Goods Used in the produc?on of other goods; not 🔹 Not included in GDP to prevent
directly consumed. (UPSC Prelims 2019) double coun*ng.
Example: Steel used in making automobiles.
Money’s Role in Used as a common unit of measurement for 🔹 Money Supply (M0 to M3) = Key
Macroeconomy valuing goods & services. (UPSC Prelims 2020) indicator for RBI’s monetary policy.
Helps calculate na*onal income, infla*on, and
monetary policy.

Stocks and Flows in Economics

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Stock Economic values measured at a specific point 🔹 Example: India’s Forex Reserves = $616.1
Variables in *me. (UPSC Prelims 2021) billion (Feb 2025, RBI Report).
Example: Foreign exchange reserves, Money
supply (M3), Popula?on.
Flow Economic values measured over a period of 🔹 Example: India’s GDP growth rate (FY 2024-25)
Variables *me. (UPSC Prelims 2019) = 7.3% (Economic Survey 2025).
Example: GDP, Na?onal Income, Exports.

Physical & Intangible Capital

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Physical Tangible assets used in produc?on. (UPSC Prelims 🔹 India’s Capital Forma*on (~32% of
Capital 2015) GDP) is below China’s (~40%).
Types: Fixed Capital (Machinery, Buildings) &
Working Capital (Raw Materials, Cash).
Intangible Non-physical assets like patents, trademarks, and 🔹 India ranks 40th in Global Innova*on
Capital human capital. (UPSC Prelims 2023) Index 2024 (WIPO Report).
Example: Google’s AI algorithm, Apple’s brand
value.
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Circular Flow of Income in an Economy
Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Circular Flow The movement of goods, services, and money in an 🔹 A closed economy has NO
of Income economy between households, firms, and government. foreign trade (UPSC Prelims
(UPSC Prelims 2020) 2011).
Example: Wages paid by firms → Spent by households →
Firms earn revenue.
Leakages & Leakages: Savings, Taxes, Imports (Reduce money in 🔹 If leakages > injec*ons →
Injec?ons circula?on). (UPSC Prelims 2018) Economic contrac*on.
Injec*ons: Investment, Government Spending, Exports
(Increase money in circula?on).

Na?onal Income Accoun?ng

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
GDP (Gross Market value of all final goods & services 🔹 India’s GDP (FY 2024-25) = ₹299.2
Domes?c produced within a country’s borders. (UPSC lakh crore (Economic Survey 2025).
Product) Prelims 2013)
Example: If Tesla manufactures in India, it adds to
India’s GDP.
GNP (Gross GDP + Net Factor Income from Abroad (NFIA). 🔹 For India, NFIA is nega*ve
Na?onal Product) (UPSC Prelims 2018) (remilances inflow < foreign investment
Example: Indian firms' profits abroad are ounlow).
included in India’s GNP, but not GDP.
Net Na?onal NNP = GNP – Deprecia*on. (UPSC Prelims 2013) 🔹 NNP is open used for welfare
Product (NNP) Shows net produc*on aper considering capital es*ma*on.
wear & tear.

Methods of Calcula?ng GDP

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
1. Income Method Sum of all wages, profits, rent, and interest. (UPSC 🔹 Useful for tax collec*on &
Prelims 2021) income distribu*on analysis.
Formula: GDP = Wages + Rent + Interest + Profits.
2. Expenditure Method Sum of Consump*on (C) + Investment (I) + Govt 🔹 Commonly used by Na*onal
Spending (G) + Net Exports (X-M). (UPSC Prelims Accounts Sta*s*cs (NAS).
2015)
Example: If C = ₹500, I = ₹200, G = ₹300, X = ₹150, M
= ₹50, then GDP = ₹1100.
3. Value Added Sum of Value Added at each stage of produc?on. 🔹 Avoids double coun*ng issue
(Produc?on) Method (UPSC Prelims 2017) of final goods approach.
Example: Farmer grows wheat (₹100) → Baker makes
bread (₹200) → Value Added = ₹100 + ₹100.

Gross Domes?c Product (GDP) & Related Concepts

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Gross Domes?c The monetary value of all final goods & services 🔹 India’s GDP (FY 2024-25) =
Product (GDP) produced within a country’s borders in a specific ₹299.2 lakh crore (Economic
period (usually a year). (UPSC Prelims 2013) Survey 2025).
Example: If Tesla manufactures in India, it adds to 🔹 Growth Rate (2024-25): 7.3%
India’s GDP. (Budget 2025-26).
GDP Growth Rate The percentage increase in GDP over a period, 🔹 Sectors contribu*ng to GDP:
indica?ng economic health. (UPSC Prelims 2019) Agriculture (18%), Industry (29%),
KARMAYOGI IAS
Example: If India’s GDP grows from ₹200 lakh crore to Services (53%).
₹214 lakh crore, growth rate = 7%. 🔹 India aims for a $5 trillion
economy by 2027.
Economic Territory Defini*on broader than poli*cal borders: Includes 🔹 GDP includes produc*on by
(Domes?c ships, aircrav, embassies, offshore plaworms. (UPSC foreigners in India.
Territory) Prelims 2021) 🔹 GDP excludes income from
Example: India’s Antarc?c research sta?ons are part of Indian ci*zens working abroad.
domes*c territory.

Nominal vs. Real GDP & GDP Deflator

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Nominal GDP measured at current year prices (without adjus?ng 🔹 Overstates economic growth if
GDP for infla?on). (UPSC Prelims 2016) infla*on is high.
Example: If GDP in 2025 is ₹300 lakh crore, it’s in 🔹 Used for budget calcula*ons & policy
nominal terms. decisions.
Real GDP GDP adjusted for infla*on using base-year prices. (UPSC 🔹 Used for year-on-year comparisons.
Prelims 2017) 🔹 India’s Real GDP Growth (2024-25):
Example: If GDP in 2025 is adjusted to 2015 prices, it’s 7.3%.
real GDP.
GDP Measures infla*on by comparing Nominal GDP to Real 🔹 More comprehensive than CPI & WPI
Deflator GDP. (UPSC Prelims 2019) (includes services).
Formula: GDP Deflator = (Nominal GDP / Real GDP) × 🔹 Released by MOSPI with Na*onal
100. Accounts Data.

Inclusions & Exclusions in GDP Calcula?on

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Inclusions in 1. Self-consumed produc*on (Ex: Farmer’s 🔹 Captures total economic ac*vity, even
GDP own crops). non-market transac*ons.
2. Own-account capital forma*on (Ex:
Construc?on of farmhouses).
3. Imputed rent of owner-occupied houses.
(UPSC Prelims 2020)
Exclusions from 1. Transfer payments (Pensions, scholarships). 🔹 GDP excludes resale transac*ons & purely
GDP 2. Black money & illegal ac*vi*es. financial transac*ons.
3. Sale of second-hand goods (UPSC Prelims
2018).

Gross vs. Net Concepts

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Gross Domes?c Total output without adjus?ng for deprecia*on. 🔹 GDP ignores capital deprecia*on.
Product (GDP) (UPSC Prelims 2015)
Formula: GDP = Consump?on + Investment +
Govt Spending + (Exports – Imports).
Net Domes?c GDP minus deprecia*on (wear & tear of capital 🔹 Beler reflects sustainable
Product (NDP) assets). (UPSC Prelims 2017) economic output.
Formula: NDP = GDP – Deprecia?on.
Gross Na?onal GDP + Net Factor Income from Abroad (NFIA). 🔹 India’s GNP < GDP due to higher
Product (GNP) (UPSC Prelims 2016) foreign investment inflow.
Example: Income earned by Indian firms abroad
adds to GNP.
Net Na?onal NNP = GNP – Deprecia*on. (UPSC Prelims 2014) 🔹 NNP is the closest measure of a
Product (NNP) Reflects the net income available for na*on’s welfare.
consump*on & investment.
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Personal & Disposable Income
Concept Details (Including UPSC PYQ Year & Facts to Remember for UPSC Prelims
Examples)
Personal Income (PI) Total income received by households, 🔹 PI = Na*onal Income – Corporate Taxes –
before taxes. (UPSC Prelims 2019) Retained Profits + Transfer Payments.
Includes: Salaries, dividends, pensions,
rent.
Personal Disposable Personal Income aper deduc*ng taxes & 🔹 Reflects the spending power of
Income (PDI) non-tax payments. (UPSC Prelims 2020) individuals.
Formula: PDI = PI – Taxes – Non-Tax
Payments.
Na?onal Disposable NDP + Net transfers from rest of the world. 🔹 Shows maximum resources available for
Income (NDI) (UPSC Prelims 2021) consump*on & investment.
Example: Foreign aid increases India’s NDI.

Factor Cost vs. Market Price

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Factor Cost Produc*on cost incurred by firms, excluding taxes & 🔹 Factor Cost = Basic Price –
(FC) subsidies. (UPSC Prelims 2015) Produc*on Taxes + Subsidies.
Example: Wages, raw material costs.
Market Price Final price paid by consumers, including taxes & 🔹 Market Price > Factor Cost due to
(MP) subsidies. (UPSC Prelims 2016) taxes.
Formula: GDP@MP = GDP@FC + Indirect Taxes –
Subsidies.

Consumer Price Index (CPI)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Consumer Price Measures changes in the retail prices of a 🔹 CPI reflects retail infla*on experienced
Index (CPI) fixed basket of goods & services. (UPSC by households.
Prelims 2020) 🔹 Used by RBI for infla*on targe*ng (4% ±
Formula: CPI = (Cost of Basket in Current Year 2%) under the Monetary Policy Framework.
/ Cost of Basket in Base Year) × 100
Types of CPI in 1. CPI for Industrial Workers (CPI-IW) (Base 🔹 CPI-C is the most comprehensive index
India Year: 2016) – Labour Bureau. used for monetary policy decisions.
2. CPI for Agricultural Labourers (CPI-AL) 🔹 RBI uses CPI-C for infla*on targe*ng,
(Base Year: 1986-87) – Labour Bureau. replacing WPI since 2014.
3. CPI for Rural Labourers (CPI-RL) (Base Year:
1986-87) – Labour Bureau.
4. CPI Combined (CPI-C) (Base Year: 2011-12)
– NSO, MoSPI (UPSC Prelims 2021).
Components of Food & Beverages (45.86%) 🔹 Food has the highest weightage (~46%),
CPI (CPI-C) Clothing & Footwear (6.53%) making CPI vola*le.
Housing (10.07%) 🔹 Housing component applies only to
Fuel & Light (6.84%) urban areas in CPI-C.
Miscellaneous (30.70%) (UPSC Prelims 2020)

CPI vs GDP Deflator

Concept CPI GDP Deflator
Defini?on Measures retail infla*on based on a fixed Measures general infla*on across all final goods &
basket of goods & services. services produced domes?cally.
Includes Only consumer goods & services purchased Includes all goods & services produced in the
by households. economy, including capital goods.
Excludes Capital goods & government purchases. Imported goods, unlike CPI.
Weights Fixed weight for each item. (UPSC Prelims Weights change dynamically with GDP composi?on.
2019)
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Wholesale Price Index (WPI)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Wholesale Price Measures price changes at the wholesale level, 🔹 Does not capture service-sector
Index (WPI) reflec?ng infla?on in the produc?on stage. (UPSC infla*on, unlike CPI.
Prelims 2020) 🔹 Used un*l 2014 for RBI’s
Released by: Office of Economic Adviser, DPIIT, infla*on targe*ng (Replaced by
Ministry of Commerce & Industry. CPI).
Base Year 2011-12 (Revised from 2004-05 in 2017). (UPSC 🔹 Covers 697 items (Primary: 117,
Prelims 2017) Manufactured: 564, Fuel: 16).
Major 1. Primary Ar*cles (22.62%) 🔹 Manufacturing sector has the
Components 2. Fuel & Power (13.15%) highest weightage (~64%).
3. Manufactured Products (64.23%) (UPSC Prelims 🔹 WPI is less vola*le than CPI due
2016) to lower food weightage.

Producer Price Index (PPI)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Producer Price Measures average change in selling prices received by 🔹 In India, WPI is used as a
Index (PPI) domes*c producers. (UPSC Prelims 2021) proxy for PPI.
🔹 PPI includes services,
unlike WPI.

Index of Industrial Produc?on (IIP)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Index of Industrial Measures short-term changes in industrial 🔹 IIP base year: 2011-12.
Produc?on (IIP) output, indica?ng economic ac?vity. (UPSC 🔹 Monthly release tracks industry
Prelims 2015) performance.
Released by: NSO, MoSPI.
Major Sectors & 1. Manufacturing (77.63%) 🔹 Manufacturing contributes the
Weightage 2. Mining (14.37%) most (~78%) to IIP.
3. Electricity (7.99%) (UPSC Prelims 2018)
8 Core Industries 1. Refinery Products (28.04%) 🔹 Refinery Products have the highest
(40.27% of IIP) 2. Electricity (19.85%) weight in core industries (~28%).
3. Steel (17.92%) 🔹 Core industries form ~40% of IIP.
4. Coal (10.33%)
5. Crude Oil (8.98%)
6. Natural Gas (6.88%)
7. Cement (5.37%)
8. Fer*lizers (2.63%) (UPSC Prelims 2015)

GDP Base Year Revision (2011-12)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
GDP Base Year The base year for GDP calcula?on was changed from 🔹 India plans to revise the GDP
Revision 2004-05 to 2011-12 to reflect structural changes in the base year to 2022-23 (as per
economy. (UPSC Prelims 2021) Budget 2025).
🔹 This was India’s 7th base year
revision.
Reasons for 1. Aligning with global standards – Based on UNSNA 🔹 GDP at factor cost was replaced
Revision 2008 (UN System of Na*onal Accounts). with GDP at market prices.
2. Capturing structural changes – Reflects changes in 🔹 Shiped from Establishment
economic ac?vi?es & price levels. Approach to Enterprise Approach.
KARMAYOGI IAS
3. Improved data sources – Uses MCA-21 database for
manufacturing sector instead of RBI surveys.
New Concepts 1. GVA at Factor Cost: Compensa?on of employees + 🔹 GVA is the primary measure of
Introduced Opera?ng surplus + Deprecia?on. output now, instead of GDP at
2. GVA at Basic Prices: GVA at Factor Cost + (Produc?on factor cost.
taxes – Produc?on subsidies).
3. GDP at Market Prices: GVA at Basic Prices + (Product
taxes – Product subsidies). (UPSC Prelims 2020)

Advantages & Disadvantages of GDP as an Economic Indicator

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Advantages of GDP as a 1. Measures economic performance – 🔹 GDP growth rate is the most
Measure of Growth Reflects size & health of the economy. commonly used indicator for
2. Easy to calculate – Based on a universal economic progress.
formula, allowing global comparison. 🔹 India’s GDP growth target
3. Policy making – Helps in government (2025-26) = 7.3% (Economic
planning & budget alloca*on. Survey 2025).
4. Tracks growth trends – Can compare past &
present GDP trends. (UPSC Prelims 2019)
Problems with GDP as a 1. Does not reflect quality of life – Ignores 🔹 India ranks 126th in the World
Measure of Development & educa*on, healthcare, poli*cal freedom, & Happiness Index 2024 (UN
Welfare happiness. Report).
2. Ignores inequality – A few wealthy 🔹 GDP does not account for the
individuals may drive GDP growth, but poverty informal sector (~40% of India’s
remains. economy).
3. Environmental impact ignored – GDP may
rise at the cost of environmental degrada?on.
(UPSC Prelims 2018)

Alterna?ves to GDP as a Measure of Development

A. Human Development Index (HDI)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Human Development A composite index measuring educa*on, 🔹 Published by: United Na*ons
Index (HDI) health, & income. (UPSC Prelims 2016) Development Programme (UNDP).
🔹 India’s HDI Rank (2023): 132/191
(UNDP Report).
Components of HDI 1. Health: Life expectancy at birth. 🔹 Developed by Amartya Sen &
2. Educa*on: Mean & expected years of Mahbub ul Haq.
schooling.
3. Standard of Living: Gross Na?onal Income
(GNI) per capita.

B. Gross National Happiness Index (GNH)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Gross Na?onal A measure of na?onal well-being based on 🔹 Introduced by Bhutan in 1972
Happiness Index happiness rather than economic output. (UPSC (King Jigme Singye Wangchuck).
(GNH) Prelims 2019) 🔹 India ranks 126 in the World
Happiness Report 2024.
KARMAYOGI IAS
Components of GNH 1. Good Governance 🔹 First World Happiness Report
2. Sustainable Socioeconomic Development was released in 2012 by the UN
3. Cultural Preserva*on SDSN.
4. Environmental Conserva*on

C. Green GDP

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Green GDP Adjusts GDP by accoun*ng for environmental 🔹 India cons*tuted the Dasgupta
damage & deple*on of natural resources. (UPSC Commilee (2011) to study Green
Prelims 2017) GDP.
Why is Green GDP 1. Includes environmental costs – Adjusts GDP for 🔹 China was the first country to
Important? pollu?on & deforesta?on. publish Green GDP data in 2006.
2. Promotes sustainable development.
3. Tracks resource efficiency.

D. Sustainable Development Index (SDG Index)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Sustainable Measures progress on Sustainable 🔹 Published by: UN Sustainable
Development Index (SDG Development Goals (SDGs) for each country. Development Solu*ons Network
Index) (UPSC Prelims 2021) (SDSN).
India’s Rank in SDG Index Rank: 112/166 countries (Economic Survey 🔹 Top rank: Finland (2024).
2024 2025).
KARMAYOGI IAS
ECONOMIC PLANNING
Economic Planning: Meaning & Types
Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Economic State-led decision-making on resource alloca?on 🔹 Introduced in USSR (1928); India
Planning - to achieve socio-economic goals. (UPSC Prelims adopted planning in 1951 (1st Five-Year
Defini?on 2018) Plan).
Features of 1. Predetermined objec*ves (GDP growth, self- 🔹 India followed centralized planning
Economic reliance, poverty reduc?on). *ll 1991; moved to indica*ve planning
Planning 2. State interven*on to regulate markets. post-LPG.
3. Defined *me frame (5-year, 10-year plans).
4. Op*mum resource u*liza*on.
5. Monitoring & evalua*on for mid-course
correc?ons.

Types of Economic Planning

Concept Details (Including UPSC PYQ Year & Facts to Remember for UPSC Prelims
Examples)
Impera?ve Planning State-controlled economy, all decisions 🔹 No role of private sector; centralized
(Centralized Planning) made by government. (UPSC Prelims alloca*on of resources.
2017)
Example: USSR, China (before reforms),
India (1951-1991).
Indica?ve Planning Government sets broad goals but 🔹 Govt acts as a "facilitator" rather than a
private sector operates freely. "regulator."
Example: India (post-1991), USA, France.
(UPSC Prelims 2019)
Perspec?ve Planning Long-term blueprint (15-20 years), 🔹 India followed Five-Year Plans *ll 2017;
divided into Five-Year Plans. (UPSC now replaced by NITI Aayog’s vision
Prelims 2016) documents.

History of Economic Planning in India

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC
Prelims
Pre-Independence 1. M. Visvesvaraya’s Plan (1934): Proposed doubling 🔹 Visvesvaraya was India’s first
Planning Models na*onal income in 10 years. economic planner.
2. Na*onal Planning Commilee (1938): Led by 🔹 Bombay Plan supported
Jawaharlal Nehru, focused on industrializa?on. heavy industries & state
3. Bombay Plan (1944): Industrialists proposed state- investment.
led development.
4. People’s Plan (1944): M.N. Roy proposed socialist
model.
5. Gandhian Plan (1944): Emphasized self-
sufficiency, rural industries.
6. Sarvodaya Plan (1950): Jai Prakash Narayan
promoted agriculture & colage industries. (UPSC
Prelims 2021)

Post-Independence Planning & Five-Year Plans

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Why India Adopted 1. Colonial legacy: Economic stagna?on, 🔹 First Five-Year Plan (1951-56)
Centralized Planning? poverty. focused on agriculture.
2. Par**on Impact: Refugee crisis, loss of
industrial areas.
KARMAYOGI IAS
3. Absence of private sector investment.
4. Success of USSR model in rapid
industrializa*on. (UPSC Prelims 2019)
Objec?ves of Indian 1. Economic Growth: Raising na?onal 🔹 Green Revolu*on (1960s) & LPG
Planning income. Reforms (1991) were key policy ships.
2. Moderniza*on: Industrializa?on &
technology adop?on.
3. Self-Reliance: Reducing foreign
dependence.
4. Social Jus*ce: Reducing inequality, poverty,
unemployment. (UPSC Prelims 2016)

Planning Commission & NITI Aayog

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Planning Commission Formed by Jawaharlal Nehru to implement 🔹 Non-cons*tu*onal, non-statutory
(1950-2014) Five-Year Plans. body (not in Cons*tu*on or created
Func*ons: by law).
1. Assess resources & formulate plans.
2. Allocate funds across sectors.
3. Monitor plan implementa*on. (UPSC
Prelims 2020)
Na?onal Development Approves Five-Year Plans, includes PM, CMs, 🔹 NDC was the apex policy body for
Council (NDC) (1952) Union Ministers. (UPSC Prelims 2021) planning.
NITI Aayog (2015- Formed to replace Planning Commission, 🔹 Publishes SDG India Index, State
Present) promotes coopera*ve federalism. (UPSC Health Index.
Prelims 2021) 🔹 Follows "bolom-up" planning.

Five-Year Plans of India: Salient Features (UPSC Prelims Notes)

1st Five-Year Plan (1951-56)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Challenges Acute food shortage, refugee influx, infla*on, & 🔹 Based on Harrod-Domar Model
post-WWII economic crisis. (UPSC Prelims 2017) (Modified as Mahalanobis-Domar
Model).
Objec?ves & Target GDP Growth: 2.1% 🔹 Actual Growth Rate: 3.6% (Exceeded
Targets 1. Focus on agriculture & irriga*on. target).
2. Self-sufficiency in food produc*on. 🔹 Bhakra, Hirakud, & Damodar Valley
3. Building infrastructure (roads, railways, dams ini*ated.
irriga*on, power).
Achievements 1. University Grants Commission (UGC) 🔹 KN Raj was a key architect of the 1st
established. FYP.
2. 5 IITs set up (first in Kharagpur).
3. Community Development Programme (CDP) &
land reforms introduced.

2nd Five-Year Plan (1956-61)

Concept Details (Including UPSC PYQ Year & Facts to Remember for UPSC Prelims
Examples)
Objec?ves & Target GDP Growth: 4.5% 🔹 Actual Growth Rate: 4.3%.
Targets 1. Rapid industrializa*on (Mahalanobis
Model).
KARMAYOGI IAS
2. Development of basic & key industries.
3. Reduc?on in income inequality.
Achievements 1. Steel Plants: Durgapur (UK), Rourkela 🔹 Nehru called industrial projects "Temples
(Germany), Bhilai (USSR). of Modern India".
2. Atomic Energy Commission (Homi
Bhabha).
Challenges 1. Acute forex crisis, leading to price rise 🔹 Panchaya* Raj elec*ons (1959) based on
(~30%). Balwant Rai Mehta Commilee.
2. Introduc*on of License-Quota Permit Raj
(1956 Industrial Policy).

3rd Five-Year Plan (1961-66)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Objec?ves & Target GDP Growth: 5.6% 🔹 Actual Growth Rate: 2.8% (Failed due to
Targets 1. Agriculture priority (self-sufficiency in food). crises).
2. Industrial & employment growth.
3. Reducing income dispari*es.
Challenges 1. Indo-China War (1962) & Indo-Pak War 🔹 Rupee devalued for the first *me (IMF
(1965). condi*ons).
2. Successive droughts (1965-66).
3. US suspended Food Aid (PL-480).
Developments 1. Green Revolu*on ini*ated (Punjab - Wheat 🔹 Shastri’s "Jai Jawan Jai Kisan" slogan
Produc*on). emerged.
2. Cement & fer*lizer plants established.

Plan Holiday: Three Annual Plans (1966-69)

Concept Details (Including UPSC PYQ Year & Facts to Remember for UPSC Prelims
Examples)
Reason for Plan 1. Failure of 3rd Plan. 🔹 Focus shiped en*rely to agriculture (HYV seeds,
Holiday 2. Rupee devalua*on & forex fer*lizers, irriga*on).
crisis.
3. Infla*onary recession & food
shortage.
Developments 1. Green Revolu*on expanded. 🔹 Paved way for self-sufficiency in food produc*on.
2. Stabilized economy for future
plans.

4th Five-Year Plan (1969-74)

Concept Details (Including UPSC PYQ Year & Facts to Remember for UPSC Prelims
Examples)
Objec?ves & Target GDP Growth: 5.7% 🔹 Actual Growth Rate: 3.3% (Failed due to crises).
Targets 1. Self-reliance & economic stability.
2. Agriculture & industrial expansion.
3. Panchaya* Raj for local planning.
Challenges 1. 1971 Indo-Pak War (Bangladesh 🔹 Indira Gandhi na*onalized 14 banks (1969).
Libera*on).
2. Influx of Bangladeshi refugees.
3. Oil Crisis (1973) - High infla*on.
KARMAYOGI IAS
Achievements 1. Pokhran-1 Nuclear Test (1974). 🔹 Gadgil Formula for state fund alloca*on
2. Coal Mining Na*onaliza*on (1973). introduced (1969).

5th Five-Year Plan (1974-79)

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Objec?ves & Target GDP Growth: 4.4% 🔹 Actual Growth Rate: 4.8%.
Targets 1. "Garibi Hatao" & self-reliance.
2. Minimum Needs Programme (Housing,
health, educa*on).
Challenges 1. High infla*on. 🔹 Na*onal Highway system ini*ated.
2. Emergency (1975) & Janata Party
government change (1977).
Achievements 1. Electrifica*on expansion. 🔹 Rolling Plan (1978-80) replaced FYPs
2. Amendment of Electricity Supply Act (1975). under Janata Govt.

6th to 12th Five-Year Plans (Key Highlights)

Plan Key Features Actual Growth

Rate
6th FYP (1980-85) Start of economic liberaliza*on, NABARD formed, Family Planning 5.7%
expanded.
7th FYP (1985-90) Focus on food, work, & produc*vity, industrial growth, tech 6.0%
upgrada?on.
Annual Plans (1990- Balance of Payments crisis, economic reforms begin. -
92)
8th FYP (1992-97) LPG Reforms (Liberaliza?on, Priva?za?on, Globaliza?on). 6.8%
9th FYP (1997-2002) Focus on agriculture, employment, & poverty reduc*on. 5.4%
10th FYP (2002-07) Highest GDP Growth Target (8%), focus on literacy & gender equality. 7.6%
11th FYP (2007-12) Theme: "Faster & Inclusive Growth", MGNREGA introduced. 8%
12th FYP (2012-17) Theme: "Faster, Sustainable & More Inclusive Growth". 5% (1st Year)
Major policy logjam & slowdown.

Present Status of Planning in India

Emergence of NITI Aayog

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Why was NITI Aayog 1. Due to cri*cism of the Planning Commission, 🔹 First introduced in 2015 by GoI.
formed? the GoI replaced it in 2015. 🔹 Focus on long-term planning aligned
2. 12th FYP (2012-17) was the last Five-Year with SDGs (2030).
Plan.
3. India s?ll follows planned development, but
with a different approach.
4. Instead of a single Five-Year Plan, India now
has:
- 3-Year Ac*on Plan
- 7-Year Strategy Paper
- 15-Year Vision Document
Are these the new No. These documents are broad roadmaps to 🔹 NITI Aayog is only an advisory body
Five-Year Plans? guide development, not detailed schemes. (Think Tank).
🔹 No financial powers, unlike Planning 🔹 Finance Commission now
KARMAYOGI IAS
Commission. determines fund alloca*on, not NITI
🔹 Does not require Union Cabinet approval, Aayog.
hence not binding. (UPSC Prelims 2020)

Criticism of Planning Commission

Issue Explana?on Impact

No State Representa?on NDC (Na*onal Development Council) was 🔹 States had no say in
too large for effec?ve state par?cipa?on. development priori*es.
Plans were oven approved as a formality
due to ?me constraints.
Encroachment on State List 1. Centrally Sponsored Schemes (CSS) were 🔹 States saw Planning
seen as interfering with State List. Commission as a tool for
2. Planning Commission micromanaged centraliza*on.
state policies.
Super-Cabinet without 1. Wide powers but not accountable to 🔹 Lack of democra*c oversight.
Accountability Parliament.
2. Formed via resolu*on, not a statutory or
cons*tu*onal body.
Financial Control Over States 1. Controlled fund transfers to states, 🔹 Undermined coopera*ve
leading to poli*cal bias. federalism.
2. Condi*onal transfers were used as an
instrument of poli*cal arm-twis*ng.
Flawed Poverty Es?ma?on 1. Unrealis*c poverty line defini*ons 🔹 Gap between planned targets
(Tendulkar & Rangarajan Commi]ees). & actual achievements.
2. Failure to ensure monitoring & effec*ve
implementa*on.
Dis?nc?on Between Plan & 1. Led to rigid budgetary alloca*on, making 🔹 Made Planning Commission
Non-Plan Expenditure social sector spending unpredictable. obsolete.
2. The dis?nc?on was abolished in 2017
Union Budget.

NITI Aayog: Structure & Functions

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Forma?on of NITI 1. Formed on January 1, 2015 via Union Cabinet 🔹 Acts as a policy Think Tank, not a
Aayog resolu*on. fund allocator.
2. Replaced Planning Commission.
3. Not a cons*tu*onal or statutory body. (UPSC
Prelims 2021)
Mandate of NITI Key Objec*ves: 🔹 Aligns India’s policies with SDG
Aayog 1. Coopera*ve federalism via structured Goals 2030.
support.
2. Long-term policy & strategy planning.
3. Village-level planning.
4. Economic security in na*onal policy.
5. Inclusive growth with social jus*ce.
Func?ons of NITI Four Key Areas: 🔹 It does not approve or allocate
Aayog 1. Designing Policy & Programmes. funds.
2. Coopera*ve Federalism (State-Centre
Coordina*on).
3. Monitoring & Evalua*on of Schemes.
KARMAYOGI IAS
4. Think Tank & Knowledge Hub (Innova*on &
Research).

Composition of NITI Aayog

Posi?on Descrip?on Current Office Holder (2025)

Chairperson Prime Minister (PM) of India. Narendra Modi
Vice-Chairperson Appointed by PM, rank of Cabinet Minister. Rajiv Kumar
CEO (Chief Execu?ve Appointed by PM, rank of Secretary to GoI. Amitabh Kant
Officer)
Full-Time Members Appointed by PM from experts in economy 3-5 members at any given *me.
& governance.
Ex-Officio Members 4 Union Ministers (appointed by PM). Ministers of Finance, Defence, Home,
Agriculture.
Special Invitees Experts, specialists, and policymakers Varies as per government needs.
appointed by PM.
Governing Council Includes all Chief Ministers & Lt. Governors Meets periodically to discuss policies.
of UTs.
Regional Councils Formed to address inter-state & regional Chaired by Union Minister or CM of a
issues. state.

Key Differences: Planning Commission vs. NITI Aayog

Parameter Planning Commission (1950-2014) NITI Aayog (2015-Present)

Forma?on Established by a resolu*on of GoI Established by a resolu*on of GoI (2015).
(1950).
Legal Status Non-statutory, non-cons*tu*onal. Non-statutory, non-cons*tu*onal.
Role Formulated Five-Year Plans & allocated Acts as a policy Think Tank, provides advisory
funds. role.
State No formal representa*on from states. Includes all CMs in Governing Council.
Representa?on
Fund Alloca?on Had financial powers, allocated funds No financial powers, alloca*on done by Finance
Power to states. Commission.
Approval of Plans Plans needed Union Cabinet approval. Recommenda*ons are not binding on
government.
Focus Centralized planning & direct control. Decentralized planning, coopera*ve federalism.
Major Cri?cism Bureaucra*c, rigid, poli*cal bias in fund Lack of financial powers, purely advisory.
alloca*on.
KARMAYOGI IAS
MONEY AND BANKING
Money can be defined as anything that is generally accepted as a means of exchange, and which can act as unit of
account, can store value, and be used for repayment of debt. For example: Paper currency, Coins, Cheques, Bank
deposits, and Crypto currency etc.

Func?ons of Money & Modern Banking

Functions of Money

Concept Details Facts to Remember for UPSC Prelims

Medium of 1. Replaces Barter System - Eliminates double 🔹 Fiat money (₹, $, €) has no intrinsic value
Exchange coincidence of wants. but is backed by government authority.
2. Legal Tender - Must be accepted for
transac?ons within an economy.
3. Example: Buying groceries with cash or UPI.
(UPSC Prelims 2018)
Unit of Account 1. Standard measure for pricing goods & 🔹 In India, ₹ is the standard unit of
services. account.
2. Helps in keeping financial records,
comparing prices. (UPSC Prelims 2019)
Store of Value 1. Retains purchasing power over ?me. 🔹 Gold is open used as an alterna*ve
2. Infla?on affects this func?on by reducing store of value during infla*onary periods.
the real value of money.
3. Example: ₹100 today can buy fewer goods
in future if infla?on rises. (UPSC Prelims 2021)
Standard of 1. Used for credit transac?ons (loans, bonds, 🔹 Money allows long-term contracts &
Deferred Payment EMIs). investments.
2. Future payments can be measured in money
terms.
3. Example: Home loans, bonds, student loans.
(UPSC Prelims 2020)

Types of Money

S. Type of Money Features Examples

No.
1 Full Bodied - Money whose commodity value is - Gold & silver coins used in ancient
Money equal to its face value. economies.
- Issued in precious metals like silver - Example: ₹1 coin during pre-independence
or gold. (UPSC Prelims 2019) era had silver value equal to its face value.
2 Token Money - Money value > Commodity value. - ₹500, ₹2000 paper notes (cost of paper <
- Used in modern monetary systems. printed value).
- Based on fiat value set by - US Dollar, Euro, etc.
government authority. (UPSC Prelims
2017)
3 Representative - Issued against bullion backing - Gold-backed US Dollars (pre-1971).
Money (precious metals). - British Gold Standard (pre-20th
- The issuing authority keeps an century).
equivalent reserve of gold/silver.
- Used historically before fiat money.
(UPSC Prelims 2015)
KARMAYOGI IAS
4 Legal Tender - Recognized by law for settling - Limited Legal Tender: Coins (₹10 limit for
Money debts. 50 paise).
- Cannot be refused for transactions. - Unlimited Legal Tender: Paper currency
- Two Types: (₹10, ₹100, ₹500, etc.).
🔹 Limited Legal Tender: Accepted
only up to a certain limit.
🔹 Unlimited Legal Tender:
Accepted for any amount. (UPSC
Prelims 2018)
5 Fiduciary Money - Money accepted based on trust, not - Cheques, Demand Drafts (DDs).
backed by the government. - Cryptocurrencies (Bitcoin, Ethereum) -
- Issued by private banks or NOT legal tender but still used for
institutions. transactions.
- Works without legal compulsion
but is widely accepted. (UPSC Prelims
2022)

Modern Forms of Money

Concept Details Facts to Remember for UPSC

Prelims
Currency (Fiat 1. Issued by RBI (except ₹1 notes, which are issued by 🔹 ₹1, ₹2, ₹5, ₹10, ₹20, ₹50, ₹100,
Money) GoI). ₹200, ₹500, ₹2000 notes exist.
2. Legal tender: Must be accepted for all payments.
3. Example: ₹, $, €, etc. (UPSC Prelims 2018)
Cheque 1. Paper instrument direc?ng a bank to pay money. 🔹 RBI’s CTS (Cheque Trunca*on
2. Not legal tender – can be refused by recipient. System) speeds up cheque
3. Example: Demand Dravs (DD), Pay Orders. (UPSC clearing.
Prelims 2017)
Cryptocurrency 1. Decentralized digital currency using blockchain. 🔹 India introduced the Digital
2. Examples: Bitcoin, Ethereum, Dogecoin. Rupee (CBDC) in 2023.
3. Dinesh Sharma Commilee (2017) recommended a
total ban on cryptocurrencies. (UPSC Prelims 2022)
Non-Fungible 1. Digital assets stored on blockchain. 🔹 NFTs can represent real-world
Token (NFT) 2. Examples: Digital art, virtual land, in-game items. assets (e.g., property deeds).
3. NFTs are unique & cannot be interchanged like
currency. (UPSC Prelims 2022)

E-Rupee vs E-RUPI

Feature E-Rupee (CBDC issued by RBI) E-RUPI (Digital Voucher by NPCI)

Issuer Reserve Bank of India (RBI) Na*onal Payments Corpora*on of India (NPCI)
Nature Digital currency (CBDC), equivalent to Prepaid digital voucher for specific services.
cash.
Usage General transac*ons (P2P, P2M, QR Used for targeted welfare benefits (health, educa*on,
codes). subsidies).
Fungibility Yes (interchangeable like cash). No (linked to a specific use case).
Example E-Rupee wallet linked to banks. E-RUPI voucher sent via SMS/QR code.

National Payment Corporation of India (NPCI) - Key Systems

System Descrip?on & Purpose Key Features

KARMAYOGI IAS
BHIM (UPI) Mobile app for instant bank 🔹 24x7 transac*ons 🔹 QR code-based
transfers using UPI. payments
Aadhaar Enabled Payment Allows biometric-based banking 🔹 Uses Aadhaar authen*ca*on
System (AePS) transac?ons.
FASTag (NETC) RFID-based electronic toll 🔹 Mandatory for all vehicles since 2021
collec*on system.
RuPay Card India’s own debit & credit card 🔹 Alterna*ve to Visa & Mastercard 🔹
system. Used in 15+ countries

RBI’s Fund Transfer Systems

Feature RTGS (Real-Time Gross Se]lement) NEFT (Na?onal Electronic Funds Transfer)
Minimum Transfer ₹2 lakh No minimum limit
Maximum Transfer No upper limit No upper limit
Se]lement Speed Real-?me Batch-wise (every 30 minutes)
Use Case Large-value transac?ons Small-to-medium transac?ons
Availability 24x7 (Since Dec 2020) 24x7 (Since Dec 2019)

Demand & Supply of Money

Concept Details (Including UPSC PYQ Year & Examples) Facts to Remember for UPSC Prelims
Transac?on 1. Money needed for daily transac*ons. 🔹 Higher GDP = Higher transac*on
Demand 2. Propor*onal to GDP & Price Level. demand for money.
Specula?ve 1. Money held for investment opportuni*es. 🔹 High interest rates → Low specula*ve
Demand 2. Inversely related to interest rates. (UPSC demand for money.
Prelims 2013)
Velocity of 1. Number of *mes money changes hands in a 🔹 Higher velocity = more economic
Money year. ac*vity.
2. Formula: V = (P × Y) / M (UPSC Prelims 2021)
Liquidity Trap 1. When interest rates are very low, people 🔹 Japan & USA faced liquidity traps post-
hoard cash. 2008 crisis.
2. Central Bank loses control over interest rates.
(UPSC Prelims 2015)

Digital Payment Systems in India

Topic Details Facts for Prelims
Paper-Based Payments Includes cheques, demand dravs, and money RBI promotes Cheque Trunca*on
orders. System (CTS) to speed up clearing.
Cheque Trunca?on System Digital image-based cheque processing - Introduced in 2008, phased
(CTS) reducing physical movement of cheques. across India.
- Reduces fraud and processing
?me.
Magne?c Ink Character Uses special ink and character fonts to enable Used in high-volume banking
Recogni?on (MICR) faster clearing. transac?ons.
Cheques
Electronic Clearing Service Bulk transac?on system for repe??ve - ECS Credit & ECS Debit available.
(ECS) payments like salary, pension, and EMI. - Being replaced by NACH.
Na?onal Automated A web-based service for bulk transac*ons like - Managed by NPCI.
Clearing House (NACH) subsidies, salary payments, u?lity bill - Consolidates mul*ple ECS
collec?ons. systems.
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Real-Time Gross Se]lement Instant, one-to-one se]lement of large - Minimum transac?on: ₹2 lakh
(RTGS) transac?ons without ne~ng. - No maximum limit.
- Available 24×7 since 2020.
Na?onal Electronic Funds One-to-one transfer system between bank - No minimum or maximum limit.
Transfer (NEFT) accounts in batches. - Available 24×7.
Immediate Payment Instant, 24×7 interbank electronic fund transfer - Launched by NPCI in 2010.
Service (IMPS) using mobile numbers or account details. - Used for P2P and P2M
transac*ons.
Unified Payments Interface Mobile-based instant payment system linking - Launched in 2016 by NPCI.
(UPI) mul?ple bank accounts. - India's fastest-growing digital
payment system.
- Used in 10+ countries, including
UAE, Nepal, Singapore.
UPI 123Pay UPI for non-smartphone users via IVR, missed - Launched in 2022 for feature
calls, sound-based transac*ons. phone users.
Bharat Interface for Money NPCI-developed mobile app for simple and fast - BHIM 2.0 added dona?on, IPO
(BHIM App) UPI transac?ons. applica?on, scan & pay features.
Bharat QR Code P2M (Person-to-Merchant) payment system - Different from BHIM QR, which
using QR codes for card-based payments. is UPI-based.
Aadhaar Enabled Payment Uses Aadhaar-linked bank accounts for - Developed by NPCI.
System (AePS) transac?ons at micro-ATMs. - Inputs required: Aadhaar, Bank
Name, Fingerprint.
Prepaid Instruments (PPIs) Digital wallets like Paytm, MobiKwik, and Airtel - Types: Closed, Semi-Closed,
Money for purchases and remi]ances. Open Wallets.
RuPay Card India’s domes*c card network compe?ng with - Adopted by Singapore & UAE.
Visa/Mastercard.

Central Bank Digital Currency (CBDC)

Topic Details Facts for Prelims
Introduc?on to Digital version of currency issued by RBI, - Announced in Budget 2022-23.
CBDC func?oning as legal tender. - Backed by blockchain technology.
Types of CBDC in 1⃣ e₹-W (Wholesale) - For interbank - Pilot in wholesale (e₹-W): Launched for
India se]lements. G-Sec sellements.
2⃣ e₹-R (Retail) - For consumers and - Pilot in retail (e₹-R): Launched in closed
businesses. user group.
Key Benefits of - Reduces cost of physical cash management. - CBDC reduces dependence on cash.
CBDC - Enhances financial inclusion. - RBI's balance sheet will show CBDC as
- Helps in cross-border transac*ons. currency in circula*on.
Challenges of - Cybersecurity risks. - India s*ll prefers cash (~85%
CBDC - Privacy concerns. transac*ons).
- Adop?on resistance from cash users. - Need for stronger cyber laws.

CBDCs vs. Cryptocurrency

Feature Cryptocurrency CBDC

Issuer Decentralized, No Issuer Central Bank (e.g., RBI)
Regulation Unregulated Regulated by Central Bank
Centralized? Decentralized Centralized
Stability Volatile (based on investor Stable (pegged to a country's fiat
sentiment/speculation) currency)
Technology Typically Blockchain May or may not require Blockchain
Nature Investment Option/Asset Digital form of currency
KARMAYOGI IAS
Liability N/A (No issuer) Liability of the Central Bank (money in
circulation)
Privacy Private currencies Aims to ensure anonymity

CBDC vs. UPI

Feature UPI CBDC

Mechanism Payment Platform for Digital Digital form of currency enabling digital
Transactions transactions
Intermediary Bank acts as an intermediary No bank intermediary (Peer-to-Peer)
Data Privacy Intermediaries (banks) have user data Aims to ensure anonymity, similar to the case
of physical cash
Purpose Platform for transactions Substitute for currency
Issuer Commercial Bank Central Bank (e.g., RBI)
Liability Liability of Commercial Bank/Financial Direct Liability of the Central Bank
Intermediary

Bond Market & Interest Rate Relation

Concept Explana?on Impact

Bonds & Interest 1. Inverse Rela*onship: If interest rates increase, 🔹 Investors ship to new high-
Rate Rela?onship bond prices fall. yield bonds, lowering demand for
2. Reason: New bonds offer higher returns, making old bonds.
old bonds less a]rac?ve.
Bond Yield 1. Yield = (Coupon Payment / Market Price) × 100. 🔹 Lower bond price → Higher
Calcula?on 2. Example: If a ₹1000 bond pays ₹50 yearly interest, yield.
and market price drops to ₹900, new yield = (50/900)
× 100 = 5.56%.
Specula?ve Demand 1. When interest rates are high, people buy bonds. 🔹 Explains why investors buy
for Money 2. When interest rates are low, people prefer holding gold when interest rates fall.
cash (to avoid losses).

Types of Deposits

Demand Deposits vs. Time Deposits

S. Feature Demand Deposits Time/Term Deposits
No.
1 Withdrawability Payable on demand; depositors can Not payable on demand; withdrawal
withdraw funds at any ?me. only on maturity.
2 Medium of Can be transferred via cheques and digital Cannot be used as a medium of
Exchange transac?ons. exchange.
3 Liquidity Highly liquid; instant access to funds. Not liquid; funds locked un?l maturity.
4 Examples All Current Accounts, Demand liability All Fixed Deposits, Time liability
por?on of Savings Account. por?on of Savings Account.

Current, Savings, & Fixed Deposits

KARMAYOGI IAS
S. Feature Current Account Savings Account Fixed Deposit (FD)
No.
1 Withdrawability Unlimited withdrawals Limited withdrawals per No withdrawal before maturity
allowed. month. (penalty for early withdrawal).
2 Interest No interest paid. Low interest paid, varies Higher interest rate than savings
with the bank. accounts.
3 Overdrap Available for businesses. Not available. Loans can be taken against FD.
Facility
4 Usage Used for frequent Used by individuals for Used for long-term savings.
transac?ons by daily transac?ons.
businesses.

Recurring Deposits (RD)

Feature Descrip?on
Defini?on A type of term deposit where a fixed amount is deposited at regular intervals over an agreed period.
Tenure Generally ranges from 6 months to 10 years.
Liquidity Less liquid than demand deposits. Premature withdrawal incurs penalty.
Users Mostly salaried individuals who save regularly.

Post Office Deposits (PO)

S. Feature PO Savings Deposits PO Time Deposits

No.
1 Withdrawability Payable on demand via withdrawal slips. Not payable on demand;
locked for a fixed period.
2 Liquidity Moderate liquidity. Least liquid among post
office deposits.
3 Examples Post Office Savings Account. Post Office Fixed
Deposits (1-year, 2-year,
3-year, 5-year).
4 Addi*onal Public Provident Fund (PPF), Sukanya Samriddhi Yojana
Schemes (SSY), Kisan Vikas Patra (KVP), Na?onal Savings Cer?ficate
(NSC), Senior Ci?zen Savings Scheme (SCSS).

Measures of Money Supply

S. No. Measure Formula Descrip?on

1 M1 (Narrow M1 = C + DD + OD Most liquid form of money, includes currency with the
Money) public (C), demand deposits with commercial banks
(DD), and other deposits with RBI (OD).
2 M2 M2 = M1 + Savings Includes M1 and savings deposits with post offices.
Deposits with Post
Office
3 M3 (Broad M3 = M1 + Net Time Broader measure, includes M1 plus net *me deposits
Money / AMR) Deposits with Banks (Fixed Deposits).
4 M4 (Widest M4 = M3 + Total Post Includes M3 plus total post office deposits (excluding
Money Office Deposits Na*onal Savings Cer*ficates - NSC).
Measure) (excluding NSC)
Liquidity M1 > M2 > M3 Most liquid → Least
Ranking > M4 liquid
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High Powered Money (M0)

Feature Descrip?on
Defini?on Total liability of the monetary authority of India (RBI), also called monetary base or reserve money.
Formula M0 = Currency in Circula*on + Deposits of Commercial Banks & Government with RBI
Components 1. Currency in circula*on (notes and coins with the public).
2. Cash reserves of commercial banks (CRR with RBI).
3. Government deposits with RBI.

Reserve Bank of India (RBI)

History of RBI

Aspect Details Latest Insights (Economic Survey 2024- UPSC Relevance

25 & Budget 2025-26)
Establishment 1st April 1935, under RBI completed 90 years in 2025, with UPSC-2015: RBI Act &
RBI Act, 1934. expanded monetary policy func?ons. its significance.
Recommenda*on Set up based on Hilton Narasimham Commilee (1991 & 1998) UPSC-2018: Role of
Young Commission. later recommended financial sector Hilton Young
reforms under RBI. Commission.
Original Loca*on Calcula (Kolkata), Mumbai remains the financial hub with UPSC-2021: Economic
shiped to Mumbai in RBI’s digital currency pilot project centers of India.
1937. launched in 2024.
Role in Burma Served as Central Bank India extended $1.5 billion in credit to UPSC-2019: India-
(Myanmar) of Burma *ll 1947. Myanmar in 2024 under RBI’s Myanmar economic
interna?onal lending framework. ?es.
Role in Pakistan Func?oned as Pakistan’s Post-Par??on economic policy under UPSC-2020: RBI's
Central Bank *ll June RBI shaped Indo-Pak financial historical role in South
1948. rela*ons. Asia.
Ownership Originally privately RBI remains 100% owned by the UPSC-2016: Evolu?on
owned, na*onalized in Government of India. of RBI’s ownership.
1949.

Functions and Role of RBI

Func?on Details Latest Insights (Economic UPSC Relevance

Survey & Budget 2025-26)
Monetary Authority Formulates & implements Repo rate at 6.5% in FY2025, UPSC-2021: Monetary
monetary policy, manages RBI focusing on infla?on policy instruments.
credit supply. control & growth balance.
Frequency of Bi-monthly (every 2 months). Infla*on control through repo UPSC-2017: Why RBI
Monetary Policy rate adjustments remained follows bi-monthly
Reviews RBI’s priority in 2024. policy.
Currency Authority Sole issuer of currency, except Digital Rupee pilot project UPSC-2022: Who
₹1 notes (issued by Ministry of ini*ated by RBI for wholesale issues currency in
Finance). & retail transac*ons. India?
Banker to the Manages receipts, payments, FY2025: ₹13.7 lakh crore UPSC-2019: RBI’s role
Government borrowing & public debt for borrowing program managed in government debt
Union & State governments. by RBI for GOI. management.
Lender of Last Resort Provides emergency liquidity RBI infused ₹50,000 crore UPSC-2018: Why RBI is
support to banks in distress. liquidity into the banking the lender of last
system in FY2024 amid global resort.
turmoil.
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Regulator & Sets regula*ons for banks, RBI introduced digital lending UPSC-2023: Role of RBI
Supervisor of NBFCs, MFIs, credit companies, norms in 2024 to regulate in regula?ng NBFCs.
Financial System etc. fintech sector.
Manager of Foreign Manages Foreign Exchange Forex reserves at $620 billion UPSC-2016: FEMA &
Exchange (Forex Management Act (FEMA), in 2024; RBI intervened to foreign exchange
Market) 1999. stabilize rupee vola*lity. management.
Developmental Role Supports economic growth via RBI’s ₹1.5 lakh crore credit UPSC-2020: RBI’s role
financial inclusion, credit flow line for MSMEs & startups in financial inclusion.
& infrastructure finance. under FY2025 schemes.
Financial Inclusion & Ensures credit access for rural Unified Payment Interface UPSC-2022: RBI &
Consumer Protec?on & underprivileged popula*ons. (UPI) expanded for cross- digital financial
border transac*ons in literacy.
FY2025.

Money Supply & Credit Creation

Feature Descrip?on
Formula Money Supply (M) = M0 × Money Mul*plier (m)
Money Mul?plier Credit crea?on capacity of banks, determines the expansion of money supply.
Determinants of Credit 1. Currency Deposit Ra*o (c) = Currency held by public / Deposits with Banks
Crea?on (Inverse rela?on).
2. Time Deposit Ra*o (t) = Time Deposits / Demand Deposits (Direct rela?on).
3. Reserves Deposit Ra*o (r) = Reserves with Banks / Deposits with Banks (Inverse
rela?on).

Types of Banks in India

Scheduled Banks

Aspect Details Latest Insights (Economic UPSC Relevance

Survey 2024-25 & Budget 2025-
26)
Defini?on Banks included in the Second RBI expanded regulatory UPSC-2016:
Schedule of RBI Act, 1934. oversight in FY2025 to ensure Features of
stability in the banking sector. Scheduled Banks.
Capital Must maintain a reserve capital RBI increased liquidity norms UPSC-2021:
Requirement of ₹5 lakh with RBI. for scheduled banks to Financial regula?ons
strengthen financial resilience. in banking.
Privileges over - Eligible for RBI loans/refinance. Scheduled banks accounted for UPSC-2020: How
Non-Scheduled - Access to Clearing House 85% of India's banking sector OMO impacts
Banks facility. assets in FY2024. liquidity.
- Allowed to par?cipate in Open
Market Opera*ons (OMO).
Regulatory - Must maintain Cash Reserve CRR remained at 4.5% in 2024, UPSC-2018:
Obliga?ons Ra*o (CRR) and Statutory while SLR was at 18% as per Difference between
Liquidity Ra*o (SLR). RBI's monetary policy. CRR & SLR.
- Subject to RBI’s Pruden*al
Norms.

Commercial Banks

Aspect Details Latest Insights UPSC Relevance

KARMAYOGI IAS
Defini?on Banks opera?ng for profit that India’s Gross Bank Credit grew by UPSC-2022: Role of
offer deposit and lending 15.5% YoY in FY2025. commercial banks in credit
services. flow.
Classifica?on Scheduled & Non-Scheduled Scheduled Commercial Banks UPSC-2019: What are
Commercial Banks. (SCBs) account for 95% of banking SCBs?
opera*ons.
Types of 1. Public Sector Banks (PSBs) 12 Public Sector Banks (PSBs) exist UPSC-2021: Consolida?on
SCBs 2. Private Sector Banks post-consolida*on. of PSBs in India.
3. Foreign Banks
4. Regional Rural Banks
(RRBs)
5. Payment Banks
6. Small Finance Banks

6.3.3 Types of Scheduled Commercial Banks

A) Public Sector Banks (PSBs)

Aspect Details Latest Insights UPSC Relevance
Defini?on Banks where >50% stake PSBs' market share declined to 55% UPSC-2018: Trends in public
is held by Govt. in 2024 from 70% in 2015. sector banking.
Number of Reduced to 12 aver Post-merger, India's largest PSB is UPSC-2020: Why did the
PSBs mergers in 2019-20. SBI, followed by PNB & BoB. government merge PSBs?
B) Private Sector Banks
Aspect Details Latest Insights UPSC Relevance
Defini?on Banks with majority 21 private sector banks, including ICICI, UPSC-2021: Growth of
ownership in private hands. HDFC, Axis, Kotak Mahindra, etc. private banks in India.
C) Foreign Banks
Aspect Details Latest Insights UPSC Relevance
Defini?on Banks incorporated outside India 45 foreign banks operate in India, UPSC-2019: Role of
but opera?ng branches in India. e.g., Ci*bank, HSBC, Standard foreign banks in India.
Chartered.
D) Regional Rural Banks (RRBs)
Aspect Details Latest Insights UPSC Relevance
Objec?ve Provide credit & financial RRBs granted ₹1.2 lakh crore UPSC-2017: Role of RRBs in
services in rural areas. in loans in FY2024. financial inclusion.
Capital 50% by GOI, 15% by State 43 RRBs operate under UPSC-2018: Funding of RRBs.
Structure Govt, 35% by Sponsor Bank. different public sector banks.
Priority Sector 75% of net credit in priority RRBs focused on MSME & UPSC-2020: Why priority
Lending sector. Agri-lending. sector lending is important?

Differentiated Banks

E) Payment Banks
Aspect Details Latest Insights UPSC Relevance
Defini?on Banks with limited services like Airtel, Paytm, India Post & Jio UPSC-2018: Role of Payment
deposits, remi]ances & payments. are major Payment Banks. Banks.
Deposit ₹2 lakh per customer. RBI increased limit to ₹2 lakh UPSC-2022: Why Payment
Limit in 2024. Banks cannot give loans?
Lending Cannot lend, only distribute third- Offer mutual funds & UPSC-2020: Lending
party financial products. insurance. restric?ons on Payment
Banks.
KARMAYOGI IAS
F) Small Finance Banks (SFBs)
Aspect Details Latest Insights UPSC Relevance
Defini?on Banks serving unserved & 11 SFBs operate, with AU SFB & UPSC-2020: Role of SFBs in
underserved segments. Ujjivan SFB among leaders. financial inclusion.
Loan 50% of loans must be ≤ ₹25 Focus on MSMEs, SHGs, & rural UPSC-2023: Why MSME
Porwolio lakh. businesses. financing is crucial?

Local Area Banks (LABs)

Aspect Details Latest Insights UPSC Relevance

Defini?on Small private banks for local credit Operate in a 2-3 district range. UPSC-2019: Role of
needs in rural/semi-urban areas. LABs in rural finance.
Capital ₹5 crore minimum capital. Struggles with viability; only a UPSC-2021: Viability of
Requirement few remain opera*onal. LABs.

Cooperative Banks

Aspect Details Latest Insights UPSC Relevance

Defini?on Financial ins?tu?ons owned by Dual regula*on by RBI & UPSC-2018: Why Coopera?ve
members (depositors). State Government. Banks are under dual regula?on?
Types 1) Rural Coopera*ve Banks Rural coopera*ve banks UPSC-2020: Difference between
(PACS, DCCBs, StCBs) mostly serve agriculture. RRBs & Coopera?ve Banks.
2) Urban Coopera*ve Banks
(UCBs)

Banking Sector Reforms

Key Initiatives Undertaken

Ini?a?ve Objec?ve Key Features Latest Insights UPSC Relevance

(Economic Survey
2024-25 & Budget
2025-26)
4Rs Strategy Address Non- - Recogni*on of NPAs PSBs recovered UPSC-2021: Role of
Performing Assets - Resolu*on & recovery ₹6.6 lakh crore 4Rs in banking
(NPAs) & revive - Recapitaliza*on under IBC in 2024. recovery.
banks - Reforms in financial
ecosystem
Mission Revitalize Public 7-Pronged Approach: Bank governance UPSC-2019: Why
Indradhanush Sector Banks (PSBs) 1. Appointments improved with FSIB PSB reforms are
2. Board Governance replacing BBB in needed?
Reforms 2022.
3. Capitaliza?on
4. De-stressing PSBs
5. Empowerment
6. Framework of
Accountability
7. Governance Reforms
SARFAESI & DRT Strengthen Loan - Faster disposal of loan SARFAESI recovered UPSC-2017: Role of
Amendments Recovery recovery cases ₹95,000 crore in SARFAESI in loan
Mechanisms - Strengthened Debt 2024 alone. recovery.
Recovery Tribunals
(DRTs)
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Insolvency & Resolve Twin - Time-bound Success rate of IBC UPSC-2018: IBC’s
Bankruptcy Code Balance Sheet resolu*on of NPAs resolu*on impact on NPA
(IBC) (TBS) Problem - Liquida?on as last increased to 56% in resolu?on.
resort FY2024.
Recapitaliza?on of Strengthen Public - ₹2.11 lakh crore PSBs infused with UPSC-2018: Why
PSBs Sector Banks infused into PSBs ₹70,000 crore in recapitaliza?on of
(2017-2019) FY2025 for liquidity PSBs is needed?
- Linked to EASE support.
(Enhanced Access &
Service Excellence)
reforms
Project Sashakt Resolve Stressed - 5-pronged strategy: Focus on Mid & UPSC-2020: How
Assets 1. SME Resolu*on Large NPA does Project Sashakt
2. Bank-led resolu*on resolu*on post- work?
3. AMC-led resolu*on 2023.
4. NCLT approach
5. Asset trading
planorm
Bank Create Global-Sized - Merger of 10 PSBs 12 PSBs exist post- UPSC-2020: Why
Consolida?on PSBs into 4 large banks in mergers; BoB, PNB PSBs were merged?
2020 among largest.
- SBI merged its 5
subsidiaries in 2017
Public Credit Improve Credit - Single repository for PCR linked with UPSC-2021:
Registry (PCR) Data Transparency credit history of GSTN & Income Tax Importance of PCR in
borrowers Data in 2024. credit reforms.

Financial Services Institutions Bureau (FSIB) (Replaced Banks Board Bureau in 2022)

Aspect Details Latest Insights UPSC Relevance

Established July 1, 2022, replacing Bank Board FSIB recommended 60+ UPSC-2022: Role of FSIB in
Bureau (BBB) Board-level appointments in bank governance.
PSBs in 2024.
Mission Corporate Governance & leadership Improved Board selec*on UPSC-2023: How FSIB
selec?on in Public Sector Financial process post 2023. enhances financial
Ins?tu?ons (PSBs, PSIs, FIs). governance?
Members 1. Chairperson (Govt-Appointed) Expanded role post-Budget UPSC-2024: Role of FSIB in
2. Secretaries of DFS, IRDAI, RBI Dy. 2025 in appoin*ng PSB PSB appointments.
Governor directors.
3. Three finance experts (PSBs/FIs)
4. Three insurance sector experts
Key - Appointment of WTDs & NECs in Linked FSIB reforms with PCA UPSC-2023: Role of FSIB in
Func?ons PSBs/FIs & PSB performance metrics financial sector
- Advising Govt on governance in 2024. appointments.
structure
- Performance appraisal of PSBs
leadership

Key Regulatory Reforms

Reform Objec?ve Key Features Latest Insights UPSC Relevance

KARMAYOGI IAS
Prompt Correc?ve Improve Financial - RBI imposes PCA on 4 PSBs removed from UPSC-2018: Why
Ac?on (PCA) Health of Banks weak banks PCA in 2023; RBI PCA is imposed on
Framework - Restric?ons on lending, revised PCA norms. banks?
dividends, expansion
Na?onal Financial Strengthen - Regulates NFRA increased UPSC-2021: Role
Repor?ng Audi*ng & accoun*ng/audi*ng penal*es on non- of NFRA in
Authority (NFRA) Financial standards compliant auditors in financial
Repor*ng - Prevents 2024. regula?on.
corporate/bank frauds

Bad Bank (2021-22 Budget Announcement)

En?ty Func?on Key Features Latest Updates UPSC Relevance

Na?onal Asset Acquire - Majority PSB- NARCL acquired UPSC-2022: Role of
Reconstruc?on Company Stressed owned (51%) ₹70,000 crore NPAs in NARCL in tackling NPAs.
Ltd (NARCL) Assets - Buys NPAs from FY2024.
banks
India Debt Resolu?on Resolve & - Private sector IDRCL facilitated UPSC-2023: Why is
Company Ltd (IDRCL) Sell NPAs holds majority ₹50,000 crore asset IDRCL crucial for bad
(51%) sales in 2024. loan recovery?
- Manages sale of
distressed assets

Velocity of Money

Feature Descrip?on
Defini?on Number of ?mes a unit of money changes hands in an economy within a given period.
Formula Velocity of Money (V) = Nominal GDP / Money Supply (M)
Economic Indicator - Higher velocity → More economic ac?vity.
- Lower velocity → Slow economic ac?vity or recession.

Basel Norms for Banking Regula?on

Feature Details Facts to Remember for UPSC Prelims
Overview Basel norms regulate global banking standards UPSC 2015: Basel III norms are
under the Basel Commilee on Bank Supervision implemented in India.
(BCBS).
India’s Status India follows Basel III norms to enhance banking Basel III norms in India were scheduled to
regula?on and financial stability. be fully implemented by 2019, but the
deadline was extended.
Basel III - Tier 1 Capital: Primary funding source, Basel III requires banks to maintain a
Requirements including shareholders’ equity and retained minimum capital adequacy ra*o (CAR)
earnings. of 10.5%.
- Tier 2 Capital: Includes revalua*on reserves,
hybrid capital instruments, subordinated term
debt, etc. (Less liquid than Tier 1).
Liquidity Coverage Ensures banks maintain adequate liquidity to Introduced to reduce risks of financial
Ra?o (LCR) survive for 30 days during financial stress. crises like 2008 Global Financial Crisis.

Priority Sector Lending (PSL)

Category Target (% of ANBC or CEOBE) Facts to Remember for UPSC
Prelims
KARMAYOGI IAS
Total Priority Sector 40% (for scheduled commercial banks) UPSC 2013: RBI mandates PSL
Lending (PSL) for economic inclusion.
Regional Rural Banks & 75% RRBs and SFBs focus on
Small Finance Banks agriculture and MSMEs.
Agriculture 18% Sub-targets exist for small &
marginal farmers (10%).
Micro Enterprises 7.5% Supports small businesses and
rural entrepreneurship.
Weaker Sec?ons (SC/ST, 12% or 10% of PSL (whichever is higher) RBI monitors PSL performance
Women, Small Farmers, annually.
etc.)
Non-compliance with PSL Banks failing PSL targets must deposit shornalls in NABARD funds support rural
NABARD’s Rural Infrastructure Development credit and infrastructure.
Fund (RIDF).

Non-Banking Financial Companies (NBFCs) vs. Banks

Feature NBFCs Banks Facts to Remember for UPSC
Prelims
License Not required Required UPSC 2022: NBFCs are major
Requirement lenders to MSMEs.
Demand Cannot accept Can accept Demand deposits enable higher
Deposits liquidity in banks.
Regula?on Regulated under the Regulated under the Banking NBFCs do not have CRR or SLR
Companies Act, 2013 Regula*on Act, 1949 requirements.
Deposit Not available Available via DICGC DICGC insures bank deposits up
Insurance to ₹5 lakh.

Money Crea?on by Banks

Feature Details (Including UPSC PYQ & Facts to Remember for UPSC Prelims
Examples)
Money Formula: m = Money Supply (M) / High Higher money mul*plier = More credit crea*on.
Mul?plier (m) Powered Money (H)
Frac?onal Banks keep a frac*on of deposits as UPSC 2019, 2021: RBI mandates a CRR (Cash
Reserve Banking reserves and lend the rest, enabling Reserve Ra*o) & SLR (Statutory Liquidity Ra*o) to
money crea?on. regulate money supply.
Currency Formula: CDR = Currency in Circula*on Higher CDR = More cash hoarding, less bank
Deposit Ra?o / Demand Deposits lending.
(CDR)
Reserve Deposit Formula: RDR = Reserves (Cash + Higher RDR = Lower money crea*on.
Ra?o (RDR) Deposits with RBI) / Total Deposits

Non-Performing Assets (NPAs)

Feature Details (Including UPSC PYQ & Facts to Remember for UPSC Prelims
Examples)
Defini?on Loan where principal/interest is UPSC 2018: RBI classifies NPAs into
overdue for >90 days. Substandard, Doubnul, and Loss assets.
Agriculture Loan NPAs - Short-dura*on crops: Overdue >2 Special relief packages for farmers during
crop seasons. droughts.
- Long-dura*on crops: Overdue >1
crop season.
Special Men?on - SMA-0: 0–30 days overdue. SMAs indicate early signs of financial stress.
Accounts (SMA) - SMA-1: 31–60 days overdue.
- SMA-2: 61–90 days overdue.
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Twin Balance Sheet Problem (TBS)
Feature Details (Including UPSC PYQ & Examples) Facts to Remember for UPSC
Prelims
Defini?on Financial distress of banks (high NPAs) and UPSC 2020: Linked to stressed
corporate sector (overleveraged debt). assets and banking crisis.
Overleveraged Companies struggle to service their debt due to Sectors most affected: Power,
Companies excessive borrowing. Telecom, and Steel.
Interest Coverage Formula: ICR = EBIT / Interest Expenses Low ICR = Higher risk of debt
Ra?o (ICR) default.

NPA Resolu?on Measures

Measure Details (Including UPSC PYQ & Examples) Facts to Remember for UPSC
Prelims
3R Framework - Rec*fica*on (Asset Quality Review - AQR). UPSC 2018: SARFAESI Act
- Restructuring (Strategic Debt Restructuring - SDR, S4A, allows banks to auc*on
Joint Lenders Forum - JLF). defaulter assets.
- Recovery (SARFAESI Act, IBC 2016).
Inter-Creditor Helps lenders resolve stressed assets worth ₹50 crore+. Implemented under Project
Agreement (ICA) Sashakt.
Bad Banks Na*onal Asset Reconstruc*on Company Ltd (NARCL) & UPSC 2022: NARCL focuses on
India Debt Resolu*on Company Ltd (IDRCL) manage NPAs cleaning bank balance sheets.
and recover distressed assets.

Mission Indradhanush (Banking Reforms)

Strategy Focus Area Facts to Remember for UPSC Prelims
A - Appointments CEO & MD roles separated. UPSC 2016: Led to governance reforms in
PSBs.
B - Bank Board Set up to oversee appointments in PSBs. BBB was later replaced by FSIB (2022).
Bureau
C - Capitaliza?on ₹70,000 crores infused to meet Basel III Govt recapitalized weak banks under PSB
norms. Reforms.
D - De-stressing Address NPAs and bad loans. Introduced a stressed asset framework.

Key Financial Ins?tu?ons in India

1. National Bank for Financing Infrastructure and Development (NABFID)

Aspect Details Latest Insights (Budget 2025-26 & UPSC Relevance

Economic Survey 2024-25)
About Development Financial Ins?tu?on Cri*cal for India's $1.4 trillion UPSC-2021: Role of DFIs
(DFI) established under NaBFID Act, Na*onal Infrastructure Pipeline in infrastructure
2021 (NIP) investment. funding.
Share ₹1 lakh crore Govt commiled ₹20,000 crore + UPSC-2022: NaBFID's
Capital ₹5,000 crore grants in FY25. impact on infra finance.
Objec?ves Financial: Lending for infrastructure 2025 Budget: NaBFID to raise UPSC-2023: How
projects ₹1.5 lakh crore via bonds. NaBFID funds infra
Developmental: Develop bonds, projects?
loans, deriva?ves market
Regula?on Regulated as an All India Financial RBI strengthened governance UPSC-2023: Role of RBI
Ins*tu*on (AIFI) by RBI norms for NaBFID in 2024. in regula?ng NaBFID.
Funding - Borrowing from Govt, RBI, Banks, NaBFID issued ₹30,000 crore UPSC-2024: How
Sources MFs, ADB, World Bank bonds in FY24, highest ever. NaBFID raises funds?
- Issuing Bonds/Debentures
KARMAYOGI IAS

2. National Bank for Agriculture and Rural Development (NABARD)

Aspect Details Latest Insights UPSC Relevance

Established 1982 by an Act of Parliament NABARD disbursed ₹2.5 lakh crore UPSC-2021: NABARD’s role
in rural credit in FY24. in rural finance.
Ownership 100% Government-Owned Govt infused ₹10,000 crore in UPSC-2022: Role of
FY25 for agri-financing. NABARD in agri-credit.
Func?ons - Refinancing: Funds coopera?ve NABARD launched ₹5,000 crore UPSC-2023: SHG-Bank
banks, RRBs, MFIs Dairy Infra Fund in FY24. linkage & NABARD.
- Development: Supports SHGs,
Agri Startups

3. Land Development Banks (LDBs)

Aspect Details Latest Insights UPSC Relevance

Established 1920s in Punjab, renamed in LDB loans surged 15% in FY24 due UPSC-2020: Role of LDBs in
1966-67 to rural credit push. rural credit.
Func?on Provides Long-Term Loans to Focus on Agri-Infra development via UPSC-2021: LDB’s impact on
Farmers NABARD refinance. farm sector.
Regula?on Registered under Linked to NABARD & State Co-op UPSC-2023: Why are LDBs
Coopera*ve Socie*es Act Banks in FY25. crucial for farmers?

4. Small Industries Development Bank of India (SIDBI)

Aspect Details Latest Insights UPSC Relevance

Established 1990 by an Act of FY24: SIDBI disbursed ₹4.7 lakh crore to UPSC-2021: MSME Financing
Parliament MSMEs. & SIDBI.
Ownership Govt & 29 Govt allocated ₹15,000 crore for MSME UPSC-2022: Role of SIDBI in
PSBs/Insurance firms support in FY25. MSME lending.
Func?ons - MSME Financing via SIDBI introduced new MSME Credit UPSC-2024: How SIDBI
Refinance Guarantee Scheme in 2024. supports MSMEs?
- Venture Capital (SVCL)
- MUDRA Support

5. National Housing Bank (NHB)

Aspect Details Latest Insights UPSC Relevance

Established 1987 by an Act of Parliament FY24: ₹3.5 lakh crore allocated UPSC-2019: NHB’s role in housing
for housing finance. finance.
Ownership 100% Govt-Owned (since NHB to provide ₹30,000 crore UPSC-2023: NHB’s importance in
2019) refinance in FY25. affordable housing.
Mandate Promotes Housing Finance PMAY-Rural credit linked via UPSC-2024: NHB’s role in PMAY
Ins*tu*ons (HFIs) NHB in FY25. success.

6. Export-Import Bank of India (EXIM Bank)

Aspect Details Latest Insights UPSC Relevance

Established 1982 via EXIM Act EXIM funded ₹80,000 crore in trade finance UPSC-2021: How EXIM Bank
in FY24. supports exports?
KARMAYOGI IAS
Ownership 100% Govt- EXIM partnered with Africa for ₹20,000 UPSC-2023: India-Africa trade &
Owned crore credit line in 2024. EXIM Bank.
Func?ons - Trade Finance EXIM Bank’s export credit fund expanded UPSC-2024: Role of EXIM Bank
- Foreign Project by ₹50,000 crore in FY25. in Indian exports.
Funding
- Tech Transfer
Support
KARMAYOGI IAS
MONETARY POLICY AND INFLATION

MONETARY POLICY - It is the use of monetary instruments under the control of the Central Bank (RBI) to regulate
the availability, cost and use of money and credit in an economy to achieve specified goals/objectives. Monetary
policy operates through changes in money supply, which influences the aggregate demand for output in money
terms (directly or indirectly).

Objectives of Monetary Policy - Through an amendment to the Reserve Bank of India (RBI) Act, 1934 in 2016, it was
written into the preamble of the RBI Act that the primary objective of the monetary policy in India is to maintain
price stability, while keeping in mind the objective of growth.

• The RBI is vested with the responsibility of conducting monetary policy under the Reserve Bank of India Act,
1934. It is announced bimonthly.
• In 2015, The RBI and Government of India (GoI) signed the Monetary Policy Framework Agreement (MPFA),
which made achieving price stability and inflation targeting the responsibilities of RBI.
• In 2016, an amendment to the RBI Act, 1934 gave a statutory backing to the aforementioned Monetary Policy
Framework Agreement and for implementation of the inflation targeting framework.

Monetary Policy CommiXee (MPC)

Aspect Details Facts to Remember for UPSC Prelims
Establishment Formed under Sec*on 45ZB of the RBI Act, UPSC 2017: Established as part of
amended in 2016. infla*on-targe*ng reforms.
Purpose To set the policy repo rate and guide India follows a Flexible Infla*on Targe*ng
monetary policy for price stability and (FIT) framework.
economic growth.
Composi?on - 6 members: Decisions by majority vote. RBI Governor
3 RBI Representa*ves - Governor has a cas*ng vote in case of a ?e.
(Chairperson), Deputy Governor (Monetary
Policy), and one officer.
3 Government Nominees - Experts in
economics, nominated by the Central
Government.
Mee?ng Frequency At least four *mes a year (quarterly) or as RBI releases minutes of mee*ngs with a
required. 14-day lag.
Tenure of Members Nominated members serve for 4 years or un*l Members are appointed by GoI in
further no*ce. consulta*on with RBI.
Infla?on Target - 4% (+/- 2%) as per the agreement between UPSC 2022: RBI is accountable if infla*on
GoI and RBI (2021-2026). remains outside 2%-6% for three
consecu*ve quarters.
Accountability & RBI must explain failure to meet infla?on RBI submits a failure report to the
Transparency targets & suggest correc?ve measures. Government of India.

Key Instruments of Monetary Policy

Instrument Purpose Facts to Remember for UPSC Prelims
Repo Rate Rate at which RBI lends to banks under the UPSC 2014: Lower repo rate = cheaper
Liquidity Adjustment Facility (LAF). loans = higher liquidity.
Reverse Repo Rate Rate at which RBI borrows from banks, Reverse repo rate is below repo rate to
absorbing liquidity. maintain LAF corridor.
Marginal Standing Overnight borrowing rate for banks, higher UPSC 2014: MSF allows banks to dip into
Facility (MSF) Rate than the repo rate. their SLR holdings for emergency funding.
Standing Deposit New tool (April 2022) - RBI absorbs liquidity UPSC 2023: SDF replaced fixed reverse
Facility (SDF) Rate without collateral. repo rate as LAF corridor floor rate.
KARMAYOGI IAS
Bank Rate Minimum lending rate for RBI loans to UPSC 2016: Aligned with MSF Rate. Used
commercial banks. for discoun*ng bills of exchange.
Cash Reserve Ra?o Banks must maintain a fixed % of NDTL (Net UPSC 2014: Higher CRR = Lower lending
(CRR) Demand & Time Liabili?es) as cash reserves ability of banks.
with RBI.
Statutory Liquidity Banks must maintain a fixed % of NDTL in UPSC 2015: Higher SLR = Reduced bank
Ra?o (SLR) government securi*es, cash, or gold. lending capacity.
Market Stabiliza?on Controls excess liquidity via special Used during demone*za*on (2016) to
Scheme (MSS) government bonds. absorb excess cash.

Market Opera?ons & Liquidity Management

Instrument Mechanism Facts to Remember for UPSC Prelims
Open Market RBI buys/sells government bonds to regulate UPSC 2013: Used to control infla*on &
Opera?ons (OMOs) liquidity. stabilize money supply.
- Buying bonds → Increases liquidity.
- Selling bonds → Reduces liquidity.
Opera?on Twist Simultaneous buying & selling of govt bonds to Implemented in 2019-20 to reduce
adjust yield curve. long-term borrowing costs.
Steriliza?on RBI offsets forex interven*on effects on UPSC 2023, 2022: Prevents currency
domes?c liquidity via OMOs & MSS bonds. fluctua*ons affec*ng money supply.
Selec?ve Credit RBI restricts/encourages lending to specific Used to control specula*ve lending in
Control (SCC) sectors. commodi?es like gold & sugar.

Qualita?ve Tools of Monetary Policy

Tool Mechanism Facts to Remember for UPSC Prelims
Moral Suasion RBI persuades banks to follow policies Non-coercive method – Used for financial
voluntarily. inclusion & credit alloca*on.
Marginal Minimum margin needed between loan Higher margin reduces excessive lending.
Requirements & collateral value.
Credit Ra?oning Limits on maximum credit exposure to Used to prevent sectoral bubbles.
industries.

Infla?on Targe?ng Framework & Monetary Policy CommiXee (MPC)

Aspect Details Facts to Remember for UPSC Prelims
Infla?on Targe?ng RBI maintains infla*on at 4% (+/- UPSC 2020: RBI must submit a report if infla?on
Framework 2%). breaches 2%-6% range for three consecu*ve
quarters.
Failure Condi?ons Infla?on outside target range (2%- RBI must report reasons & correc*ve measures to
for MPC 6%) for 3 quarters = MPC failure. GoI.
Urjit Patel Proposed Infla*on Targe*ng (IT) UPSC 2022: Aimed at anchoring infla*on
Commi]ee (2014) framework & established MPC. expecta*ons.

Impact of RBI’s Monetary Policy on Economy

Policy Type Mechanism Examples from India
Expansionary Monetary - Lowers interest rates to increase Used during COVID-19 (2020-21) to
Policy borrowing & spending. support economic recovery.
- Reduces CRR & SLR to boost liquidity.
Contrac?onary - Raises interest rates to control Used in 2022-23 to combat post-COVID
Monetary Policy infla?on. infla*on.
- Increases CRR & SLR to restrict lending.
Neutral Stance RBI balances growth & infla*on by Maintained during stable infla*on periods
maintaining steady rates. (2017-18).
KARMAYOGI IAS
Three Approaches to Monetary Policy

Aspect Details
Exchange Rate Used by export-oriented economies like Singapore to stabilize the currency and boost
Stability exports.
Multiple Indicators RBI followed this model until 2016, focusing on growth, employment, inflation control,
and exchange rate stability.
Flexible Inflation Adopted in 2016. Focuses on inflation control, based on the Urjit Patel Committee
Targeting (FIT) Report (2013-14). Implemented via amendment to RBI Act, Section 45.

Monetary Policy Stances

Stance Objective Impact

Accommodative RBI reduces policy rates to increase the money Lower interest rates promote borrowing and
supply during economic slowdowns. spending, boosting economic activity.
Neutral RBI maintains flexibility in adjusting policy Stabilizes inflation and economic growth.
rates.
Hawkish RBI increases policy rates or keeps them Contains inflation but reduces economic
unchanged to control inflation. activity in the short term.

Transmission of Monetary Policy

Channel Effect
Interest Rate Channel Lower interest rates reduce the cost of capital, boosting business investment and
consumption.
Exchange Rate Lower rates depreciate the currency, improving export competitiveness but increasing
Channel import costs.
Credit Channel Expansionary policy increases bank lending, boosting investment and output.
Asset Price Channel Lower rates boost asset prices, increasing household wealth and spending.
Expectation Channel Inflation targets anchor expectations, improving confidence in economic decision-
making.

Monetary Policy in Present-Day India

Concept Description Facts for UPSC Prelims

Exchange Rate A monetary policy approach where the central bank stabilizes Helps in export promotion by
Stability the currency to boost exports, used by economies like keeping the currency
Singapore. competitive.
Multiple Central banks monitor various economic factors like GDP, RBI followed this approach
Indicators employment, inflation, and exchange rates to determine until the adoption of FIT in
Approach monetary policy. India followed this till 2016. 2016.
Flexible Inflation Introduced in India in 2016 based on Urjit Patel Committee RBI Act, Section 45 was
Targeting (FIT) Report (2013-14). RBI aims to control inflation while amended to implement this.
supporting growth.

Unconventional Monetary Policy Tools

Tool Description Facts for UPSC Prelims

Zero Interest Rate Central bank sets interest rates near zero to boost May lead to a liquidity trap where
Policy (ZIRP) borrowing and investment. Used in Japan, U.S., and economic activity remains weak.
EU.
Negative Interest Interest rates are set below zero to encourage Not implemented in India; used in
Rate Policy (NIRP) spending and discourage saving. Adopted in advanced economies.
Sweden and Japan.
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Helicopter Money Direct injection of money by the government into Milton Friedman coined the term;
the economy, e.g., tax rebates or direct transfers. not used in India.

Banks’ Lending Rates and External Benchmarking

Concept Description Facts for UPSC Prelims

Internal Benchmark Calculated based on bank’s financial conditions, Base rate was used from
Lending Rate (IBLR) NPAs, and deposit structure. Earlier used BPLR, 2010-2016, replaced by
Base Rate, and MCLR. MCLR.
Marginal Cost of Funds Introduced in 2016 to improve transparency and Considered ineffective in
Based Lending Rate ensure better monetary policy transmission. achieving full transmission.
(MCLR)
External Benchmarking Mandatory for retail floating rate loans and MSME Ensures better transmission
(since 2019) loans. Banks can link lending rates to repo rate or of policy rates.
T-bill yields.
Benchmarking Options RBI repo rate, 91-day T-bill yield, 182-day T-bill Ensures better alignment
yield, or a benchmark developed by Financial with market rates.
Benchmarks India Pvt. Ltd.

Inflation in India: Concept and Measurement

Concept Descrip?on Facts for UPSC Prelims

Infla?on The general rise in the price level of goods and services Measured by MoSPI using CPI and
over ?me, reducing the purchasing power of money. WPI.
Ministry The Ministry of Sta?s?cs and Programme Implementa?on Infla?on indices: CPI, WPI, and
Responsible (MoSPI) tracks infla?on. GDP Deflator.
Impact Infla?on erodes the real value of money, affec?ng savings, Moderate infla?on (around 4%) is
investments, and wages. considered good for growth.

Types of Inflation (Based on Causes)

Type Descrip?on Facts for UPSC Prelims

Demand-Pull Occurs when aggregate demand exceeds aggregate supply, Linked to expansionary fiscal
Infla?on leading to higher prices. policy (UPSC-2021).
Cost-Push Caused by increased produc?on costs such as wages and Oil price shocks can cause cost-
Infla?on raw materials, which businesses pass on to consumers. push infla?on.
Monetary Caused by excessive money supply due to central bank High money supply leads to
Infla?on policies, such as prin?ng more money. infla?on (UPSC-2015).
Supply Chain When external shocks, such as pandemics or natural COVID-19 pandemic led to high
Disrup?ons disasters, disrupt supply and push prices up. food infla?on.
Imported Infla?on caused by a deprecia?ng domes?c currency, Weak rupee increases the cost
Infla?on making imported goods more expensive. of crude oil imports.

Types of Inflation (Based on Speed)

Type Rate of Impact Facts for UPSC Prelims

Infla?on
Creeping 1-4% Manageable, helps economic growth. Ideal for stable economies.
Infla?on annually
Walking 2-10% Central banks monitor closely; may RBI may ?ghten monetary policy.
Infla?on indicate overhea?ng.
KARMAYOGI IAS
Running 10-20% Economic instability, declining Needs urgent policy response.
Infla?on purchasing power.
Galloping 20-1000% Disrupts economic func?oning, loss of Seen in developing economies.
Infla?on investor confidence.
Hyperinfla?on >1000% Currency collapse, severe economic Historical cases: Zimbabwe (2000s),
annually crises. Germany (1920s).

Key Economic Terms Related to Inflation

Term Descrip?on Facts for UPSC Prelims

Disinfla?on A slowdown in the rate of infla?on (not Infla?on drops from 8% to 6% but remains
defla?on). posi?ve.
Defla?on A general fall in price levels, oven caused by a Leads to lower wages and reduced
weak economy. consump?on.
Depression A prolonged economic downturn with high Great Depression (1929-1939) example.
unemployment.
Refla?on Government policies to boost demand aver a Used post-pandemic through fiscal s?mulus.
slowdown.
Infla?onary Gap When demand exceeds an economy’s Formula: Infla?onary Gap = Actual GDP –
produc?on capacity. Poten?al GDP.
Defla?onary Gap When demand falls below an economy’s Leads to stagna?on and high unemployment.
poten?al output.
Bo]leneck Short supply of key goods pushes prices up. Example: Chip shortage raising electronics
Infla?on prices.
Infla?on Tax Infla?on erodes purchasing power, indirectly Higher infla?on increases government tax
ac?ng as a tax. revenue.
Infla?on Borrowers benefit as real interest rates Encourages borrowing and investment.
Premium decline due to infla?on.
Infla?on Spiral Rising wages push prices up, leading to further Example: Price-Wage Spiral in economies with
wage increases. labor shortages.

Stagflation and Other Inflation Trends

Concept Descrip?on Facts for UPSC Prelims

Skewfla?on Price rise in only select items, while others remain Example: Onion price hike while other food
stable. prices are stable.
Stagfla?on High infla?on and high unemployment Seen during global oil crises of the 1970s.
simultaneously.
Phillips Illustrates inverse rela?onship between infla?on Suggests that reducing unemployment
Curve and unemployment. increases infla?on.

Inflation Indices and Measurement in India

Index Purpose Base Year Major Components Facts for UPSC Prelims
GDP Deflator Comprehensive measure Varies No fixed basket Formula: (Nominal GDP
covering all goods and annually / Real GDP) × 100.
services.
Wholesale Measures price changes 2011-12 Manufactured Products Published by Office of
Price Index at the wholesale level. (64%), Primary Ar?cles Economic Adviser,
(WPI) (23%), Fuel (13%) Ministry of Commerce.
KARMAYOGI IAS
Consumer Measures price changes 2011-12 Food (45.86%), Used for RBI’s infla?on
Price Index for consumers. Miscellaneous (28.32%), targe?ng (UPSC-2016).
(CPI) Housing (10.07%), Fuel
(6.84%)
Producer Price Captures price changes NA Excludes indirect taxes. Removes mul?ple
Index (PPI) from the producer’s coun?ng bias found in
perspec?ve. WPI.

Inflation Control Measures

Monetary Policy Measures

Ac?on Impact Facts for UPSC Prelims
Increase in Bank Rate Reduces borrowing and slows infla?on. Used during infla?onary periods.
Increase in Interest Rates Encourages saving, reduces demand. Implemented via Repo Rate hikes.
Open Market Opera?ons RBI sells bonds to absorb liquidity. Controls money supply in the
(OMO) economy.
Increase in Repo Rate, CRR, Tightens money supply, controlling CRR and SLR impact bank lending
SLR infla?on. capacity.

Fiscal Policy Measures

Ac?on Impact Facts for UPSC Prelims
Increase in Taxes Reduces consumer spending, slowing infla?on. Indirect control on demand-pull
infla?on.
Reduce Government Lowers aggregate demand, controlling Used to curb overhea?ng in the
Spending infla?on. economy.
Broaden Tax Coverage Increases government revenue and reduces Helps control long-term infla?on.
fiscal deficit.

Other Measures
Ac?on Impact Facts for UPSC Prelims
Price Controls Provides short-term relief but may distort Can lead to black markets if imposed strictly.
markets.
Import Controls Reduces imported infla?on. Used to prevent excessive dependence on foreign
goods.
Wage Helps prevent price-wage spirals. Effec?ve in sectors where labor costs are major
Restric?ons cost drivers.

Cases When Expansionary Monetary Policy May Prove Ineffec?ve

Aspect Details Latest Insights (Economic UPSC Relevance
Survey 2024-25 & Budget 2025-
26)
Time Lag Monetary policy shows effects Monetary policy takes 2-4 UPSC-2016: Lag effect
with a delay, making it quarters to impact growth, as in monetary policy
ineffec?ve in the short term. per RBI reports. transmission.
Liquidity Trap Highly liquid assets ('money') RBI used SDF & variable rate UPSC-2015: Keynesian
get trapped in the financial repo auc*ons to absorb surplus liquidity trap and
system, limi?ng monetary policy liquidity in FY2024. interest rate policies.
effec?veness.
Risk-Averse Banks High NPAs make banks reluctant Gross NPA ra*o fell to 3.2% in UPSC-2018: Link
to lend, even with low interest FY2025, but banks remain between NPAs & credit
rates. cau?ous post-IL&FS crisis. growth.
KARMAYOGI IAS
Low Business & Weak animal spirits lead Private sector investment grew UPSC-2019: Role of
Consumer businesses and consumers to at just 6% YoY in FY2024, lower animal spirits in
Confidence priori*ze debt repayment over than the required 10% to drive economic growth.
new loans. growth.
Poor Monetary Banks may not lower lending Transmission lag: Repo rate UPSC-2021: Why
Policy Transmission rates, despite RBI repo rate cuts. down by 250 bps (FY2020-24), monetary transmission
but lending rates reduced only is weak in India.
by 180 bps.
Disconnect with Expansionary monetary policy Government fiscal UPSC-2022:
Fiscal Policy may be neutralized by consolida*on efforts (lowering Coordina?on between
contrac?onary fiscal policy (e.g., fiscal deficit to 5.1% in FY2025) fiscal & monetary
spending cuts). may reduce demand. policy.
Liquidity Shortages Crises like IL&FS default, DHFL Budget FY2025 proposes ₹1.2 UPSC-2020: NBFC
in NBFCs & Banking collapse, Yes Bank crisis sucked lakh crore support for MSME liquidity crisis & its
Sector liquidity out of the system. credit through SIDBI. impact on credit flow.
Structural Infrastructure deficit, weak India ranked 63rd in World UPSC-2017: Structural
Pressures Ease of Doing Business (EoDB) Bank EoDB 2024, but MSME bo]lenecks &
limit private sector borrowing & credit penetra*on remains economic growth.
spending. low.
KARMAYOGI IAS
GOVERNMENT BUDGETING AND FISCAL POLICY
Fiscal Policy Basics (Brief)

• Definition: Government's use of taxation and spending to influence the economy. Focuses on the
"quantity and quality" of public finances.
• Objectives:
o Economic Growth: Boost productive capacity through resource mobilization.
o Equity: Distribute wealth fairly (progressive taxes, welfare spending).
o Price Stability: Control inflation (reduce spending, raise taxes).
o Employment: Create jobs (public works, support for small businesses).
o Forex Stability: Promote exports, reduce imports to manage BoP.
o Capital Formation: Encourage savings and investment through tax relief.
o Regional Balance: Incentivize investment in less developed regions.
• Types:
o Expansionary: Increase government spending and/or cut taxes to stimulate demand during
recessions. Downsides: potential crowding out of private investment and increased debt.
o Contractionary: Decrease government spending and/or raise taxes to cool down an overheating
economy (inflation).
o Neutral: Government spending equals tax revenue. Used when the economy is in equilibrium.

Government Budget

The word ‘Budget’ is not mentioned in the Indian Constitution, however, it is reflected by the term Annual Financial
Statement' (AFS). Constitutional obligation: Article 112 (in case of central govt) and Article 202 (in case of state
govt) of Indian constitution requires Annual Financial Statement to be laid before the respective legislatures.

• The Budget shows the Statement of the Estimated Receipts and Expenditure of the GoI, for a given financial
year.
• The Budget Division of the Department of Economic Affairs, in the Ministry of Finance, is responsible for the
preparation of Central Government Budget.
• The budget, usually, has the following three types of information:
• - Actual figures of receipts and expenditure of the previous year.
• - Budget and revised figure for the current year.
• - Budget estimate for the upcoming year.

Aspect Description Facts for UPSC Prelims

Definition The Government Budget is an Annual Financial Union Budget is prepared by the
Statement mandated by Article 112 of the Indian Department of Economic Affairs
Constitution, detailing estimated receipts and expenditures (DEA), Ministry of Finance. (UPSC-
for a financial year (April 1 - March 31). 2015)
Types of The budget is divided into Revenue Budget (day-to-day First Budget of Independent India
Accounts expenses) and Capital Budget (long-term investments). (1947) was presented by R. K.
Shanmukham Chetty.

Budgetary Reforms

• Merger of Railway Budget: The Railway Budget is now part of the Union Budget (since 2017-18),
presented as a single document.
KARMAYOGI IAS
• Removal of Plan/Non-Plan Expenditure: This distinction was eliminated because it led to the
misconception that non-plan spending was wasteful and neglected maintenance of existing
infrastructure. With the NITI Aayog not having the power to allocate resources made the distinction
irrelevant.
• Advanced Budget Date: The budget is now presented on February 1st (instead of the last day of
February) to ensure it's approved before the financial year starts on April 1st. This avoids the need
for a "Vote on Account."

Economic Survey

• Highlights economic trends to aid understanding of resource mobilization and budget allocation.
• Prepared by the Economic Division of the Department of Economic Affairs, Ministry of Finance.
• Presented to Parliament before the Union Budget.

Types of Budgets in India

Type of Description Facts for UPSC Prelims

Budget
Revenue Includes revenue receipts and revenue Revenue budget primarily funds social
Budget expenditures. It focuses on current operational schemes like PM Awas Yojana, food
expenses such as salaries, pensions, and subsidies. subsidies, and MGNREGA.
Capital Includes capital receipts and capital expenditures Capital budget funds infrastructure projects
Budget aimed at long-term asset creation, such as roads, like Bharatmala, Sagarmala, and rail
railways, and defense infrastructure. electrification. (UPSC-2016)

Budget Components: Receipts

Category Description Facts for UPSC Prelims

Revenue Funds that do not create liabilities or reduce assets; Includes tax and non-tax revenues.
Receipts used for current expenses.
Tax Revenue Government's primary income source through direct GST is the largest indirect tax
and indirect taxes. contributor to tax revenue.
Non-Tax Government earnings from fees, penalties, Non-tax revenue includes RBI
Revenue dividends, profits from PSUs, and interest dividends and spectrum auctions.
receipts.
Capital Includes borrowing, disinvestment, and asset sales, Includes external loans, recovery of
Receipts increasing liabilities. loans, and PSU disinvestment.
Debt-creating Borrowed funds increasing government liabilities. Examples: Market borrowings,
Receipts external debt, public debt.
Non-Debt Funds received without creating liabilities, such as LIC IPO was India’s largest PSU
Receipts disinvestment. disinvestment in 2022.

Tax Revenue: Direct vs. Indirect Taxes

Category Description Examples Facts for UPSC Prelims

Direct Paid directly by individuals/businesses Income tax, Corporate Direct taxes account for over
Taxes to the government. tax, Wealth tax. 50% of total tax revenue.
Indirect Levied on goods and services; GST, Customs duties, GST (introduced in 2017)
Taxes collected by intermediaries. Excise duties. subsumed most indirect taxes.

Budget Components: Expenditure

KARMAYOGI IAS
Category Description Examples Facts for UPSC Prelims
Revenue Does not create assets; Salaries, pensions, Interest payments on public debt are
Expenditure used for routine expenses. subsidies, interest the largest component of revenue
payments. expenditure.
Capital Used for infrastructure Highways, railways, Budget 2025-26 allocated ₹11.1 lakh
Expenditure and asset creation. power plants, irrigation crore for capital expenditure,
projects. highest-ever.

Types of budgeting

1. Line-Item Budget:

• Description: The most basic type of budget. It lists each expense item (e.g., salaries, travel, office
supplies) as a separate "line." It focuses on controlling spending by setting limits on each item. The
primary concern is adherence to these spending limits. It's easy to understand and implement, but
provides little insight into what those expenses actually achieve.
Merit Demerit
Easy to understand and implement Doesn't provide much detail about activities and
achievements.
Facilitates centralized control & Focuses on input control, not efficiency or effectiveness of
accountability spending.

2. Zero-Based Budget (ZBB):

• Description: A radical approach. Each budget cycle, every expenditure must be justified from
scratch ("zero base"). No past spending is automatically approved. All activities are evaluated and
ranked based on their cost-benefit. This allows for resources to be reallocated to the most
effective programs. It is time-consuming and requires in-depth analysis.
Merit Demerit
Ensures optimal use of resources, justifying all Lengthy and time-consuming; requires high skill
activities on a cost-benefit basis. levels, increasing administrative costs.
Focuses on current needs over historical budgets; Potential resistance to new ideas, danger of
weeds out waste and inefficient units. prioritizing short-term gains over long-term
benefits.
Overcomes weaknesses of incremental budgeting Overcomes weaknesses of incremental budgeting
by addressing "budget inflation" by scrutinizing by addressing "budget inflation" by scrutinizing
every line item every line item

3. Performance Budget:

• Description: Focuses on linking budget allocations to measurable outputs (goods and services
produced). It's more advanced than line-item budgeting because it considers what the spending
achieves. Ministries must specify quantitative objectives, programs, and criteria for assessing
performance. This budget type enhances transparency and accountability.
Merit Demerit
States objectives clearly, informing resource Focuses on quantitative, not qualitative, evaluation.
allocation.
Improves transparency and accountability; Requires a robust accounting system; difficult to
reviews program efficiency. estimate accurate benefits of each activity.
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Integrates planning, programming, and It is difficult to quantify social benefits.
budgeting.

4. Outcome-Based Budget:

• Description: Goes a step further than performance budgeting by emphasizing the impact of
government programs on society (the "outcomes"). The goal is to connect budget outlays to
specific, measurable results for citizens. It's a refined version of performance budgeting that
includes quarterly targets and evaluations.
Merit Demerit
Increases transparency and stakeholder Mapping targets to funding might be inefficient;
participation; links funding to specific additional analysis may add costs and confusion.
outcomes.
Improves Executive accountability; integrates Governments can introduce too many outcomes,
funding and objectives for economy, efficiency, diluting data usefulness; standard performance
and effectiveness. measurement tools are still evolving.
Promotes coordination, cooperation & better Standard specifications, measurement of performance
decision making between departments indicators, and evaluating tools are still evolving in
India.

5. Gender-Based Budgeting (GBB):

• Description: Analyzes the budget through a "gender lens" to assess its impact on women and
girls. It ensures that gender equality is considered in policy formulation and implementation. It's not
a separate budget, but an analytical tool. It examines how budget allocations affect women and
promotes their participation in the economy.
Merit Demerit
Addresses gender inequalities, empowers Requires complex restructuring of political, social,
women, and encourages their economic and economic systems; demands a shift from
participation, boosting GDP. patriarchal mindsets.
Creates accountability and transparency in Entails a complex process of restructuring of the
governance. existing political, social and economic mechanisms

Budget Deficit and Fiscal Indicators

Indicator Definition Formula Facts for UPSC Prelims

Fiscal Deficit Difference between total Fiscal Deficit = Total Fiscal Deficit target for 2025-
expenditure and total Expenditure - Total 26 is 5.1% of GDP (Budget
receipts (excluding Receipts (excluding 2025-26).
borrowings). borrowings).
Revenue Difference between revenue Revenue Deficit = Revenue A high revenue deficit implies
Deficit expenditure and revenue Expenditure - Revenue the government is borrowing
receipts. Receipts. for routine expenses.
Primary Fiscal deficit minus interest Primary Deficit = Fiscal Primary Deficit reflects
Deficit payments on past borrowings. Deficit - Interest Payments. government’s borrowing for
new expenditures.
Effective Revenue deficit excluding Effective Revenue Deficit = Used to analyze revenue
Revenue capital transfers to states. Revenue Deficit - Grants for spending efficiency.
Deficit Capital Assets.

Fiscal Deficit
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• Advantages:
o Provides government flexibility to meet spending commitments.
o Can promote economic growth if used for productive capital investments.
o Finances public sector investment and encourages private investment during economic
downturns.
• Adverse Impacts: [See Revision Card - not provided here, implies known negatives]
• Tackling High Fiscal Deficit:
o Fiscal Consolidation: Reduce deficit, eliminate revenue deficit, control spending.
o Expenditure Switching: Shift spending from consumption to capital formation.
o Increase Tax-to-GDP Ratio: Broaden tax base, prevent evasion, formalize the economy.
o Increase Tax Buoyancy: Improve tax collection efficiency through reforms.
o Increase Non-Tax Revenue: Asset monetization and strategic disinvestment.

Budget Highlights 2025-26 (Latest Data)

Sector Key Announcements Budget Allocation

Infrastructure Expansion of PM Gati Shakti, Bharatmala, and ₹11.1 lakh crore (highest-ever capital
Sagarmala projects. expenditure).
Education PM Schools for Rising India (PM SHRI) ₹1.15 lakh crore.
expanded.
Health Increased focus on Ayushman Bharat and Digital ₹89,000 crore.
Health Mission.
Agriculture Support for PM Kisan and crop insurance. ₹2.5 lakh crore.
Defense Modernization of armed forces, new defense ₹6.2 lakh crore.
corridors.
Renewable Expansion of solar, wind, and hydrogen energy ₹35,000 crore for energy transition.
Energy projects.
Railways Vande Bharat expansion, new freight corridors. ₹2.55 lakh crore.

Fiscal Policy and Government Functions

Function Description Examples Facts for UPSC Prelims

Allocation Government provides public Roads, defense, law Public goods are non-
Function goods and services. enforcement. excludable and non-rival.
Redistribution Reduces income inequality PM Garib Kalyan Yojana, Progressive taxation
Function through taxes and welfare food subsidies. supports redistribution.
schemes.
Stabilization Uses fiscal policy to control Higher spending during Counter-cyclical fiscal
Function inflation and recession. recession, tax hikes in policy stabilizes the
inflation. economy.

Government Borrowing and Public Debt

Aspect Description Examples Facts for UPSC Prelims

Market Raising funds via government Treasury Bills, State Major source of public
Borrowings securities (G-Secs), bonds. Development Loans. debt.
External Debt Loans from foreign institutions like Multilateral loans, External debt is ~5% of
IMF, World Bank. sovereign bonds. GDP.
Public Debt Total government borrowing Market borrowings, Public debt is ~57% of
including internal and external external loans, PSU loans. GDP (Budget 2025-26).
sources.
KARMAYOGI IAS

Types of Fiscal Policy

Fiscal Expansionary Fiscal Policy Contractionary Fiscal Policy Facts for UPSC Prelims
Policy
Type
Purpose Stimulating Economic Growth Controlling Inflation Budget 2025-26 increased
capital expenditure by 11% to
boost growth.
Tools Increase in Government Decrease in Government 2020 COVID-19 stimulus
Spending: Higher investment in Spending: Reduced public included higher spending and
infrastructure, public projects, expenditure on projects. tax reliefs.
and social programs. Tax Increases: Higher tax
Tax Cuts: Reductions in taxes rates to curb excess spending.
to boost disposable income for
consumers and businesses.
Impact Boost Aggregate Demand: Reduce Aggregate Demand: Contractionary measures
More consumer spending and Controls excessive (higher interest rates) used in
business investment. consumption. 2023 to control post-COVID
Job Creation: More Prevent Overheating: inflation.
employment opportunities. Stabilizes inflation.
Prevention of Recessions: Ensure Macroeconomic
Counters economic slowdowns. Stability: Avoids economic
imbalances.
Examples 2008 Financial Crisis: Stimulus 1970s and 1980s (USA): UPSC-2017: Asked about
packages increased spending to Interest rate hikes and fiscal stimulus and its impact on
boost growth. government spending cuts to the economy.
COVID-19 Recovery (2020- fight inflation.
22): Tax cuts, loan moratoriums, India (2022-23): RBI’s
and fiscal relief packages. monetary tightening and fiscal
discipline to curb inflation.

Pro-cyclical Policy vs. Counter-cyclical Policy

Aspect Pro-cyclical Policy Counter-cyclical Policy Facts for UPSC Prelims

Definition Aligns with the economic cycle, Moves against the economic UPSC-2021: Question on
expanding during booms and cycle, expanding during fiscal policy response
contracting during recessions. recessions and contracting during recessions.
during booms.
Purpose Follows economic trends, often Reduces economic fluctuations, Pro-cyclical policies
amplifying fluctuations. stabilizing growth. worsen volatility, while
counter-cyclical policies
maintain balance.
Action Expansionary Measures: More Contractionary Measures: India's 2021 post-COVID
During public spending and tax cuts, Cuts in spending and tax hikes boom phase saw inflation
Booms increasing risk of inflation. to control excessive growth. due to excess liquidity.
Action Contractionary Measures: Expansionary Measures: India’s 2020 Atmanirbhar
During Spending cuts and tax hikes, Boosts spending and cuts taxes Bharat package was
Recessions worsening the economic to revive demand. counter-cyclical to revive
downturn. demand.
Economic Can cause overheating and Balances demand across cycles; India follows counter-
Impact inflation in booms; deepens helps limit inflation in booms cyclical policy under
recessions through reduced and supports recovery in FRBM Act guidelines.
spending and higher taxes. recessions.
KARMAYOGI IAS
Examples Increasing public spending and Stimulus packages during a Budget 2025-26 aims for
tax cuts in a boom, risking recession with more fiscal consolidation by
inflation and asset bubbles. government spending and tax reducing deficit to 5.1%
reliefs to revive demand. of GDP.

Fiscal Policy Measures from Budget 2025-26

Sector Expansionary Measures Contractionary Measures Budget 2025-26 Allocations

Infrastructure Higher capital Debt reduction strategy to ₹11.1 lakh crore (highest-ever
expenditure to boost control fiscal deficit. capital investment).
economic growth.
Social Schemes PM Awas Yojana, Reduction in non-essential ₹4.2 lakh crore for welfare
MGNREGA, Food subsidies. schemes.
Subsidy expansion.
Taxation Tax incentives for Higher tax collection focus Targeted 12% increase in tax
MSMEs and startups to to ensure fiscal stability. revenue.
promote growth.
Monetary Policy Lower borrowing costs Tighter fiscal deficit target Deficit target aligned with
Coordination for businesses. (5.1% of GDP) to control FRBM Act
inflation. recommendations.

Classifica?on of Taxes
Basis of Types Descrip?on Facts for UPSC Prelims
Classifica?on
Based on Nature Direct Taxes Levied directly on income, wealth, CBDT regulates direct taxes under
or property. the IT Act, 1961.
Indirect Taxes Levied on goods and services, paid GST is the biggest indirect tax
by consumers indirectly. reform in India (2017).
Based on En??es Personal Taxes Levied on individuals (Income Tax, Income Tax follows a progressive
Taxed Wealth Tax). structure in India.
Corporate Levied on companies (Corporate India's corporate tax rate was cut
Taxes Tax, MAT). to 22% in 2019.
Based on Purpose Revenue Taxes Aim to raise government revenue. GST collec*ons crossed ₹10.62
lakh crore in FY 2024-25.
Regulatory Used to control economic ac?vi?es High excise du*es on alcohol,
Taxes (Customs Duty, Sin Tax). tobacco for deterrence.
Based on Dura?on Permanent Levied con?nuously (Income Tax, India's taxa*on system is mainly
Taxes Corporate Tax). permanent.
Temporary Introduced for a limited period COVID-19 introduced a health
Taxes (COVID Cess, War Taxes). cess on medical imports.
Based on Progressive Higher income, higher tax rate Direct taxes in India follow a
Progressivity Taxes (Income Tax). progressive model.
Propor*onal Fixed percentage on income Corporate tax rate is uniform at
Taxes (Corporate Tax). 22% (since 2019).
Regressive Same tax rate for all, burdening Indirect taxes like GST can be
Taxes lower-income groups. regressive.
Based on Central Taxes Collected by Union Govt. (Income Finance Ministry regulates central
Administra?on Tax, Customs Duty). taxes.
State Taxes Collected by State Govts. (Stamp States administer GST through
Duty, Property Tax). SGST.

Direct vs. Indirect Taxes

Category Direct Taxes Indirect Taxes
KARMAYOGI IAS
Defini?on Taxes levied directly on individuals & Taxes levied on goods & services.
businesses.
Examples Income Tax, Corporate Tax, Capital Gains Tax. GST, Customs Duty, Excise Duty.
Progressivity Progressive Tax: Higher income = Higher tax Regressive Tax: Flat rate on all consumers.
rate.
Economic Reduces inequality. Encourages consump*on, but regressive
Impact impact.

Types of Direct Taxes

Tax Type Descrip?on Key Features Facts for UPSC Prelims
Income Tax Levied on individuals Progressive tax structure. Highest slab: 30% on income
based on income slabs. > ₹15 lakh.
Corporate Tax Levied on companies' net Standard rate: 22% (since India's corporate tax rate
profits. 2019). among lowest in Asia.
Wealth Tax Levied on net wealth Abolished in 2016. Replaced by a surcharge on
exceeding a threshold. the super-rich.
Capital Gains Tax Levied on profits from Short-Term (STCG): 15% UPSC-2012: Ques?on on
asset sales. Long-Term (LTCG): 10% (above LTCG applicability.
₹1 lakh).
Dividend Tax on dividends paid by Abolished in 2020, now taxed UPSC-2023: Asked about
Distribu?on Tax companies. in shareholders’ hands. dividend taxa?on reforms.
(DDT)
Securi?es Tax on stock market Encourages transparency in Stock trading taxed under
Transac?on Tax transac?ons. trading. STT at 0.1%.
(STT)

Types of Indirect Taxes (Before GST)

Indirect Tax Descrip?on Status Post-GST Facts for UPSC Prelims
Excise Duty Tax on manufactured goods at the Merged into GST. UPSC-2017: Asked about indirect
produc?on stage. tax reforms.
Customs Duty Tax on imports and exports. S?ll applicable. Budget 2025-26 increased customs
duty on luxury goods.
Service Tax Tax on service transac?ons. Merged into GST. GST replaced service tax at a
uniform rate.
Central Sales Tax on inter-state sales of goods. Replaced by IGST. UPSC-2011: Asked about CST vs.
Tax (CST) VAT.
Value Added Tax on intra-state sales of goods. Par?ally merged S*ll applies on petrol, diesel,
Tax (VAT) into GST. alcohol.
Entry Tax Levied on goods entering a state. Repealed. GST subsumed entry tax.
Stamp Duty Tax on property transac?ons. State-administered. Varies across states.

Goods and Services Tax (GST) [UPSC-2017]

Aspect Details
GST Introduc?on Implemented on 1st July 2017, replacing mul?ple indirect taxes.
Tax Slabs 0%, 5%, 12%, 18%, 28%
Nature Des*na*on-based tax, levied where goods/services are consumed.
Input Tax Credit Eliminates tax-on-tax (cascading effect).
GST Council Decision-making body for GST rates, exemp?ons.
An?-Profiteering Authority Ensures tax benefits reach consumers.
Dual GST Model CGST + SGST (for intra-state), IGST (for inter-state transac*ons).
E-Way Bill Required for goods movement above ₹50,000.
GSTN IT backbone for GST compliance and return filing.
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Tax Buoyancy & Growth Trends (Economic Survey 2024-25)

Year Nominal GDP Growth Corporate Tax Growth Income Tax Growth Tax
(%) (%) (%) Buoyancy
2021-22 19.5% 55.6% 43.0% 2.52
2022-23 15.4% 16.0% 20.0% 1.1
2023-24 (Apr-Aug) 8.0% 15.0% 35.7% 1.4
2024-25 7.8% 12.0% 25.0% 1.5
(Projec?on)

Tax Evasion and Tax Avoidance

Point of Tax Evasion [UPSC-2021] Tax Avoidance Facts for UPSC Prelims
Difference
Defini?on Illegal prac?ce of not paying due Legal use of loopholes and India has signed FATCA to
taxes by misrepor?ng or exemp?ons in tax law to curb tax evasion via
concealing income. reduce tax liability. offshore accounts.
Legality Illegal and punishable under law. Legal but considered India implemented GAAR in
unethical; uses tax law 2017 to curb tax avoidance.
provisions strategically.
Methods Used Underrepor?ng income, infla?ng Exploi?ng deduc?ons, UPSC-2021: Asked about tax
expenses, concealing assets, exemp?ons, tax credits, and evasion laws.
black money. loopholes.
Purpose To evade or reduce tax payments To reduce tax liability within Shell companies open used
by viola?ng laws. legal limits. for tax evasion.
Consequences Legal penal?es, fines, and No penal?es, but may lead UPSC-2018: Ques?on on
possible imprisonment. to future legal reforms. interna?onal tax havens.
Examples Falsifying income records, hiding Using offshore accounts, India revised DTAA with
foreign assets. inves?ng in tax-saving Mauri*us to prevent tax
schemes. avoidance.

Base Erosion and Profit Shiding (BEPS) & Global Minimum Corporate Tax (GMCT)
Concept Descrip?on Key Features Facts for UPSC Prelims
BEPS (Base Strategies used by mul?na?onal - OECD BEPS guidelines India signed BEPS
Erosion and corpora?ons to shiv profits from high-tax - India follows BEPS Mul*lateral Instrument
Profit Shiving) jurisdic?ons to low-tax ones, reducing tax norms to prevent tax (MLI) in 2019.
burden. base erosion.
GMCT (Global A global 15% minimum tax rate on MNCs - Pillar 1: Tax rights Budget 2025-26 to
Minimum to prevent profit shiving to tax havens. allocated to market implement GMCT for
Corporate Tax) jurisdic?ons. India-based MNCs.
- Pillar 2: 15% global
minimum tax on large
MNCs.

Transfer Pricing & Authority for Advance Rulings (AAR)

Concept Descrip?on Key Features Facts for UPSC Prelims
Transfer Pricing Pricing of transac?ons between - Ensures transac?ons India’s APA (Advance Pricing
related en??es, like MNC occur at "arm’s length". Agreement) introduced in
subsidiaries. - Prevents tax base 2012.
erosion.
AAR (Authority for Provides binding rulings on tax - Reduces li?ga?on & tax UPSC-2016: Ques?on on
Advance Rulings) ma]ers for MNCs. uncertain?es. AAR's role in tax certainty.
- Provides clarity on tax
liabili?es.
KARMAYOGI IAS

General An?-Avoidance Rules (GAAR) & Double Taxa?on Avoidance Agreement (DTAA)
Concept Descrip?on Key Features Facts for UPSC Prelims
GAAR Rules to counter aggressive tax - Prevents abuse of tax laws. India revised tax trea*es with
avoidance. - Implemented in FY 2017-18. Singapore & Cyprus under
GAAR.
DTAA Agreements between countries to - India has DTAA with 90+ UPSC-2022: Ques?on on DTAA
prevent double taxa?on of the same countries. benefits.
income. - Allows tax
exemp?on/credits on foreign
income.

Tax Reforms: CommiXees & Recommenda?ons

Direct Tax Reforms

Commi]ee/Task Force Key Recommenda?ons

Kelkar Commi]ee (2002) Simplify tax laws, reduce exemp?ons, broaden tax base, lower corporate tax.
Parthasarathi Shome GAAR safeguards, clear tax avoidance rules, expert reviews.
Commi]ee (2012)
Akhilesh Ranjan Commi]ee Modernized Direct Tax Code, reduced corporate tax rates, ra?onalized capital
(2017-19) gains tax, improved taxpayer services.

Indirect Tax Reforms

Commi]ee/Task Force Key Recommenda?ons

Raja J. Chelliah Commi]ee (1991) Introduce VAT, harmonize state and central taxes, allow input tax credit.
Arvind Subramanian Commi]ee (2015) Proposed Revenue Neutral Rate for GST, recommended dual GST model.

Fiscal Responsibility and Budget Management (FRBM) Act

The FRBM Act, 2003 aims to institutionalize fiscal discipline, improve macroeconomic stability, and reduce
deficits. It was amended in 2018 to set new deficit targets.

Aspect Details Latest Updates (Budget 2025-26 UPSC Prelims PYQs

& Economic Survey 2024-25)
Objec?ve Reduce fiscal deficit, control public debt, - 2024-25 Fiscal Deficit Target: 2016: Impact of FRBM
promote intergenera?onal equity. 5.1% of GDP Act on fiscal deficit.
- Debt-to-GDP ra*o: 60% by
FY2026 (40% Centre, 20%
States).
Key - Targets on fiscal deficit, revenue - Centre's Revised Borrowing: 2022: Escape clause in
Features deficit, debt management. ₹11.5 lakh crore (FY2025). FRBM Act.
- Requires government to provide - States' Fiscal Deficit Limit: 3.5%
medium-term fiscal policy & of GSDP (includes 0.5%
macroeconomic framework flexibility).
statements.
Escape Allows devia?on from fiscal targets - COVID-19 Relaxa*on (2020- 2019: Clause
Clause during na?onal crises (e.g., war, 23): Centre & States exceeded permi~ng fiscal
pandemic, natural disasters). fiscal deficit target. devia?on in crisis.
- New Commitments: Rever?ng
to pre-pandemic targets by FY
2026.
KARMAYOGI IAS
Impacts - Improves fiscal discipline, boosts - Infla*on Control Target: 4% 2020: Effect of fiscal
investor confidence. (+/- 2%) maintained under FRBM consolida?on on
- Controls infla?on by reducing excessive Act & RBI mandate. infla?on.
borrowing.

Government Debt & Deficits

Government debt arises due to budgetary deficits (expenditure exceeding revenue). Debt is financed through
taxes, market borrowings, and external loans.

Debt Category Descrip?on Latest Data (2024-25) UPSC Prelims PYQs

Market Borrowings Government raises ₹13 lakh crore borrowing planned 2018: Market borrowing
funds via G-Secs & T- for FY 2025 (Budget 2025-26). as a share of fiscal
Bills. deficit.
Loans from Borrowings from Increase in SDLs (State 2017: How does bank
Banks/Ins?tu?ons domes?c & global Development Loans) due to rising lending to govt affect
financial en??es. welfare spending. private credit?
External Debt Loans from World Bank, External Debt-GDP Ra*o: 18.7% 2022: India’s reliance on
IMF, and bilateral (13-year low). external debt.
agencies.
Small Savings & PPF, NSC, Postal Savings New Incen*ves in Budget 2025: 2021: Role of small
Provident Funds used for deficit Increased tax benefits for senior savings in deficit
financing. ci?zen savings schemes. financing.

Public Debt Management: Key Ins?tu?ons

Agency Role in Debt Management
Reserve Bank of India (RBI) Manages internal debt, issues G-Secs, and controls monetary policy.
Ministry of Finance Sets fiscal policy, oversees external borrowing, maintains fiscal discipline.
Securi?es & Exchange Board of India Regulates securi*es markets, ensures market transparency & investor
(SEBI) protec*on.
Public Debt Office (PDO) Under RBI, handles G-Sec issuance, bond servicing, interest payments.
Public Debt Management Cell (PDMC) Transi*on body for independent Public Debt Management Agency
(PDMA).

Mone?za?on of Deficit & Deficit Financing [UPSC 2022]

Par?culars Mone?za?on of Deficit Deficit Financing
Defini?on Central bank prints new money to finance Government borrows funds via bonds, T-
deficits. bills.
Primary Actor RBI collaborates with Finance Ministry. Government (Finance Ministry).
Mechanisms Open Market Opera?ons, direct lending to Market borrowings, external loans.
govt.
Infla?onary Highly infla?onary due to excess money supply. Mild infla?on if borrowing is moderate.
Impact

Fund Transfers from Union to State Governments (15th Finance Commission, 2021-26)
Aspect Details Latest Updates (Budget UPSC Prelims PYQs
2025-26 & Economic Survey
2024-25)
Ver?cal States receive 41% of the divisible pool of No change in 41% 2015: Ver?cal
Devolu?on Central taxes. devolu*on; but increase in devolu?on trend
over ?me.
KARMAYOGI IAS
*ed grants for rural & urban
local bodies.
Exclusions from Cess & surcharges, UT revenue, Na*onal Cess & surcharge collec*ons 2022: Impact of
Divisible Pool Calamity Con*ngent Duty. at 20.2% of gross tax cess & surcharge
revenue, reducing states' on state finances.
share.
Horizontal Allocated based on income distance Forest-based states benefit 2017: Horizontal
Distribu?on (45%), popula*on (15%), area (15%), from increased green devolu?on criteria
Parameters demographic performance (12.5%), and incen*ves. changes.
forest & ecology (10%).

Revenue Deficit Grants

Aspect Details Latest Updates (Budget 2025-26)
Purpose Compensates states facing post- ₹1.18 lakh crore allocated for Revenue
devolu?on fiscal gaps. Deficit Grants in FY2025.
States Receiving Grants 17 states received grants. Projected to reduce to 6 states by 2025-26
(2021-22) as fiscal health improves.
Key Beneficiaries States with lower tax revenues, high Andhra Pradesh, West Bengal, Punjab
spending commitments. remain major recipients.

Local Body Grants

Aspect Details Latest Updates (Economic Survey 2024-25)
Total Alloca?on ₹4.36 lakh crore for 2021-26 period. ₹90,000 crore allocated for FY2025-26.
Purpose 60% for drinking water & sanita*on, Increased focus on Smart Ci*es & Swachh
40% un?ed. Bharat 2.0.
Urban-Rural Shiv From 67.5:32.5 to 65:35 (urban-rural). Encourages decentralized governance in
rural areas.
State Distribu?on 90% based on popula*on, 10% based on Beler alloca*on to large, sparsely
Criteria area. populated states.

Disaster Management Grants

Aspect Details Latest Updates (Budget 2025-26)
Centre-State 75:25 (General States), 90:10 (Northeast & Hilly ₹32,000 crore allocated for State
Contribu?on Ra?o States). Disaster Response Fund (SDRF).
Fund Alloca?on 80% to State Disaster Response Fund (SDRF), 20% SDRF corpus increased due to
to State Disaster Mi*ga*on Fund (SDMF). climate-related disasters.

Sector-Specific Grants [UPSC-2015]

Category Purpose Latest Updates (Economic Survey 2024-25)
Health Sector Grants Funds for healthcare infrastructure & ₹15,000 crore for health sector
Ayushman Bharat expansion. development.
School Educa?on Improving school infrastructure, teacher NEP 2020 implementa*on supported
Grants training. with ₹5,500 crore.
Higher Educa?on R&D funding, digital universi?es. Boost in AI & STEM funding under Digital
Grants India program.
Agricultural Reform Land lease reforms, water use efficiency, ₹8,000 crore for sustainable farming &
Incen?ves export promo?on. agri-tech innova*ons.

State-Specific Grants
Aspect Details Latest Updates (Budget 2025-26)
Purpose Grants allocated beyond regular tax devolu*on & ₹75,000 crore allocated for state-specific
sectoral grants. infrastructure projects.
Key Focus Water conserva*on, heritage protec*on, physical Rajasthan, Kerala, U]arakhand get special
Areas infrastructure, tourism promo*on. funds for heritage tourism.
KARMAYOGI IAS

Special Assistance Grants to Assam & Northeast

Aspect Details Latest Updates (Economic Survey 2024-
25)
Purpose Assistance for tribal area development & Sixth ₹2,500 crore allocated for Assam & NE
Schedule implementa*on. states.
Development Infrastructure in autonomous districts. 100 new Eklavya Model Residen*al
Focus Schools (EMRS) planned.

Addi?onal Transfers from Central to State Governments

Category Purpose Latest Updates (Budget 2025-26)
Special Assistance Grants Given for disaster relief, infrastructure, & ₹10,000 crore set aside for post-
sectoral development. disaster rehabilita*on.
Addi?onal Central Includes both grants & loans. Increased assistance to newly formed
Assistance UTs (J&K, Ladakh).
Na?onal Disaster Response Funds for post-disaster reconstruc*on. ₹8,000 crore for climate disaster
Fund (NDRF) response.

Fiscal Policy vs. Monetary Policy: A Comparison

Feature Fiscal Policy Monetary Policy Latest Insights UPSC Relevance
(Economic Survey &
Budget 2025-26)
Defini?on Government policies Central bank's RBI maintained a UPSC-2018:
on spending & regula*on of money *ght monetary Difference between
taxa*on to influence supply & interest stance despite fiscal fiscal & monetary
economic ac?vity. rates. deficit reduc*on. policy.
Implemented Ministry of Finance Reserve Bank of India Budget FY2025 UPSC-2020: Role of
By (Government of (RBI). priori*zes fiscal RBI & government in
India). consolida*on (5.1% economic stability.
deficit target).
Primary Focus Economic growth, Infla*on control, Infla?on remains UPSC-2019: Infla?on
employment, income currency stability, within 4-6% band, vs. Growth debate in
redistribu*on. financial stability. but fiscal discipline is India.
crucial.
Tools Used Government Repo rate, CRR, SLR, Repo rate held at UPSC-2021: Repo
spending, taxa*on, Open Market 6.5% to control rate & infla?on
subsidies. Opera*ons (OMOs). infla*on despite targe?ng.
growth concerns.
Effec?veness in Highly effec*ve: Less effec*ve: Budget FY2025 UPSC-2023:
Economic Government can Monetary s?mulus increases capital Government
Slowdowns directly increase depends on banks expenditure by investment in
spending to boost lending more & 11.1% to revive infrastructure during
demand. consumers borrowing. growth. slowdowns.
Time Lag Short-term impact, Long-term impact, as Tax reliefs announced UPSC-2017:
since government changes in interest in Budget FY2025 Monetary vs fiscal
spending directly rates take ?me to expected to show policy lags.
affects GDP. influence the results in 6-12
economy. months.
Response to Reduces spending, Raises interest rates, CPI infla*on at 5.4%, UPSC-2015: How
Infla?on increases taxes to reduces money supply indica*ng mixed policies counter
control infla?on. to curb infla?on. success of policies. infla?on.
KARMAYOGI IAS
Limita?ons Poli*cal constraints, Weak transmission, High public debt UPSC-2016:
fiscal deficit concerns. risk-averse banks, (82.5% of GDP) limits Challenges in deficit
liquidity traps. fiscal expansion. financing.
KARMAYOGI IAS
INSURANCE AND PENSION SECTOR IN INDIA
History of Insurance Sector in India

Aspect Details Latest Insights (Budget UPSC Relevance

2025-26 & Economic Survey
2024-25)
First Life Insurance Oriental Life Insurance NA UPSC-2021: Evolu?on of
Company Company (1818) India's insurance sector.
First General Triton Insurance (1850) NA UPSC-2023: History of
Insurance Company general insurance.
Key Legisla?ve - Insurance Act, 1938: First LIC IPO was India’s largest- UPSC-2022: LIC
Developments comprehensive insurance law ever in FY23. na?onaliza?on impact.
- Na*onaliza*on of Life
Insurance (1956): LIC
established
- Na*onaliza*on of General
Insurance (1973)
Post-Liberaliza?on - Malhotra Commilee (1993): Govt increased FDI cap to UPSC-2024: IRDAI’s role in
Reforms Allowed private sector entry 74% in FY24. insurance reforms.
- IRDAI (1999): Set up to
regulate insurance

Key Facts & Trends in India's Insurance Sector

Indicator Details Latest Data (2024-25) UPSC Relevance

India’s Insurance Market 10th Largest Globally Projected to be 6th by UPSC-2023: Growth
Rank 2032. poten?al of Indian
insurance.
FDI Limit in Insurance Raised from 49% to 74% Major foreign insurers UPSC-2022: FDI reforms in
entering Indian market. insurance.
Insurance Penetra?on (% 4% (India) vs. 6.8% Life Insurance: 3% of GDP UPSC-2024: India's insurance
of GDP) (Global Average) (higher than global avg penetra?on vs global peers.
2.8%)
Insurance Density (Per 92 USD (2023) vs. 52 S*ll below global average UPSC-2023: Growth trends
Capita Premium in USD) USD (2014) of 500+ USD. in insurance penetra?on.
Systemically Important - Life Insurance IRDAI monitoring D-SIIs UPSC-2024: Importance of
Insurers (D-SIIs) Corpora*on of India post-COVID recovery. D-SIIs in economic stability.
(LIC)
- General Insurance
Corpora*on of India
(GIC)
- New India Assurance

Key Issues in the Insurance Sector

Issue Description Latest Data (2024-25) UPSC Relevance

Low Insurance India’s insurance penetration Life insurance penetration UPSC-2023: Need for
Penetration is just 4% of GDP, far below (3%) is above the global avg universal insurance
the global average of 6.8%. (2.8%). coverage.
Low Insurance Per capita premium (insurance Compared to $500+ in UPSC-2022: Growth
Density density) remains $92, much advanced economies. potential of India’s
lower than developed markets. insurance sector.
KARMAYOGI IAS
Complex Multiple regulations under IRDAI is working on "One UPSC-2024: Role of
Regulatory IRDAI, SEBI, PFRDA, creating Nation, One Insurance IRDAI in improving
Framework overlaps. Policy" for simplification. regulation.
High Cost of Private insurers charge high LIC IPO in FY23 aimed to UPSC-2023: Steps to
Premiums premiums, limiting access for increase competition in the improve insurance
lower-income groups. sector. affordability.
Lack of Many people lack financial Financial literacy programs UPSC-2022: How
Awareness literacy about insurance launched in FY24. financial literacy affects
benefits, leading to under- insurance coverage?
subscription.
Claim Delays in processing health and IRDAI mandated faster UPSC-2023: Impact of
Settlement life insurance claims create digital claim settlements in claim settlement on trust
Delays distrust. 2024. in insurance.

Way Ahead for the Insurance Sector

Suggestion Proposed Actions Expected Impact Government Initiatives

(2024-25)
Increase Expand Ayushman Bharat & PM Boosts financial Expanded health
Insurance Fasal Bima Yojana coverage. security for insurance coverage to gig
Penetration vulnerable sections. workers.
Improve Introduce subsidized insurance for Ensures wider Govt considering
Affordability low-income groups. coverage, especially subsidies for rural health
for rural areas. insurance.
Enhance Digital Strengthen digital claim processing Faster settlements, IRDAI introduced new
Infrastructure & AI-based fraud detection. reduced fraud cases. digital claim verification
process.
Increase Financial Integrate insurance awareness in Encourages early PM Financial Literacy
Literacy school curriculums. adoption of insurance Scheme launched in
policies. FY24.
Regulatory Unify regulations under a single Simplifies Govt considering merging
Reforms authority (IRDAI+PFRDA+SEBI). compliance for IRDAI & PFRDA under a
insurers and single body.
customers.

Pension Sector Reforms in India

Evolution of Pension System in India

Aspect Details Latest Insights (Budget UPSC Relevance

2025-26 & Economic Survey
2024-25)
OASIS Project (1999) Examined old-age social Led to Na*onal Pension UPSC-2023: Evolu?on of
security policies System (NPS). India's pension system.
Defined Contribu?on Replaced Defined Benefit Shiped financial risk to UPSC-2021: Pension
Pension System (2003) System individual pensioners. reform impact on govt
liability.
Na?onal Pension January 1, 2004 Extended to all ci*zens in UPSC-2022: NPS vs Old
System (NPS) Launch 2009. Pension Scheme debate.
Pension Regulator Pension Fund Regulatory & Expanded coverage to gig UPSC-2024: Role of
Development Authority workers in FY24. PFRDA in pension
(PFRDA) reforms.
KARMAYOGI IAS
Structure of National Pension System (NPS)

Feature Tier-I Account (Mandatory) Tier-II Account (Voluntary)

Withdrawal Restricted (Re*rement Freely Withdrawable
focused)
Minimum Contribu?on (Yearly) ₹6,000 ₹2,000
Tax Benefits EET (Exempt-Exempt-Taxed) Covered under Sec*on 80C if locked-in for
Model 3 years
Govt Contribu?on (For Central Increased from 10% to 14% No Govt Contribu*on
Employees)

Key Features of NPS

Feature Details Latest Developments (2024- UPSC Relevance

25)
Investment Market-Linked Annuity NPS corpus crossed ₹10 lakh UPSC-2022: How NPS
Mechanism Product crore in FY24. differs from tradi?onal
pensions?
Premature Allowed up to 25% for Govt relaxed withdrawal UPSC-2023: Premature
Withdrawals emergencies (3 *mes during norms for medical withdrawal policy in NPS.
tenure). emergencies.
Tax Benefits on Lump 60% tax-free on exit 100% tax-free annuity UPSC-2024: Taxa?on
Sum Withdrawals withdrawals proposed in benefits under NPS.
Budget 2025.

Key Issues in the Pension Sector

Issue Descrip*on Latest Data (2024-25) UPSC Relevance

Low Pension Coverage Only 12% of India’s workforce Compared to 60-70% in UPSC-2023: Importance
has formal pension coverage. developed na*ons. of expanding pension
coverage.
NPS vs. Old Pension States rever*ng to OPS, Fiscal deficit impact UPSC-2024: Should India
Scheme Debate raising fiscal sustainability es*mated at ₹2.5 lakh move back to OPS?
concerns. crore over 10 years.
Underdeveloped Limited annuity products PFRDA working on UPSC-2022: Need for a
Annuity Market make re?rement planning diversified pension strong annuity market in
difficult. instruments. India.
Lack of Portability Pension schemes are oven Govt considering portable UPSC-2023: How to
not easily transferable across pension system for gig improve pension
states & jobs. workers. portability?
Gender Disparity in Women have lower pension Only 30% of NPS UPSC-2024: Gender gaps
Pension Access savings due to career breaks. subscribers are women. in financial security.

Way Ahead for the Pension Sector

Sugges*on Proposed Ac*ons Expected Impact Government Ini*a*ves (2024-

25)
Expand Pension Make NPS mandatory for Increases re?rement Govt exploring universal
Coverage private sector employees. security for informal pension for gig workers.
workers.
Strengthen NPS Introduce higher guaranteed Encourages long-term Govt considering a minimum
returns on pension funds. investments. return scheme in NPS.
KARMAYOGI IAS
Improve Pension Create centralized pension Reduces complexity for E-Pension Portal under
Portability database. migrant workers. development.
Promote Annuity Offer tax incen*ves for long- Boosts financial security PFRDA working on diversified
Market term annuity plans. for re?rees. annuity products.
Reduce Gender Provide higher govt Encourages more women Govt exploring 16% employer
Disparity contribu*on for women to join pension schemes. contribu*on for women in NPS.
subscribers.
KARMAYOGI IAS
BALANCE OF PAYMENTS, FOREIGN EXCHANGE AND
INTERNATIONAL FINANCIAL INSTITUTIONS
Open Economy

• Definition: An economy interacting with other nations through trade, services, and financial assets.
Opposite of a closed economy.
• Linkages:
o Output Market: Trade in goods/services (more choice).
o Financial Market: Investment in foreign assets.
o Labor Market: Firms/workers choose locations globally.
• Trade & Aggregate Demand:
o Leakage: Imports reduce domestic demand.
o Injection: Exports increase domestic demand.
• Need for International Monetary System (IMS):
o Stability: Reliable currency exchange.
o Convertibility & Trust: Confidence in currency value.
o Preventing Imbalances: Managing exchange rates.
• Functions of IMS:
o Currency Exchange & Stability: Regulate exchange rates.
o Crisis Prevention: Resolve payment imbalances (e.g., IMF support).
o Liquidity Support: Provide reserves for currency shortfalls.
o Economic Integration: Foster cooperation and growth.

India’s Merchandise Trade Performance

Topic Details Facts for Prelims
India’s Rising Share in India’s merchandise exports share in global - India's share in global
Global Trade trade has increased. merchandise exports (FY16-FY20
avg): 1.7%.
- India's share in global services
exports (FY16-FY20 avg): 3.3%.
India’s Export India’s merchandise exports stood at $448 - Top export des?na?ons: USA, UAE,
Performance (FY24) billion, declining from $514 billion in FY23. China, Netherlands, Singapore.
India’s Import Merchandise imports declined from $675 - India’s top imports: Crude oil, gold,
Performance (FY24) billion in FY23 to $600 billion in FY24. electronic goods, machinery.
- Top import sources: China, UAE,
USA, Saudi Arabia.
Trade Deficit The merchandise trade deficit narrowed to - FY23 trade deficit was $264 billion,
$238 billion in FY24. indica?ng improvement.
Composi?on of Capital goods, consumer goods, intermediate - Capital goods: 5.1%
Merchandise Exports goods, and raw materials form the bulk of - Consumer goods: 4.7%
(FY24) exports. - Intermediate goods: 30.2%
- Raw materials: 28.4%

Balance of Payments (BoP) and Foreign Exchange Reserves (2023-24)

Topic Details Facts for Prelims
Balance of Payments The Balance of Payments (BoP) records all - BoP must always balance
(BoP) - Overview economic transac*ons between India and the (Deficit/Surplus in one account is
KARMAYOGI IAS
rest of the world during a par?cular period. It offset by another).
includes: - Deficit in Current Account →
1. Current Account (Trade in goods, services, Financed by Capital Account/Forex
remi]ances) Reserves.
2. Capital Account (FDI, FPI, External Borrowing)
3. Financial Account (Foreign Reserves, SDRs,
Loans, Investments)
Current Account (Goods, The Current Account includes transac?ons of - India's Current Account Deficit
Services, Transfers, goods, services, income, and transfers. (CAD) in FY24 → 1.4% of GDP
Income) Formula: (Lower than 2.1% in FY23).
Current Account = (Exports - Imports) + Net
Services + Net Income + Transfers
UPSC PYQ 2011: Components of Current
Account include goods, services, remi]ances,
and transfers.
Current Account Deficit A Current Account Deficit (CAD) occurs when - Major reason for CAD in India:
(CAD) imports exceed exports, meaning India spends High crude oil & gold imports.
more foreign currency than it earns. - India’s CAD peaked at 4.8% of
UPSC PYQ 2020: Factors affec?ng CAD - crude GDP in FY13.
prices, global demand, rupee deprecia?on.
Goods Trade This includes exports and imports of physical - India’s Merchandise Trade Deficit
(Merchandise) goods like petroleum, gold, machinery, in FY24: $238 billion (Lower than
electronics, etc. $264 billion in FY23).
Services Trade (Net Services exports > Imports → Creates a services - India’s Service Exports (FY24):
Invisibles) trade surplus. $330 billion
Major services exports: IT, sopware, business - Net Services Surplus (FY24): $138
services, financial services, tourism. billion (Major BoP stabilizer).
Transfers (Remi]ances, Remilances: Money sent by Indian workers - India received $120 billion in
Grants, Foreign Aid) abroad. remilances (2023) → Largest
Grants & Aid: Includes financial assistance to global recipient.
India or from India to other countries.
Income (Factor Income Factor Income: Earnings from abroad (profits, - India pays high interest on
& Interest Payments) interest, dividends). external borrowings → Contributes
Interest Payments: Payments on external debt. to CAD.

Capital Account & Financial Account (Investments, Foreign Borrowing, Forex Reserves)

Topic Details Facts for Prelims

Capital Account (FDI, FPI,The Capital Account records investment - India’s Net Capital Inflows (FY24):
Loans, Reserves, etc.) flows, foreign borrowings, and external $85 billion.
asset sales.
UPSC PYQ 2013: Capital Account includes
FDI, FPI, External Commercial Borrowings
(ECBs).
Foreign Direct Investment FDI is long-term investment in India by - FDI Inflows in FY24: $70 billion (Top
(FDI) foreign companies. Sectors: IT, Pharma, Manufacturing).
UPSC PYQ 2022: Which countries are the - Top FDI sources: Singapore, USA,
top sources of FDI in India? UAE, Netherlands, Japan.
Foreign Porwolio FPI is investment in Indian stocks, bonds, - FPI Inflows in FY24: $28 billion
Investment (FPI) securi*es by foreign en??es. (Vola?le due to global interest rates).
UPSC PYQ 2011: Difference between FDI &
FPI.
KARMAYOGI IAS
External Commercial Loans taken by Indian companies from - India’s External Debt (FY24): $663.8
Borrowings (ECBs) foreign lenders (World Bank, ADB, IMF, billion (18.7% of GDP).
foreign banks).
NRI Deposits Deposits by Non-Resident Indians (NRIs) in - NRI Deposits (FY24): $142 billion.
Indian banks.
Foreign Exchange India’s foreign exchange reserves act as a - India’s Forex Reserves (Feb 2024):
Reserves (Forex Reserves) buffer against external shocks. $640 billion (5th largest globally).
Forex Reserves include: - India can cover 10.2 months of
- Foreign currency assets (FCA). imports using forex reserves.
- Gold reserves. UPSC PYQ 2015: Why does RBI
- Special Drawing Rights (SDRs) with IMF. maintain forex reserves?
- Reserve posi?on in IMF.

Trends & Recent Developments in Balance of Payments (BoP)

Issue/Trend Explana?on Impact on Economy

Rising Service Exports India’s IT, sopware, financial services exports - $330 billion service exports in FY24.
are driving BoP stability. - Helps offset merchandise trade
UPSC PYQ 2021: "India's service exports help deficit.
reduce CAD significantly."
Declining Current Strong remi]ances & service exports reduced - FY24 CAD: 1.4% of GDP (lower than
Account Deficit (CAD) India’s CAD. FY23).
FPI Vola?lity Foreign Porwolio Investment (FPI) is highly - FPI ounlows in 2022 due to US Fed
vola?le due to global interest rate changes. rate hikes; recovered in 2023-24.
Forex Reserves RBI intervenes in Forex Markets to stabilize the - India’s Forex Reserves (Feb 2024):
Stabiliza?on rupee. $640 billion.
Increase in External India’s external debt has risen to $663.8 - Debt-to-GDP Ra*o (FY24): 18.7%
Debt billion, raising concerns over repayment (Lowest in 13 years).
burden.

RemiXances into India

Topic Details Facts for Prelims
India as the Largest India received $120 billion in remi]ances in - Top remilance sources: USA, UAE,
Recipient of Remi]ances 2023, 14% of total global flows. Saudi Arabia, Kuwait, Oman, UK.
Top Global Remi]ance- India leads global remi]ances, followed by - India ranks #1 globally in remi]ance
Receiving Countries Mexico, China, Philippines, Pakistan. inflows.
Impact of Remi]ances - Boosts foreign exchange reserves. - Remilances account for ~3.5% of
- Supports current account balance. India’s GDP.
- Enhances rural incomes and household
consump*on.

Classifica?on of Transac?ons
Transac?on Details Examples & PYQs
Type
Loans and Loans are capital inflows/ounlows recorded under - Example: A foreign bank lending to an
Interest the Capital Account, while interest payments are Indian firm is a capital inflow, while
Payments under the Current Account as they represent interest payments on that loan are
earnings or borrowing costs. Current Account ounlows.
- UPSC PYQ 2020: Capital Account
includes loans, FDI, and external
assistance.
KARMAYOGI IAS
Givs & Grants Unilateral transac*ons recorded under the Current - Example: Foreign aid, NGO funding.
Account as transfers. - UPSC PYQ 2011: Remi]ances & grants
are Current Account items.
Remi]ances Money sent by NRIs to India, categorized under - India’s Remilances in FY24: $120
Current Account - Transfers. billion (highest globally).
- UPSC PYQ 2016: Remi]ances impact
BoP stability.

Current & Capital Account Conver?bility

Aspect Details Facts for Prelims & PYQs
Current Account Allows free exchange of rupees for foreign - UPSC PYQ 2013: "India's Current
Conver?bility currency in trade, services, and transfers. India Account is fully conver?ble, but Capital
has full current account conver*bility since Account remains par?ally conver?ble."
1994.
Capital Account India maintains par*al conver*bility to prevent - Tarapore Commilee (1997, 2006)
Conver?bility capital flight & specula*ve alacks. recommended phased full conver?bility.
- UPSC PYQ 2011: Capital Account
Conver?bility is restricted to prevent
economic shocks.

Feature Autonomous Transactions [UPSC Accommodating Transactions {UPSC

2013] 2020}
Nature Independent of Balance of Payments Address gaps or imbalances in the BoP.
(BoP) balancing needs.
Examples Exports, Imports, Foreign Direct RBI's reserve transactions (e.g.,
Investment (FDI) inflows. buying/selling currency to manage exchange
rates).
Purpose Driven by profit motives, investment Meant to restore equilibrium in the BoP.
opportunities, consumer preferences,
etc.
Initiating Regular economic activities Targeted Intervention by monetary authority
factor(TI)

India’s Foreign Exchange Reserves - FY24

Component Details Facts for Prelims & PYQs
Total Forex Reserves $652.87 billion, providing 12 months of - UPSC PYQ 2013: Forex reserves are
(March 2024) import cover. used for external stability.
Foreign Currency Assets Largest component, held in USD, Euro, Yen, - UPSC PYQ 2019: Dominant forex
(FCA) etc. reserves are in USD.
Gold Reserves Held for financial security and as a hedge - India’s gold reserves (FY24): $50
against currency deprecia?on. billion.
Special Drawing Rights IMF-created reserve asset, valued based on a - UPSC PYQ 2020: SDRs contribute to
(SDRs) basket of currencies. reserve liquidity.
Reserve Tranche India’s quota in the IMF, available for - UPSC PYQ 2020: RTP is part of IMF
Posi?on (RTP) withdrawal. financial assistance.

India’s External Debt - FY24

Debt Type Details Facts for Prelims & PYQs
Total External $663.8 billion (18.7% of GDP), reflec?ng - UPSC PYQ 2019: India’s External Debt-to-GDP
Debt sustainable debt levels. ra?o is moderate.
Short-term Debt Maturity of less than 1 year. - UPSC PYQ 2019: Short-term debt is a
financial risk indicator.
KARMAYOGI IAS
Long-term Debt Maturity of more than 1 year. - UPSC PYQ 2022: Most of India's debt is long-
term.
Sovereign Debt Government bonds issued in foreign - UPSC PYQ 2019: India raises external debt
currency. through sovereign bonds.
Dominant USD > Indian Rupee > SDR > Yen > Euro.
Currencies

Foreign Exchange Rate Mechanisms

Type Descrip?on Facts for Prelims & PYQs
Fixed Exchange Government sets currency value; - UPSC PYQ 2021: China follows a managed
Rate Devalua*on boosts exports. peg system.
Floa?ng Exchange Market-driven by demand & supply. - UPSC PYQ 2012: India follows a managed
Rate floa*ng rate system.
Managed Floa?ng RBI intervenes to prevent excessive - UPSC PYQ 2019: RBI buys/sells forex to
Rate vola*lity. stabilize rupee.

Key Exchange Rate Indicators - FY24

Indicator Details Facts for Prelims & PYQs
Nominal Effec?ve Exchange Weighted average of rupee vs. other - UPSC PYQ 2022: "A rise in NEER indicates
Rate (NEER) currencies. rupee apprecia?on."
Real Effec?ve Exchange Infla*on-adjusted NEER that reflects - UPSC PYQ 2022: "If REER > 100, rupee is
Rate (REER) compe??veness. overvalued."
Purchasing Power Parity Compares currency values based on - UPSC PYQ 2019: "India is the 3rd largest
(PPP) the cost of goods. economy in PPP terms."

Exchange Rate Mechanisms

Mechanism Descrip?on Facts for Prelims & PYQs
Fixed Exchange The government pegs the currency to a stable foreign - UPSC PYQ 2021: China follows a
Rate currency (e.g., USD) or a commodity (e.g., gold). The managed peg system.
central bank intervenes in the forex market to - Example: Bre]on Woods system
maintain the fixed rate. (1944-1971) fixed USD to gold at
$35/ounce.
Flexible Market-driven exchange rate determined by demand - UPSC PYQ 2012: India follows a
(Floa?ng) and supply without government interven?on. managed floa*ng rate rather than a
Exchange Rate purely floa?ng rate.
Managed The central bank intervenes periodically to prevent - UPSC PYQ 2019: RBI buys/sells forex
Floa?ng Rate extreme fluctua?ons but does not fix the exchange to stabilize the rupee, such as during
rate. the 2013 Rupee deprecia*on crisis.
Pegged Float A country’s currency is pegged to another currency or - UPSC PYQ 2019: Gulf na?ons like
a basket, but allowed to fluctuate within a band. UAE peg their currency to USD but
allow minor fluctua?ons.

Determinants of Exchange Rates

Factor Effect on Currency Facts for Prelims & PYQs
Demand & Supply of High demand appreciates currency; - UPSC PYQ 2012: Exchange rate depends on
Forex oversupply causes deprecia*on. forex demand-supply dynamics.
Interest Rates Higher rates alract foreign - UPSC PYQ 2022: India’s higher interest rates
(Monetary Policy investments (FPI/FDI), strengthening a]ract FDI/FPI inflows.
Impact) currency.
Infla?on (Purchasing Low infla?on stabilizes currency; high - UPSC PYQ 2022: India’s higher infla*on
Power Parity - PPP) infla?on reduces currency value. weakens the rupee.
KARMAYOGI IAS
Trade Deficit (Imports Persistent trade deficits cause - Example: India's 2022 Current Account Deficit
> Exports) currency deprecia*on. (CAD) widened due to rising oil imports.
Global Capital Flows Higher FPI inflows strengthen - UPSC PYQ 2023: "Hot money" ouwlows cause
(FPI/FDI) currency; sudden ouwlows weaken it. currency deprecia?on (Example: 2013 Taper
Tantrum).

Nominal & Real Effec?ve Exchange Rates (NEER & REER)

Indicator Descrip?on Facts for Prelims & PYQs
NEER (Nominal Trade-weighted index of a country's currency - UPSC PYQ 2022: A rise in NEER
Effec?ve Exchange against a basket of other currencies. indicates rupee apprecia*on.
Rate)
REER (Real Effec?ve Infla*on-adjusted NEER showing currency - UPSC PYQ 2022: If REER > 100, rupee is
Exchange Rate) compe??veness. overvalued, making exports costly.

Foreign Exchange & External Debt

Concept Descrip?on Facts for Prelims & PYQs
Forex Reserves India’s forex reserves stand at $652.87 billion, - UPSC PYQ 2013: Forex reserves stabilize
(March 2024) covering 12 months of imports. BoP deficits.
India's External External debt stands at 18.7% of GDP. Debt - UPSC PYQ 2019: External debt
Debt (2024) service ra?o remains 5.5%, ensuring sustainability depends on debt-service
sustainability. ra*o.

Foreign Investment Instruments

Instrument Descrip?on Examples & PYQs
American Depository Issued in US represen?ng Indian - Example: Infosys ADRs on NYSE.
Receipts (ADRs) company shares.
Global Depository Receipts Issued outside US for Indian company - Example: Reliance GDRs on London
(GDRs) shares. Stock Exchange.
Par?cipatory Notes (P- Issued by FIIs for foreign investors to - UPSC PYQ 2017: P-Notes are linked to
Notes) invest in Indian securi?es. money laundering concerns.
Masala Bonds Rupee-denominated bonds issued - UPSC PYQ 2016: HDFC issued Masala
abroad. Bonds in London.
External Commercial Loans raised from foreign lenders for - Example: Reliance raising ECBs for
Borrowings (ECBs) Indian firms. expansion.

Currency Swaps, Forex Swaps & Interest Rate Swaps

Feature Currency Swap Forex Swap Interest Rate Swap
Dura?on Medium to long Short-term Medium to long
Principal Exchange Yes Yes No
Interest Payments Different currencies Single currency Single currency

Illustra?ve Swap Examples

Type Example & Process Use Case
Currency Swap RBI & Bank of Japan swap ₹10,000 crore (INR) and ¥100 - Reduces forex risk for India-
billion (JPY). Japan trade.
Forex Swap Indian exporter receives $10M revenue, swaps for ₹800 - Provides immediate liquidity.
crore at ₹80/USD.
Interest Rate Indian company with ₹1000 crore loan at floa*ng 8% - Protects against interest rate
Swap swaps to fixed 8.5%. hikes.

Foreign Exchange Rate Mechanisms & Global Examples

Mechanism Country Examples Insights
Fixed Exchange UAE, Hong Kong (pegged to - Prevents currency vola?lity but loses monetary policy
Rate USD) autonomy.
KARMAYOGI IAS
Floa?ng Rate USA, Eurozone, Japan - Provides policy flexibility but can cause high vola*lity.
Managed Float India, China - RBI manages INR deprecia*on/apprecia*on.
Dollariza?on Ecuador, El Salvador - Countries use USD instead of domes*c currency to stabilize
economy.

Foreign Investment Methods

Investment Descrip?on Examples & UPSC PYQs
Instrument
American ADRs are nego*able cer*ficates issued by U.S. banks, - Example: Infosys ADRs on
Depository represen?ng shares in foreign companies. They are traded on NYSE enable U.S. investors
Receipts (ADRs) U.S. stock exchanges like NYSE & NASDAQ. to invest in Infosys.
- UPSC PYQ: ADRs help
Indian companies raise
capital in U.S. markets.
Global Depository GDRs are cer*ficates issued by interna*onal banks - Example: Reliance
Receipts (GDRs) represen?ng shares in foreign companies. Traded on Industries issued GDRs on
interna*onal stock exchanges outside the U.S.. the London Stock Exchange.
- UPSC PYQ: GDRs allow
Indian firms to tap European
& Asian capital markets.
Par?cipatory P-Notes are financial instruments used by foreign investors to - UPSC PYQ 2017: Concerns
Notes (P-Notes) invest in Indian securi?es without direct SEBI registra*on. about misuse of P-Notes for
Issued by registered Foreign Ins*tu*onal Investors (FIIs), but tax evasion and round-
scru?nized for money laundering & tax evasion risks. tripping.
Masala Bonds Rupee-denominated bonds issued outside India, allowing - Example: HDFC & NTPC
Indian companies to raise funds without currency risk. issued Masala Bonds in
global markets.
- UPSC PYQ 2016: Masala
Bonds help reduce
dependence on foreign
currency loans.
External Loans raised by Indian en**es from non-resident lenders. - Example: Reliance raised
Commercial Used for projects, infrastructure, or overseas acquisi*ons. ECBs for expansion.
Borrowings (ECBs) Regulated by RBI. - UPSC PYQ: ECBs provide
long-term funds cheaper
than domes*c borrowing
rates.

Trade Agreements
Agreement Type Descrip?on Examples & UPSC PYQs
Preferen?al Trade Agreement (PTA) A PTA involves two or more - Example: India-MERCOSUR PTA
countries reducing tariffs on specific (2009) grants tariff concessions
products, providing preferen?al between India and MERCOSUR
access to each other’s markets. members.
- UPSC PYQ: PTAs do not completely
eliminate tariffs but reduce them
selec*vely.
Free Trade Agreement (FTA) FTAs eliminate or reduce tariffs and - Examples: India-Sri Lanka FTA
trade barriers on most goods and (2000), SAFTA (South Asian Free
services between member Trade Area), India-ASEAN FTA
countries. (2010), India-Australia ECTA (2022).
- UPSC PYQ 2020: FTAs promote
trade liberaliza*on and economic
integra*on.
KARMAYOGI IAS
Comprehensive Economic CECA and CEPA go beyond FTAs by - Examples: India-Singapore CECA
Coopera?on Agreement (CECA) & covering trade in goods, services, (2005), India-Japan CEPA (2011),
Comprehensive Economic investments, intellectual property, India-UAE CEPA (2022).
Partnership Agreement (CEPA) and economic coopera*on. - UPSC PYQ 2022: CEPA includes
investment and services sectors
beyond simple tariff elimina?on.
Customs Union A customs union removes trade - Example: EU Customs Union (India
barriers among member countries is not part of any customs union).
and adopts a common external
tariff against non-members.
Common Market Extends a customs union by - Example: European Economic Area
allowing free movement of labor & (EEA). India is not part of any
capital among member states. common market.
Economic Union A common market with harmonized - Example: Eurozone (India is not
economic policies and a common part of any economic union).
currency among member countries.

Government Schemes for Foreign Trade

Scheme Objec?ve Details & UPSC PYQs
Niryat Rin Vikas Yojana Enhances loan availability for exporters - Introduced by Export Credit Guarantee
(NIRVIK) and simplifies lending. Corpora*on of India (ECGC).
- Provides higher insurance cover,
reduced premiums for small exporters,
and faster claim sellements.
Services Exports from Incen*vizes service exports by providing - UPSC PYQ 2018: SEIS encourages
India Scheme (SEIS) duty credit scrips to service providers. service sector exports like IT, tourism,
and healthcare.
Special Economic Zones Establish export hubs under the SEZ Act - As of 2024, India’s SEZs significantly
(SEZs) 2005 to boost manufacturing and services contribute to renewable energy &
exports. industrial exports.
- UPSC PYQ 2016: SEZs provide tax
benefits & infrastructure support for
exporters.
Trade Infrastructure for Improves export infrastructure by - Funds government agencies for
Export Scheme (TIES) funding projects to enhance trade building new ports, logis*cs parks, and
compe??veness. warehouses.
Agriculture Export Policy Aims to double agricultural exports and - Target: Increase exports to $60 billion
(2018) increase India’s share in global agri- (extended ?meline).
exports. - Focus: Removing export restric*ons,
promo?ng value-added agri-products.
Remission of Du?es and Reimburses embedded taxes and du?es - Replaces Merchandise Exports from
Taxes on Export Products not refunded under other schemes to India Scheme (MEIS).
(RoDTEP) boost export compe??veness. - UPSC PYQ 2021: RoDTEP ensures cost
compe**veness for Indian exports.
KARMAYOGI IAS
INTERNATIONAL ORGANISATIONS
BreXon Woods Conference (1944)
Aspect Details UPSC Prelims PYQs & Key Facts
Date & July 1-22, 1944, Mount Washington Hotel, - UPSC 2016: Bre]on Woods Conference led to the
Loca?on New Hampshire, USA forma?on of IMF & World Bank
Key 44 Allied na?ons, including John Maynard - Keynes proposed an interna?onal currency called
Par?cipants Keynes (UK) & Harry Dexter White (USA) Bancor, but it was rejected.
Major 1. Interna*onal Monetary Fund (IMF) – - Fixed Exchange Rate System pegged global
Outcomes for monetary stability & BoP crises currencies to US Dollar, which was conver?ble to
2. World Bank (IBRD) – for post-war gold ($35/ounce)
reconstruc?on & development

World Bank Group (WBG)

Ins?tu?on Year Purpose India’s Key Func?ons
Membership
Interna?onal Bank for 1944 Provides long-term loans for ✅ Yes - Funds large
Reconstruc?on and middle-income & creditworthy infrastructure projects &
Development (IBRD) low-income countries economic development
Interna?onal Development 1960 Concessional (low-interest) ✅ Yes - Focuses on poverty
Associa?on (IDA) loans & grants for the poorest reduc*on & social
countries development
Interna?onal Finance 1956 Promotes private sector ✅ Yes - Provides funding &
Corpora?on (IFC) growth in developing na?ons advisory services to
startups & SMEs
Mul?lateral Investment 1988 Poli*cal risk insurance for FDI ✅ Yes - Ensures FDI flows in
Guarantee Agency (MIGA) stability unstable countries
Interna?onal Centre for 1966 Arbitra*on of investment ❌ No - India is not a member of
Se]lement of Investment disputes ICSID
Disputes (ICSID)

🔹 Key Reports by the World Bank:

✔ Ease of Doing Business Report (Discontinued in 2021)
✔ Human Capital Index
✔ World Development Report

🔹 Shareholding:

• US (16.41%), Japan (7.87%), Germany (4.49%), UK (4.31%), France (4.31%)

• India holds around 3% of vo*ng power.

🔹 UPSC Prelims PYQ 2016: The World Bank Group is not a single entity but consists of five institutions.

Interna?onal Monetary Fund (IMF)

Aspect Details UPSC Prelims PYQs & Key Facts
Established 1944 (Bre]on Woods Conference) - UPSC 2022: IMF was formed before the
United Na*ons (1945).
Headquarters Washington, D.C., USA - IMF & World Bank share their Annual
Mee*ngs.
Objec?ves 1. Promote monetary coopera*on & exchange - UPSC 2011: IMF provides financial
rate stability assistance during crises.
2. Provide financial aid for BoP crises
3. Encourage economic growth & employment
KARMAYOGI IAS
IMF Lending 1. Stand-By Arrangement (SBA) – Short-term - UPSC 2020: IMF helps structural
Facili?es support adjustments in developing economies.
2. Extended Fund Facility (EFF) – Medium-term
loans
3. Flexible Credit Line (FCL) – For strong
economies
4. Rapid Credit Facility (RCF) – Emergency relief
for low-income na?ons
Quota System - Quota = GDP (50%) + Openness (30%) + - Top 5 Shareholders: US, Japan, China,
Economic Variability (15%) + Forex Reserves (5%) Germany, France
- India is ranked 8th in IMF Quotas &
Vo*ng Power.

🔹 Special Drawing Rights (SDRs)

✔ Not a currency but a reserve asset created in 1969
✔ Value is based on USD, Euro, RMB, JPY, GBP

🔹 IMF Bailouts:
✔ 1991 Crisis: India took a $2.2 billion loan from IMF, pledged 67 tonnes of gold.
✔ Sri Lanka (2022): IMF approved a $3 billion bailout package due to economic collapse.

IMF Lending Programs

Facility Purpose Condi?ons Eligibility Repayment
Period
Stand-By Short-term BoP support Policy adjustments All member 3¼ - 5 years
Arrangement (SBA) required countries
Extended Fund Medium-term loans for Requires structural All members 4½ - 10 years
Facility (EFF) structural reforms changes
Flexible Credit Line Precau?onary facility for Pre-qualified Selected 3 - 5 years
(FCL) strong economies economies economies
Rapid Credit Facility Emergency support for low- No ex-post Low-income 5½ - 10 years
(RCF) income na?ons condi?ons countries

World Trade Organization (WTO)

Aspect Details Facts for Prelims

Introduction The WTO is the only global international Established on January 1, 1995, replacing
organization dealing with the rules of trade GATT (1947). HQ: Geneva, Switzerland
between nations, ensuring free and
predictable trade.
Membership Comprises 166 member nations and 23 India is a founding member (since 1995).
observer governments (as of 2024). The latest member: Timor-Leste (2024).
Principles of 1. Non-discrimination (MFN, National Most-Favoured Nation (MFN): No
WTO Treatment). preferential treatment unless part of
2. Reciprocity (trade liberalization through FTAs/RTAs.
negotiations). National Treatment: Foreign and domestic
3. Market Access (reducing trade barriers). products must be treated equally.
4. Rule-Based System (no arbitrary trade
restrictions).
5. Economic Development (developing and
least-developed country (LDC) provisions).
KARMAYOGI IAS
Objectives of 1. Facilitate trade liberalization. Special and Differential Treatment
WTO 2. Promote non-discriminatory trade (S&DT): Provides flexibility for developing
practices. nations.
3. Provide a dispute settlement mechanism.
4. Encourage economic development.
5. Ensure predictable and transparent trade
policies.
Key Agreements 1. General Agreement on Tariffs and UPSC Prelims 2016: Asked about the
Trade (GATT, 1994) – covers trade in purpose of the Trade Facilitation Agreement
goods. (TFA).
2. General Agreement on Trade in Services
(GATS) – covers trade in services.
3. Trade-Related Aspects of Intellectual
Property Rights (TRIPS) – regulates global
IP rights.
4. Agreement on Agriculture (AoA) –
governs agricultural trade and subsidies.
5. Agreement on Sanitary and
Phytosanitary Measures (SPS) – deals with
food safety standards.
6. Technical Barriers to Trade (TBT)
Agreement – prevents arbitrary technical
regulations.
Dispute The WTO's Dispute Settlement Body (DSB) Appellate Body (since 1995) – has been
Settlement resolves trade disputes. Members can non-functional since 2019 due to U.S.
Mechanism challenge each other's policies. blocking judge appointments.
Challenges to 1. US-China Trade War (impact on global India & WTO Agricultural Subsidies:
WTO trade). India has invoked the Peace Clause (Bali
2. Appellate Body Paralysis (Dispute Ministerial, 2013) to protect its food security
settlement crisis). programs.
3. Failure of Doha Round (2001) (developed
vs. developing country conflicts).
4. Digital Trade & E-Commerce
Regulations (absence of clear rules).
5. Rise of Regional Trade Agreements
(RTAs) (diverting focus from WTO
negotiations).
6. Agricultural Subsidies Debate (conflict
over India's MSP program).
India’s Role in 1. Agriculture – India defends its Minimum India's Recent WTO Cases:
WTO Support Price (MSP) subsidies against 2019: India lost a WTO dispute against the
developed nations. U.S. over export subsidies.
2. TRIPS Flexibilities – Supports affordable 2020: India challenged U.S. tariffs on steel
generic medicines against Big Pharma and aluminum.
interests. 2022: India opposed global e-commerce
3. Developing Country Status – Advocates rules.
for Special and Differential Treatment
(S&DT).
4. Digital Trade Regulation – Resists WTO-
led e-commerce regulations to protect data
sovereignty.
5. Export Subsidies – Committed to phasing
out certain subsidies by 2030.
WTO 1. Market Access: Reduction of tariffs and Amber Box Subsidy Limit: WTO caps
Agricultural non-tariff barriers. India’s trade-distorting agricultural subsidies
Trade Rules 2. Domestic Support: Categorization of at 10% of production value (De Minimis
subsidies into Green Box (permitted), Blue Limit).
Box (limited), Amber Box (reduction
required).
KARMAYOGI IAS
3. Export Subsidies: Prohibition on trade-
distorting subsidies.
Recent 1. WTO Ministerial Conference (MC12, UPSC Prelims 2020: Asked about India’s
Developments 2022): Agreement on ending fisheries stand on the TRIPS waiver proposal.
subsidies harmful to marine ecosystems.
2. E-commerce Moratorium Debate: India
opposed indefinite duty-free treatment of
digital goods.
3. TRIPS Waiver for COVID-19 Vaccines:
India and South Africa led efforts to
temporarily waive IP rights.

India’s Trade Safeguards at WTO

Safeguard Type Description Example India’s Use Outcome

Anti-Dumping Imposed when India imposed India has used anti- WTO upheld
Measures foreign goods are anti-dumping dumping laws India's right to
sold below fair duties on Chinese extensively in sectors like impose duties on
market price. steel imports in steel, chemicals, and unfairly priced
2015. textiles. imports.
Countervailing Used to offset India challenged India has imposed India lost the
Measures subsidies given by U.S. solar panel countervailing duties on case; WTO ruled
foreign governments subsidies at WTO. subsidized imports, in favor of the
to exporters. particularly from China. U.S.
Safeguard Measures Temporary tariffs on 2018: India Used to protect domestic WTO allowed
sudden import imposed manufacturing from India’s safeguard
surges harming safeguard duties import shocks. duties.
domestic industries. on Chinese solar
panels.
General Agreement Allows tariffs & 2018: U.S. India challenged U.S. WTO ruled in
on Tariffs and quotas in imposed tariffs on tariffs at WTO. India’s favor,
Trade (GATT 1994) exceptional cases. steel imports, imposing
including from retaliatory
India. measures.
Sanitary & Protects human, India banned Used in food safety cases WTO upheld
Phytosanitary (SPS) animal, and plant Chinese poultry (e.g., GM crops, pesticide India's ban.
Measures life from harmful imports in 2007 residues).
imports. over bird flu
concerns.

Key WTO Trade Terms

Term Definition Fact for Prelims

Most-Favoured No WTO member can offer better trade terms to Exceptions: FTAs, RTAs.
Nation (MFN) one member over another.
Dumping Selling goods below cost price in foreign Anti-dumping duties last 5 years
markets. unless extended.
De Minimis Rule Limits amber box subsidies to 5% for developed India uses this for MSP support.
nations, 10% for developing nations.
Peace Clause Temporary protection for developing nations Introduced in Bali (2013) to protect
breaching subsidy limits. India's food stockpile programs.

United Na?ons Conference on Trade and Development (UNCTAD)

Aspect Details Facts for Prelims (UPSC)
KARMAYOGI IAS
Introduc?on UNCTAD is a permanent intergovernmental body HQ: Geneva, Switzerland.
of the United Na?ons, established in 1964, Members: 195 countries (as of 2024).
focused on promo?ng inclusive trade and
development in developing na?ons.
Objec?ves - Integrate developing na*ons into the global UNCTAD is known as the UN's focal
economy. point for trade, investment, and
- Address trade inequali*es and promote fair development.
globaliza?on.
- Strengthen investment and trade policies in
emerging markets.
- Support sustainable development goals (SDGs).
Structure & - Trade and Development Board (TDB): UNCTAD conducts research on trade,
Mechanisms Governing body overseeing UNCTAD’s work. FDI, debt sustainability, digital trade,
- Subcommilees: Focus on investment, trade, and technology transfer.
and digital economy.
- Secretariat: Produces analy?cal reports like
World Investment Report, Digital Economy
Report, Trade & Development Report.
Key Reports (2023- - World Investment Report (2023): India remains UNCTAD publishes data on
24) a top FDI des*na*on in technology and interna*onal trade trends, global
renewable energy. supply chains, and trade finance.
- Trade and Development Report (2023): India’s
focus on green energy and electric mobility.
- Digital Economy Report (2023): India leads in
FinTech & e-commerce, but digital divides remain
a concern.
India’s Role in - IT & Pharmaceu*cal Exports: India is a top India’s digital economy is set to be a
Global Trade exporter of generic medicines & IT services. major contributor to global trade by
(UNCTAD Reports) - FDI Inflows: India ranks among the top 5 FDI 2030, but regulatory frameworks on
des*na*ons globally. data privacy & AI are needed.
- Global Supply Chain Hub: India’s "Make in
India" policy strengthens manufacturing & trade
infrastructure.
- Green Trade: India is inves*ng in renewable
energy exports.

Intellectual Property Rights (IPRs) and Global Ins?tu?ons

Category Descrip?on Facts for Prelims (UPSC)
Copyright Protects literary, ar*s*c, and musical India’s Copyright Act (1957): Amended in 2012
works for 50+ years aver the author’s to include digital copyrights.
death.
Trademarks Protects logos, signs, slogans, and brand The Trade Marks Act (1999): Provides indefinite
names to dis?nguish goods/services. protec*on if renewed every 10 years.
Geographical Iden?fies products with unique GI Act (1999): India has 400+ GI tags (Highest:
Indica?ons (GIs) geographical origins (e.g., Darjeeling Karnataka, Tamil Nadu).
Tea, Banarasi Saree).
Patents Protects inven*ons for 20 years, gran?ng India’s Patents Act (1970, amended 2005):
exclusive rights to the inventor. Shived from process patents to product patents
to comply with TRIPS.
Industrial Designs Protects aesthe*c & visual appearance The Designs Act (2000): 10-year protec*on,
of a product. extendable to 15 years.
Trade Secrets Protects confiden*al business data, India does not have a dedicated law; trade
formulas, and marke?ng strategies. secrets are protected under contract &
compe**on law.
KARMAYOGI IAS
Plant Varie?es Protects new plant varie*es and The Protec*on of Plant Varie*es and Farmers'
Protec?on farmers’ rights. Rights Act (2001).
Integrated Circuit Protects circuit designs & semiconductor Semiconductor Integrated Circuits Layout-
Layouts layouts. Design Act (2000).

Global Conven?ons on IPRs and India’s Compliance

Treaty/Conven?on Objec?ve India’s Status Prelims Facts
Paris Conven?on Protects industrial India joined in 1998. Established the Na*onal
(1883) property rights across Treatment Principle (foreign &
countries. domes?c applicants treated
equally).
Berne Conven?on Protects copyrights India joined in 1928. No registra*on required for
(1886) globally. copyright protec?on.
TRIPS Agreement Establishes global India complies with TRIPS India used TRIPS flexibili*es to
(1995) minimum standards for via Patents Act (1970), GI issue compulsory licenses for
IP laws. Act (1999), Copyright Act life-saving drugs.
(1957).
Patent Coopera?on Allows global patent India joined in 1998. WIPO-administered PCT
Treaty (PCT) applica*ons through a streamlines interna*onal
single filing. patent filings.
Madrid Protocol Simplifies global India joined in 2013. A single Madrid applica*on
(1996) trademark registra*on. covers 130+ countries.
Hague Agreement Protects industrial India joined in 2019. Reduces cost of registering
(1925) designs interna*onally. industrial designs worldwide.

India’s IPR Laws and Key Features

Legisla?on Focus Area Key Provisions
Patents Act (1970, Amended 2005) Patents - 20-year patent protec?on.
- Prevents evergreening (Sec?on
3(d)).
- Allows compulsory licensing for
public health.
Copyright Act (1957, Amended 2012) Copyright - Covers digital works, movies,
sopware.
- Copyright term = life*me of
author + 60 years.
Trade Marks Act (1999) Trademarks - Indefinite protec?on (renewed
every 10 years).
Geographical Indica?ons Act (1999) GI Tags - First GI in India: Darjeeling Tea
(2004).
- GI protec?on valid for 10 years,
renewable.
Designs Act (2000) Industrial Designs - Protects visual appearance of
products.
- Protec?on for 10 years,
extendable to 15.
Plant Varie?es and Farmers’ Rights Act Agriculture - Protects plant breeders &
(2001) farmers' rights.
- Farmers can freely use protected
varie*es.
Semiconductor Integrated Circuits Layout- Electronics & Semiconductor - Protects IC layout designs for 10
Design Act (2000) Industry years.

India’s Key Trade & IPR Issues

Issue India’s Stance Recent Developments
KARMAYOGI IAS
Pharmaceu?cal Patents & India supports compulsory licensing 2021: India & South Africa pushed for a
TRIPS Flexibili?es for essen?al drugs. TRIPS waiver on COVID-19 vaccines.
Agricultural Subsidies & India demands flexibility in public Peace Clause (Bali, 2013): Protects India
MSP stockholding for food security. from WTO ac?on on MSP.
E-Commerce & Digital Trade India opposes WTO-led digital trade 2022: India opposed indefinite extension
rules (wants data sovereignty). of e-commerce moratorium at WTO.
Evergreening of Patents India restricts patent extensions on Novar*s Case (2013): India denied a
minor drug modifica*ons. patent for Glivec, ci?ng Sec*on 3(d).

Mul?lateral Organiza?ons and India’s Par?cipa?on (2024 Updates Included)

Organiza?on Established Headquarters Objec?ve Founding New India’s Role &
Members Members Key Projects
(Latest
Addi?ons)
New 2014 Shanghai, - Infrastructure Brazil, Bangladesh, - India’s Vo*ng
Development China financing in BRICS Russia, India, UAE, Egypt Share: 18.98%
Bank (NDB) & emerging China, South (2023). - Key Projects:
(BRICS Bank) economies. Africa 1. Mumbai
- Sustainable (BRICS). Metro
development Expansion
projects. ($300 million).
2. Delhi-
Ghaziabad-
Meerut RRTS
($500 million).
3. Bihar Rural
Roads Project.
4. Rural
Employment
Loan ($1
billion, 2020).
Shanghai 2001 Beijing, - Security, China, India, - India’s Focus:
Coopera?on China Counterterrorism, Russia, Pakistan 1. INSTC
Organisa?on Economic Kazakhstan, (2017), Iran (Interna*onal
(SCO) Coopera*on. Kyrgyzstan, (2023), North-South
- Strengthening Tajikistan, Belarus Transport
Eurasian Uzbekistan. (2024). Corridor).
connec?vity. 2. Increased
trade with
Central Asia.
3. Hos*ng SCO
Summit
(2023).
Indo-Pacific 2022 (U.S.- No - Trade, Clean U.S., India, No new - India opted
Economic led) Permanent Energy, Supply Australia, members out of the
Framework HQ Chains, Fair Japan, South (as of 2024). Trade Pillar but
(IPEF) Economy (Tax, Korea, New supports
An*-Corrup*on). Zealand, supply chain
Singapore, resilience &
Malaysia, an*-corrup*on
Vietnam, measures.
Philippines,
Brunei,
Indonesia,
KARMAYOGI IAS
Thailand,
Fiji.
Build Back 2021 (G7- No - Countering G7 (USA, UK, No new - India’s Role:
Be]er World led) Permanent China’s Belt & Germany, addi*ons. Partnering for
(B3W) HQ Road Ini*a*ve France, Italy, transparent &
(BRI). Canada, sustainable
- Infrastructure Japan). infrastructure.
funding for
developing
na?ons.
Blue Dot 2019 US, Japan, - Cer*fies US, Japan, No new - India
Network Australia Infrastructure Australia. addi*ons. supports high-
(BDN) Projects for standard
sustainability & global
transparency. infrastructure
- Alterna?ve to projects.
China’s BRI.
Organisa?on 1961 Paris, France - Economic policy European & Latvia, - India is a key
for Economic coordina?on & North Colombia, partner, not a
Coopera?on trade American Costa Rica member.
and liberaliza?on. countries. (2020-21). Collaborates
Development on taxa*on,
(OECD) economic
policy.
Asian 2015 Beijing, - Infrastructure China, India, UAE, Liberia - India’s Share:
Infrastructure China funding in Asia & UK, (2024). 7.6% (2nd
Investment beyond. Germany, largest aper
Bank (AIIB) France, China).
Australia, - Key Projects:
Russia. Chennai
Metro,
Mumbai Urban
Transport.
Bank for 1930 Basel, - Oversees global USA, UK, No recent - RBI
Interna?onal Switzerland monetary stability France, addi*ons. represents
Se]lements & financial Germany, India in global
(BIS) regula*ons. Belgium, financial risk
Italy. monitoring.
Financial 2009 Basel, - Ensures financial G20 Na*ons No recent - India
Stability Switzerland stability & crisis & financial addi*ons. represented by
Board (FSB) preven*on. ins*tu*ons. RBI, SEBI,
Ministry of
Finance.

Vo?ng Shares in Major Mul?lateral Financial Ins?tu?ons (2024-25)

Ins?tu?on Top Vo?ng Shareholders (%) India’s Key Feature
Share (%)
IMF USA (16.5), Japan (6.1), China 2.75% Quota-based, reflec?ng
(6.1), Germany (5.3) economic size.
World Bank USA (15.5), Japan (7.1), China 3.2% Capital-based vo?ng system.
(5.8), Germany (4.4)
New Development Bank Equal for all BRICS (20% each). 20.0% Egalitarian vo*ng.
(NDB)
Asian Development Bank Japan (15.6), USA (15.6), China 6.3% Shared leadership between
(ADB) (6.4), India (6.3) Japan & USA.
KARMAYOGI IAS
Asian Infrastructure China (26.6), India (7.6), Russia 7.6% India is AIIB’s 2nd largest
Investment Bank (AIIB) (5.9), Germany (4.2) shareholder.

Major Global Ins?tu?ons Funding India’s Infrastructure & Development (Latest Updates - 2024)
Ins?tu?on Key India-Focused Projects (2024-25) Funding Amount (Approx.)
Japan Interna?onal Coopera?on 1. Mumbai-Ahmedabad Bullet Train India’s biggest bilateral donor.
Agency (JICA) ($14 bn).
2. Delhi Metro Expansion.
3. Ganga Rejuvena*on (Namami
Gange).
Asian Development Bank (ADB) 1. East Coast Economic Corridor $7 billion+ investment.
(ECEC).
2. Chennai-Kanyakumari Industrial
Corridor.
AIIB (Asian Infrastructure 1. Mumbai Urban Transport Project India is AIIB’s largest borrower ($6
Investment Bank) (MUTP). billion+).
2. Rajasthan Solar Power Project.
World Bank Group 1. Rural Electrifica*on (PM $30 billion+ funding in India.
Saubhagya Yojana).
2. Na*onal Ganga River Basin
Project.
European Investment Bank (EIB) 1. Bangalore Metro Phase-II. Largest EU lender in renewable
2. Green Climate Financing. energy.
KARMAYOGI IAS
FINANCIAL MARKET
Financial Markets and Instruments (2024-25)

1. Overview of Financial Markets

Component Descrip?on Regulatory Authority Key Features

Money Short-term RBI - Used for liquidity adjustment and
Market borrowing/lending (≤1 monetary policy implementa?on.
year). - Instruments: T-Bills, Commercial Papers,
Call Money, etc.
Capital Long-term investments (>1 SEBI (corporate - Divided into Primary Market (new
Market year) in stocks, bonds. securi*es) & RBI securi?es) and Secondary Market (trading
(govt. bonds) exis?ng securi?es).
Forex Market Trading of currencies at RBI & SEBI - Includes spot, forward, and futures
global level. contracts.
Deriva?ves Trading of futures, op?ons, SEBI - Hedging tool for risk management in
Market swaps. equi?es, commodi?es, and forex.

Money Market Instruments (2024)

Instrument Issuer Maturity Purpose Features
Treasury Bills (T-Bills) GOI (RBI on its 91, 182, Short-term liquidity - Zero-coupon bonds issued at
behalf) 364 days for the discount.
government. - Retail investors need Demat
Account to invest. (UPSC 2018,
2021)
Cash Management GOI (in < 91 days Temporary cash - Issued only when urgent
Bills (CMBs) consulta*on with flow mismatches. liquidity needed.
RBI)
State Development State 5-30 years Long-term - Qualifies for SLR. (UPSC
Loans (SDLs) Governments infrastructure 2012)
projects.
Ways and Means RBI to GOI/States Max 90 Temporary funding - Overdrap beyond 90 days →
Advances (WMA) days gap for 2% penalty interest. (UPSC
governments. 2012)
Cer?ficates of Deposit Banks & Financial 7 days – 1 Short-term liquidity - Nego*able but not used as
(CDs) Ins*tu*ons year needs. collateral. (UPSC 2020)
Commercial Papers Corporates & 7 days – 1 Short-term working - Issued at discount,
(CPs) NBFCs year capital needs. unsecured. (UPSC 2020)
Commercial Bills Businesses 30-90 days Used in trade - Used by
financing. exporters/importers.
Call Money Banks Overnight Interbank liquidity - Highly vola*le interest rates.
(≤1 day) adjustment. (UPSC 2020)
No?ce Money Banks & NBFCs 2-14 days Temporary cash - Interest rate higher than call
shortages. money.
Term Money Banks & > 14 days Medium-term cash - Larger volume transac*ons.
Corporates management.
Collateralized CCIL (Clearing 1 day – 1 Secure borrowing - Collateral-based lending.
Borrowing and Corpora*on of year for financial (UPSC 2024)
Lending Obliga?on India Ltd.) en??es.
(CBLO)

Capital Market Instruments (2024)

Instrument Type Nature Key Features
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Equity Shares Ownership High risk, High return - Represents ownership in the
company.
- Investors earn dividends + capital
apprecia*on. (UPSC 2018)
Preference Shares Hybrid (Debt + Moderate risk - Fixed dividend but no vo*ng
Equity) rights.
Debentures & Bonds Debt Instrument Low risk, Fixed return - No ownership, interest income.
Conver?ble Debentures Hybrid Ini*ally debt, later - Op*on to convert to shares.
converted into equity.
Mutual Funds Investment Diversified risk - Investors pool money → Fund
Pooling Managers invest.
Exchange Traded Funds Passive Index-based pornolio - Trades like a stock, lower expense
(ETFs) Investment ra*o.
Infrastructure Investment Hybrid (Equity + Fixed + Variable returns - Allows retail investors in infra
Trusts (InvITs) Debt) projects.
Real Estate Investment Hybrid Income from property - Provides exposure to commercial
Trusts (REITs) investments real estate.

Difference Between Primary & Secondary Market

Feature Primary Market Secondary Market
Defini?on Issuance of new securi?es. Trading of exis?ng securi?es.
Par?cipants Companies & investors. Investors only.
Price Determina?on Fixed by issuer. Demand & supply driven.
Types of Issue IPO, FPO, Rights Issue, Private Placement. Open market transac?ons.
Regula?on SEBI + RBI (Govt. Bonds). SEBI (Stock Exchanges).

Key Concepts in Capital Market (2024)

Concept Defini?on Example
Market Capitaliza?on Value of a company’s outstanding Reliance Market Cap ₹18 trillion
shares. (2024).
Dividends Profit share paid to shareholders. TCS Dividend Yield ~2.5%.
Stock Buyback Company repurchases its shares. Infosys Buyback ₹9000 Cr (2024).
Bond Yield Interest return on bonds. 10-Year G-Sec Yield ~7.2%.
Repo Rate (Monetary Rate at which RBI lends to banks. Current: 6.5% (Feb 2024).
Policy)

Forex Market & Exchange Rate Regimes (2024)

Regime Defini?on Example
Fixed Exchange Rate Govt. sets exchange rate. China’s Yuan peg to USD.
Floa?ng Exchange Rate Market forces decide rate. INR vs. USD (~₹82-₹83/USD).
Managed Float Central bank intervenes to stabilize. RBI stabilizing INR.

India’s Recent Financial Market Developments (2024-25)

Event Key Highlights
RBI’s Digital Rupee (CBDC) - Introduced in Wholesale & Retail (e₹-W, e₹-R).
- Pilots launched in major ci*es & banks.
IPO Boom in India (2024) - Record ₹75,000 crore raised.
- Notable IPOs: Ola Electric, Swiggy, FirstCry.
Government Bond Inclusion in Global Index - JP Morgan included Indian G-Secs in 2024.
- Expected $20-30 billion FII inflows.

Overview of Debt Market

Category Descrip?on Key Features Regula?ng Authority
KARMAYOGI IAS
Debt A segment of financial markets where - Provides regular income SEBI (Corporate
Market fixed-income securi?es (bonds, through fixed interest Bonds)
debentures, etc.) are bought and sold. payments. RBI (Government
- Lower risk than equity Bonds & Sovereign
markets. Debt)
- Includes Government Bonds,
Corporate Bonds, Debentures,
ETFs, etc.

Classifica?on of Bonds (Based on Interest Rate)

Type Descrip?on Features Example
Fixed Rate Bonds with a predetermined - Stable returns, predictable 10-Year Government Bonds
Bonds fixed interest rate throughout the income.
tenure. - Interest rate remains
unchanged regardless of
market condi?ons.
Floa?ng Rate Bonds with variable interest - Coupon rate linked to RBI Floa*ng Rate Savings
Bonds rates, adjusted periodically. benchmark rates (MIBOR, G- Bonds (FRSBs)
Sec yields).
- Protects investors from
interest rate vola*lity.
Zero Coupon Bonds issued at a discount and - No periodic interest GOI Zero Coupon Bonds
Bonds redeemed at face value upon payments (Deep Discount (UPSC 2020)
maturity. Bonds).
- Returns come from price
apprecia?on.
Nega?ve Yield Investors receive a maturity value - Occurs during economic Nega*ve Yield Japanese
Bonds lower than purchase price. uncertainty. Govt Bonds
- Protects investors from
capital erosion.
Conver?ble Hybrid debt securi?es that can be - Lower interest rates due to Foreign Currency
Bonds converted into equity shares. conversion op*on. Conver*ble Bonds (FCCBs)
- Provides investors with (UPSC 2022)
capital apprecia*on poten*al.

Classifica?on of Bonds (Based on Maturity)

Type Descrip?on Features Example
Perpetual Bonds Bonds without maturity, offering - Principal never repaid. AT-1 Bonds issued by
(Consol Bonds) lifelong interest payments. - Risk of coupon Indian Banks
suspension by issuer.
Bearer Bonds Bonds with no registered owner, - Anonymous Old US Treasury
ownership belongs to the holder. transac*ons. Bearer Bonds
- Higher risk of
loss/thep.

Infla?on-Protected Bonds
Type Descrip?on Features Example
Capital Indexed Bonds Principal linked to infla*on, - Only principal increases GOI Capital
providing protec?on against value with infla?on. Indexed Bonds
erosion. - Interest remains fixed. (CIBs)
Infla?on Indexed Both principal and coupon - Protects against infla*on RBI-IIB Bonds
Bonds (IIBs) (UPSC payments are linked to infla?on. risk.
2022) - Lowers the government’s
borrowing cost.
KARMAYOGI IAS
Bonds with Call/Put Bonds with buyback (call) or early - Call op*on allows issuer to RBI 10-Year
Op?ons sale (put) op?ons. buy back bonds early. Callable Bonds
- Put op*on gives investors
right to sell early.

Government Bonds
Type Descrip?on Issued By Key Features
Sovereign Gold Gold-backed bonds where investors GOI (RBI issues on - Fixed 2.5% interest rate.
Bonds (SGBs) receive cash equivalent at maturity. behalf of GOI) - No capital gains tax if held
un?l maturity.
UDAY Bonds Bonds issued to help power State Governments - Part of UDAY Scheme.
distribu*on companies (DISCOMs) - Reduces financial stress on
clear debt. DISCOMs.
Municipal Bonds Bonds issued by Urban Local Bodies Local Governments - Tax-free bonds.
(Muni Bonds) (ULBs) to fund infrastructure projects. - First issued by Bangalore
Municipal Corpora*on.
Green Bonds Bonds financing environment-friendly Corporates, - Used for solar, wind, and
projects. Government clean energy projects.
- India’s first green bond
issued by Yes Bank (2015).

Interna?onal Bonds
Type Descrip?on Issued In Key Features
Masala Bonds Rupee-denominated bonds issued London, Singapore, - Issued by Indian
outside India. Japan companies.
- Investors bear currency
risk. (UPSC 2016)
Panda Bonds Yuan-denominated bonds issued in China - Used by ADB, IFC.
China by foreign en??es. - Helps raise capital in China.
Uridashi Masala Special Masala Bonds bought by Japan - Used to tap retail investors
Bonds Japanese retail investors. in Japan.
Maharaja Bonds Rupee bonds issued in India by foreign India - Issued by IFC, World Bank.
ins*tu*ons.

Exchange-Traded Fund (ETF) Bonds

Type Descrip?on Features Example
Bond ETFs that invest in bonds and trade - Provides fixed income + Bharat Bond ETF (AAA-rated
ETFs like stocks. liquidity. CPSE bonds)
- Low cost, diversified risk.

Debentures (Corporate Bonds)

Type Descrip?on Key Features Example
Conver?ble Can be converted into equity - Provides lower interest. Tata Motors
Debentures aver a set period. - Op?on to become Conver*ble Debentures
equity shareholder.
Non-Conver?ble Cannot be converted into equity, - Used for long-term Power Finance
Debentures (NCDs) offering fixed returns. borrowing. Corpora*on NCDs
- Higher coupon rates
than bank FDs.

Bond Yield, Interest Rates & Market Trends

Concept Defini?on Key Insights
Bond Yield The effec*ve return investors earn - Formula: Yield = (Coupon Payment / Bond Price)
from bonds. × 100.
KARMAYOGI IAS
Higher bond price → Lower yield.
Lower bond price → Higher yield.
Inverse Bond Yield- When bond prices increase, yields - Rising interest rates = lower bond prices.
Price Rela?on decrease and vice versa. - Falling interest rates = higher bond prices.
Yield Curve A graph showing yields across - Normal Curve: Longer dura?on bonds have
different maturi*es. higher yields.
- Inverted Curve: Short-term bonds yield more
than long-term bonds (recession indicator).
Indian Bond Market - 10-Year G-Sec Yield: 7.2% (Feb - RBI expected to pause rate hikes in H2-2024.
Trends (2024-25) 2024).

EQUITY MARKET
Overview of Equity Market
Category Descrip?on Key Features Regula?ng Authority
Equity A segment of financial markets where - Provides ownership rights. SEBI (Securi*es and
Market shares of publicly traded companies are - Higher risk but higher Exchange Board of
bought and sold. returns poten*al. India)
- Includes shares,
preference shares,
deriva*ves, ETFs.

Share Types: Preference Shares vs. Ordinary Shares

Feature Common Shares (Equity Shares) Preferred Shares
Vo?ng Rights Yes May or may not have vo?ng rights
Dividend Rights Variable dividends Fixed dividend rate
Claim on Assets Residual claim Priority claim over common shareholders
Risk Higher risk, higher poten?al return Lower risk, lower poten?al return
Conver?ble into Equity No Some?mes conver?ble into equity shares
Redemp?on Not redeemable Redeemable aver a set period

Market Par?cipants in Indian Capital Market

Category Descrip?on Key Features
Stock Exchange A regulated marketplace for buying/selling - Major Indian Stock Exchanges: BSE (Bombay
financial instruments (shares, bonds, Stock Exchange), NSE (Na?onal Stock
deriva?ves). Exchange).
Angel Investors Individuals inves?ng in startups for ownership - Provide mentorship and technical exper?se.
stake. - Higher risk, long-term investment.
Venture Private equity investors funding high-growth - Focus on profitability & exit strategies.
Capitalists (VCs) startups. - Invest in later-stage funding rounds. (UPSC
2014)

Deriva?ves Market Overview

Category Defini?on Key Uses
Deriva?ves Financial instruments whose value is derived from - Hedging (risk reduc?on)
an underlying asset (stocks, commodi?es, - Specula*on (profit from price movements)
currencies, interest rates). - Arbitrage (exploit price differences)

Types of Deriva?ves

A. Forward Contracts

Feature Details
Defini?on A private agreement between two par?es to buy/sell an asset in the future at a pre-decided
price.
KARMAYOGI IAS
Characteris?cs - Customized contracts (not standardized).
- Traded OTC (Over-the-Counter).
- Higher default risk due to counterparty dependency.
Example A farmer enters a forward contract to sell wheat at ₹2,500 per quintal aver three months.

B. Futures Contracts

Feature Details
Defini?on A standardized contract traded on exchanges to buy/sell an asset at a future date at a pre-agreed
price.
Characteris?cs - Exchange-traded (e.g., NSE, MCX).
- No counterparty risk due to clearinghouse guarantee.
- Used for hedging and specula*on.
Example A trader buys a Nipy 50 Futures Contract at ₹18,000, expec?ng an increase.

C. Options Contracts

Type Right Given Obliga?on

Call Op?on Right to buy at a predetermined price No obliga?on to buy
Put Op?on Right to sell at a predetermined price No obliga?on to sell
Example Scenario Outcome
Call Trader expects Reliance shares If the stock price rises, they exercise the op*on and make a profit.
Op?on to rise from ₹2,500 to ₹2,700. If the price drops, they let it expire and lose only the premium
paid.
Put Trader expects Infosys shares to If the price falls, they sell at the higher pre-agreed price and make
Op?on drop from ₹1,800 to ₹1,600. a profit. If the price rises, they let it expire with minimal loss.

D. Swaps (Over-the-Counter)

Type Defini?on Example

Interest Rate Exchange of fixed-rate interest payments A company paying fixed 7% interest swaps it for a
Swap for floa?ng-rate payments. floa*ng rate linked to market rates.
Currency Exchange of cash flows in different RBI swaps ₹1,000 crore with USD $150M with the
Swap currencies. US Fed.

Warrants
Feature Details
Defini?on Long-term financial instruments that give the holder the right to buy company stock at a fixed
price before expira?on.
Characteris?cs - Typically issued by companies to raise capital.
- Valid for several years, unlike op?ons.
Example Tesla issues stock warrants at a strike price of $500, valid for five years.

Uses of Deriva?ves
Category Defini?on Example
Hedging Used to protect against price fluctua*ons in A farmer locks in a wheat price using futures to
the underlying asset. prevent losses from a price drop.
Specula?on Traders use deriva?ves to bet on price A trader buys a Call Op*on on Tata Steel, expec?ng
movements for profit. price apprecia?on.
Arbitrage Exploi?ng price differences for risk-free Buying stock in NSE at ₹2,000 and selling at BSE for
profit. ₹2,010.
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Commodity Exchanges in India

A. Multi Commodity Exchange (MCX)

Feature Details
Defini?on Largest commodity exchange in India for trading gold, silver, crude oil, metals, and
agricultural products.
Traded - Futures Contracts (for commodi?es like wheat, soybean, crude oil).
Instruments - Op*ons Contracts (used for price hedging).
Market - Farmers (hedge against price vola?lity).
Par?cipants - Traders & Speculators.
- Hedgers (industries dependent on raw material prices).

B. National Commodity & Derivatives Exchange (NCDEX)

Feature Details
Defini?on Commodity exchange focused on agriculture-based contracts (wheat, pulses, spices).
Market Par?cipants - Farmers & Traders (price hedging).
- Processors & Exporters (to secure input prices).
Example A soybean farmer locks in a price of ₹4,500 per quintal using NCDEX futures.

Role of Commodity Exchanges in Hedging

Scenario Example Impact
Hedging Against Price A wheat farmer an?cipates a bumper Enters a wheat futures contract at ₹2,500
Fluctua?ons crop but fears a price drop. per quintal, ensuring fixed income.
Price Discovery Farmers track real-*me prices on MCX Helps decide best selling *me.
& NCDEX.
Flexible Hedging with Mustard seed farmer buys a Put Op*on If prices fall below ₹5,000, the farmer sells at
Op?ons on NCDEX. a higher strike price.

Government Securities Market and Related Financial Instruments (2024-25)

Overview of Government Securities Market

Category Descrip?on Key Features Regula?ng

Authority
Government Debt instruments issued by the Government of - Risk-free investment. RBI (Reserve
Securi?es (G-Secs) India or State Governments to meet their - Issued via auc*ons Bank of India)
borrowing needs. by RBI on E-Kuber.
- Includes T-bills,
bonds, SDLs, IIBs,
SGBs.

Types of Government Securi?es

Category Defini?on Key Features Example
Treasury Bills (T- Short-term debt securi?es with - Issued at discount and A ₹100 T-bill issued at
bills) maturi?es of 91, 182, and 364 days. redeemed at face value. ₹98.20, redeemed at
- No interest payments. ₹100.
Cash Management Ultra-short-term bills issued for less - Issued in *mes of First issued in 2010.
Bills (CMBs) than 91 days to manage temporary liquidity crunch.
cash shortages. - Similar to T-bills but for
shorter dura?ons.
Dated G-Secs Long-term securi?es with fixed or - Maturity: 5 to 40 years. 7.17% GS 2028 (matures
floa*ng coupon rates paid semi- - Auc?oned on E-Kuber. in 2028, pays 7.17%
annually. interest).
KARMAYOGI IAS
- Used for capital
expenditure.

Types of Dated Government Bonds

Category Defini?on Key Features Example
Fixed Rate Bonds with fixed coupon rates - Predictable returns. 8.24% GS 2018 (Fixed
Bonds throughout tenure. - Suitable for risk-averse 8.24% interest).
investors.
Floa?ng Rate Bonds with variable interest rates - Rates linked to T-bill FRB 2024 (Rate resets
Bonds (FRBs) reset periodically. yields. every 6 months).
- Reduces interest rate risk.
Zero Coupon Bonds issued at discount with no - Redeemed at face value. Last issued by GOI in
Bonds periodic interest payments. - Used by the government 1996.
to raise funds efficiently.
Capital Indexed Principal linked to an infla*on index - Shields against infla?on. First issued in 1997.
Bonds (CPI/WPI). - Principal amount adjusts
over ?me.
Infla?on Indexed Both principal and interest linked to - Protects against infla?on Introduced in 2013, ?ed
Bonds (IIBs) infla?on. risk. to CPI.
- Coupon payments adjust
as per infla?on.
Bonds with Bonds where the issuer or investor - Provides flexibility. 6.72% GS 2012 (First
Call/Put Op?ons has the op*on to buy/sell before - Reduces reinvestment bond with both
maturity. risk. op?ons).

Special Government Securi?es

Category Defini?on Key Features Example
STRIPS (Separate Trading of Bonds divided into separate - Enhances liquidity. Introduced in 2000.
Registered Interest and interest and principal components, - Used in zero-
Principal Securi?es) making them zero-coupon coupon yield curves.
securi?es.
Sovereign Gold Bonds Bonds denominated in grams of - Alterna?ve to Minimum investment
(SGBs) gold, with 2.5% interest per annum. physical gold. 1 gram.
- Redemp?on based Maturity: 8 years.
on gold price.
State Development Loans Bonds issued by State - Used for Issued under UDAY
(SDLs) Governments to fund public infrastructure & Scheme for DISCOM
projects. development. debt relief.
- Qualifies for
Statutory Liquidity
Ra*o (SLR).

Government Bond Issuance Mechanisms

Method Descrip?on Regulator
E-Kuber (RBI) Electronic plaworm for primary auc?ons of G-Secs, accessible RBI
to banks, PDs, and insurance firms.
Retail Direct Scheme (2021) Allows retail investors to buy G-Secs directly from RBI via RBI
Retail Direct Gilt (RDG) Account.
NDS-OM (Nego?ated Dealing System Screen-based trading plaworm owned by CCIL for secondary CCIL
- Order Matching) market transac?ons in G-Secs.
Over-the-Counter (OTC) Market Direct transac?ons between banks, PDs, and ins?tu?ons, RBI &
confirmed via brokers. CCIL
Stock Exchanges (NSE, BSE, MCX) G-Secs can be traded in Demat form, facilita?ng retail SEBI
par?cipa?on.
KARMAYOGI IAS
Key Government Securi?es Market Players
Category Role in G-Sec Market
Commercial Banks & Primary Market makers ensuring liquidity and stability.
Dealers (PDs)
Ins?tu?onal Investors Insurance companies, pension funds, mutual funds, and coopera?ve banks
invest heavily in G-Secs.
Foreign Porwolio Investors (FPIs) Par?cipate within prescribed limits set by RBI.
Corporates Use G-Secs for porwolio diversifica?on.

Clearing & Benchmarking Authori?es

Category Defini?on Key Func?ons
Clearing Corpora?on of India Limited Acts as a central counterparty for - Guarantees se]lement.
(CCIL) G-Sec transac?ons. - Maintains Sellement Guarantee
Fund.
- Collects margins to ensure
liquidity.
Financial Benchmark India Pvt. Ltd. Sets financial benchmarks in - Determines interest rate and FX
(FBIL) India. benchmarks.
- Took over benchmark
administra?on from FIMMDA in
2018.
Fixed Income Money Market & Represents bond, money, and - Develops market prac*ces and
Deriva?ves Associa?on of India deriva*ves markets in India. valua*on norms.
(FIMMDA) - Works with RBI & SEBI.

Investment Funds: Mutual Funds vs. REITs/InvITs

Basis Mutual Fund Real Estate Investment Trusts (REITs) / Infrastructure
Investment Trusts (InvITs)
Meaning Investment in securi?es of listed en**es Investment in income-genera*ng real estate and
(stocks, bonds, etc.). infrastructure projects.
Underlying Stocks, bonds, government securi?es, and Real estate and infrastructure projects (e.g., roads,
Asset money market instruments. airports, power transmission lines).
Holding Short-term to medium-term. Long-term (10-15 years).
Period
Liquidity Can be redeemed any?me (open-ended). Sold on the stock exchange; less liquid than mutual
funds.
Regula?on SEBI (Securi?es and Exchange Board of SEBI for REITs and InvITs.
India).
Exit Op?on Easy withdrawal in open-ended funds. Investors can exit only by selling on the stock
exchange at quoted value.

Depository Receipts (DRs): GDR vs. IDR vs. ADR

Parameters Global Depository Receipt Indian Depository Receipt American Depository Receipt
(GDR) (IDR) (ADR)
Nego?ability Traded globally across mul?ple Traded only within India. Traded on U.S. stock
stock exchanges. exchanges.
Listed In London, Luxembourg, NSE, BSE. NASDAQ, NYSE.
Singapore.
Purpose Enables companies to raise Helps foreign companies Allows U.S. investors to own
funds interna*onally. raise funds in India. foreign stocks easily.
Currency USD, EUR, or any foreign Indian Rupees (₹). USD ($).
Denomina?on currency.
KARMAYOGI IAS
Example Infosys GDR listed in London. Standard Chartered IDR HDFC Bank ADR in the U.S.
(first IDR in India).

Types of Foreign Investment: FDI vs. FPI vs. FII

Basis Foreign Direct Investment Foreign Porwolio Foreign Ins?tu?onal Investment (FII)
(FDI) Investment (FPI)
Meaning A controlling ownership in Investment in financial Investment by ins?tu?ons like
a business en?ty in another assets like stocks, bonds, mutual funds, pension funds,
country. and mutual funds. insurance companies in financial
markets.
Investment Long-term commitment Short-term investment, Short-term, focused on quick gains.
Nature with ac?ve par?cipa?on. high liquidity.
Sectors of Manufacturing, Stocks, bonds, government Stocks, bonds, deriva?ves.
Investment infrastructure, real estate, securi?es.
etc.
Control Over Ac?ve ownership and No control over No control over management
En?ty control. management decisions. decisions.
Entry & Exit Difficult – involves Easy – market-driven, can Easy exit by selling securi?es.
approvals and compliance. be bought/sold any?me.
Where Capital Account of Balance Capital Account of BOP. Capital Account of BOP.
Reflected in of Payments (BOP).
BOP
Example Walmart inves?ng in Foreign investors buying BlackRock inves?ng in Indian stock
Flipkart (FDI in retail). Indian government bonds. markets.

FDI Instruments in India

Instrument Defini?on & Purpose FDI Link
Foreign Currency Hybrid bonds issued by Indian companies in foreign Counts as FDI when converted
Conver?ble Bonds markets, conver?ble into equity shares aver a into equity.
(FCCBs) period.
Foreign Ins?tu?onal Investment by pension funds, insurance Becomes FDI if stake crosses
Investment (FII) companies, hedge funds in Indian markets. 10%.
Global Depository Foreign-listed cer?ficates represen?ng shares of Converts into equity,
Receipts (GDRs) Indian companies. contribu?ng to FDI.
Non-Resident External Bank accounts held by NRIs in Indian banks. Not direct FDI, but funds can be
(NRE) Deposits invested in Indian markets.

FDI in India: Allowed vs. Restricted Sectors

Sector FDI Allowed? Condi?ons
Single Brand Retail 100% FDI allowed 30% local sourcing if above 51%.
Mul?-Brand Retail 51% FDI allowed State Government approval required.
(Restricted)
E-Commerce (Marketplace Model) 100% FDI allowed Companies cannot hold inventory or sell
directly.
E-Commerce (Inventory Model) FDI Not Allowed Companies like Amazon cannot sell their own
inventory.
Lo]ery, Gambling, Tobacco, Atomic FDI Not Allowed Completely restricted.
Energy

Retail E-Commerce FDI in India

Category Allowed? Example
E-Commerce ✅ 100% FDI Amazon, Flipkart – act as facilitators, not inventory
Marketplace Model holders.
KARMAYOGI IAS
E-Commerce Inventory ❌ FDI Not Allowed A company cannot directly sell its own products
Model online.
Mul?-Brand Retail ✅ 51% FDI (State Govt. Walmart’s 77% stake in Flipkart (2018) was through
Approval Required) the marketplace model.

FDI Routes in India

Route Descrip?on Approval Required?
Automa?c Route No prior approval needed; FDI allowed in most sectors. ❌ No government approval
required.
Government Requires approval from the Foreign Investment ✅ Approval needed for sensi?ve
Route Facilita*on Portal (FIFP). sectors.

Key Financial Terminology

Term Defini?on
Qualified Foreign Investor (QFI) Individual or en?ty from a foreign country inves?ng in Indian markets while
mee?ng FATF & IOSCO norms.
Registered Foreign Porwolio A foreign investor registered under SEBI guidelines (includes FIIs and QFIs).
Investor (FPI)
Credit Default Swap (CDS) A deriva?ve that allows transferring credit risk between par?es.
IPO (Ini?al Public Offer) When a company issues shares for the first *me.
OFS (Offer for Sale) Promoters selling their shares; no new shares issued.
Blue-Chip Companies Large, well-established firms with strong financials.
Bull Market A period of rising stock prices.
Bear Market A period of falling stock prices.
Circuit Breaker A mechanism to halt trading if stock prices move too dras?cally.
Retail Investor An investor with less than ₹2 lakh investment.
Market Capitaliza?on The total market value of a company’s shares: Price per share × No. of shares.
Beta A measure of a stock’s vola*lity compared to the market.

Short Selling vs. Long Selling in India

Aspect Short Selling Long Selling
Defini?on Selling securi?es not owned by the seller with the Buying securi?es to hold and sell later for
expecta?on of buying them back at a lower price. a profit.
Purpose Profit from falling stock prices. Profit from rising stock prices.
Investor Retail (intraday only), Ins?tu?onal (with disclosure). Retail and Ins?tu?onal Investors.
Types
Regula?on Allowed under Securi*es Lending and Borrowing No restric?ons; investors can hold
Mechanism (SLBM). securi?es indefinitely.
Restric?ons Naked short selling (selling without borrowing) is No restric?ons; can benefit from
prohibited. dividends and capital apprecia?on.
Example A trader borrows and sells shares at ₹200, expec?ng An investor buys shares at ₹100 and sells
to buy them back at ₹180. them at ₹150 aver apprecia?on.

SEBI (Securi?es and Exchange Board of India)

Aspect Details
Established 1988 as a non-statutory body; became a statutory body in 1992 under the SEBI Act.
Mandate Regulates securi?es markets, protects investors, and ensures fair trade prac?ces.
Jurisdic?on Stock exchanges, listed companies, brokers, mutual funds, foreign investors, and depositories.

Func?ons of SEBI
Category Func?ons
KARMAYOGI IAS
Regulatory - Regulates stock exchanges, mutual funds, brokers, investment bankers.
- Prevents insider trading and market manipula*on.
- Monitors corporate governance in listed companies.
Protec?ve - Investor protec?on via SEBI Complaints Redress System (SCORES).
- Prevents unfair trade prac?ces.
- Enforces circuit breakers to prevent excessive market vola?lity.
Developmental - Encourages innova?on in financial products.
- Implements investor awareness programs.
- Promotes ins?tu?onal investments and mutual funds.

SEBI's Organiza?onal Structure

Level Role
Chairman Appointed by the Government of India; oversees SEBI’s func?oning.
SEBI Board Comprises Finance Ministry, Corporate Affairs Ministry, RBI, and market experts.
Regional Offices Located in Mumbai (HQ), Delhi, Kolkata, Chennai, Ahmedabad.
Departments - Market Regula*on: Stock exchange oversight.
- Corporate Finance: Ensuring corporate disclosure and governance.
- Investor Protec*on: Handling complaints and awareness.

Key SEBI Regula?ons & Ini?a?ves

Ini?a?ve Descrip?on
Surveillance Mechanism Real-*me monitoring to detect market manipula?on and insider
trading.
Primary Market Regula?on Regulates IPO processes, public issues, and disclosure norms.
Secondary Market Regula?on Ensures fair trading prac*ces on NSE, BSE, MCX.
Investor Protec?on Fund (IPF) Compensates investors for broker defaults.
Securi?es Appellate Tribunal (SAT) Handles appeals against SEBI orders.
SCORES Online grievance redressal system for investor complaints.
FPI Regula?ons Defines rules for foreign investment in India.
Market Infrastructure Ins?tu?ons Regulates stock exchanges, clearing corpora*ons, and depositories.
(MIIs)
Corporate Governance Enforces transparency, disclosure norms, and lis*ng obliga*ons.

SEBI's Regula?on of Mutual Funds

Aspect Regula?on
Fund Categoriza?on SEBI mandates Large-Cap, Mid-Cap, Small-Cap, Debt, and Hybrid
Funds.
Minimum Investment in Equity for Equity 80% investment required in equi*es for equity mutual funds.
Funds
Expense Ra?o Limits SEBI limits expense ra*os to protect investors from high fees.
Systema?c Investment Plans (SIPs) Regulated to encourage long-term inves?ng.

SEBI's Role in Foreign Pornolio Investment (FPI)

Category Details
Defini?on Foreign investment in Indian stocks, bonds, and deriva*ves.
Regulated by SEBI (FPI Regula*ons, 2019).
Categories - Category I (Sovereign, Mul?lateral Agencies, Government En??es).
- Category II (Banks, Mutual Funds, Insurers).
- Category III (Hedge Funds, Retail Investors).
Recent Updates Relaxed disclosure norms to a]ract global investors.

Key Trends in Indian Capital Markets (Economic Survey 2023-24)

Trend Details
Primary Market Mobiliza?on ₹10.9 lakh crore raised, 78.8% through debt issuances.
KARMAYOGI IAS
IPOs (Ini?al Public Offerings) 272 IPOs, ₹67,995 crore raised (66% increase).
REITs & InvITs Growth ₹39,024 crore raised, 5x growth in last year.
Market Capitaliza?on ₹415 lakh crore; 124% of GDP.
Mutual Fund Growth ₹53.4 lakh crore AuM; 35% increase, SIP contribu*ons doubled in 3 years.
Stock Market Performance Nivy 50 grew 26.8%, India’s MSCI-EM share up to 17.7%.
Retail Par?cipa?on 9.2 crore investors, 35.9% equity turnover share.
Debt Issuances ₹8.6 lakh crore in corporate debt, ₹19,167 crore in public bond issues.

SEBI's Role in Market Infrastructure Ins?tu?ons (MIIs)

MII Role
Stock Exchanges Facilitate buying and selling of securi*es (e.g., NSE, BSE).
Clearing Corpora?ons Ensure sellement of trades, elimina?ng counterparty risk.
Depositories (NSDL, CDSL) Maintain dematerialized securi*es, facilita?ng electronic trading.

Financial Terms Related to Market Regula?on

Term Defini?on
Circuit Breaker Halts trading if price vola*lity exceeds limits.
Market Capitaliza?on Total value of listed company’s shares.
Beta Measures vola*lity of a stock compared to the market.
Blue-Chip Companies Large, financially stable corpora?ons.
Bull Market Period of rising stock prices.
Bear Market Period of falling stock prices.
Ini?al Public Offer (IPO) First-?me share sale by a company.
Insider Trading Trading based on non-public, material informa*on.
KARMAYOGI IAS
HISTORICAL BACKGROUND OF INDIAN ECONOMY AND
AGRICULTURE AND ALLIED SECTOR
Agriculture Sector: Overview & Significance
Indicator Details (2024-25)
Share in GDP 18.2% (2023-24) at current prices.
Employment in 42.3% of India’s workforce engaged in agriculture.
Agriculture
Growth Rate 4.18% per annum (last five years); 1.4% (FY24) due to El Niño and erra?c monsoons.
Budget Alloca?on (2024- ₹1.16 lakh crore allocated for agriculture and allied sectors.
25)
Top Agricultural #1 in Milk, Pulses, Spices, Colon, Jute
Producers #2 in Rice, Wheat, Fruits, Vegetables.
Major Challenges Low produc*vity, fragmented land holdings, post-harvest losses, climate
vulnerability, soil degrada*on.

Agriculture Growth & Produc?on Trends

Aspect Details (2023-24)
Total Foodgrain Produc?on 332.3 million tonnes (record high).
Hor?culture Produc?on 352 million tonnes (India ranks #2 globally).
Oilseed Produc?on 41 million tonnes (focus on reducing edible oil imports).
Nutri-Cereals (Millets) Output 18.5 million tonnes (India is the largest producer).
Fisheries Growth 8.2% increase, total fish produc?on: 17.9 million tonnes.
Livestock Contribu?on ₹13.92 lakh crore (30.4% of Agricultural GVA).
Dairy Sector Growth 6.5% annual growth rate, India produces 25% of the world’s milk.

Agricultural Reforms & Budget 2024-25 Ini?a?ves

Ini?a?ve Objec?ve Budget 2024-25 Provisions
PM Kisan Samman Nidhi ₹6,000/year direct income support to ₹60,000 crore allocated for FY25.
farmers.
Digital Public Infrastructure for AI-driven analy?cs, weather forecas?ng, Expansion of Digital Agri Stack for
Agriculture crop advisories. smart farming.
Atmanirbhar Oilseeds Abhiyan Reducing edible oil imports, improving ₹12,000 crore allocated.
domes?c produc?on.
PM Matsya Sampada Yojana Enhancing fisheries produc?on & exports. ₹6,000 crore allocated.
Dairy Processing Infrastructure Strengthening milk produc?on and cold ₹8,000 crore investment in dairy
Fund chain logis?cs. infrastructure.

Irriga?on & Water Management

Indicator Details (2023-24)
Total Gross Sown Area 141 million hectares
Irrigated Area Coverage 52% (73 million hectares)
PM Krishi Sinchayee Yojana (PMKSY) ₹4,000 crore allocated for micro-irriga?on.
Jal Jeevan Mission Household tap water connec*ons in rural areas (achieved 82% target).
Watershed Development 1.97 million hectares covered under Rejuvena*on of River Basins Program.

Market Reforms & Digital Agriculture

Ini?a?ve Details & Impact
e-NAM (Na?onal Agriculture 1.75 crore farmers onboarded, 1,260 APMCs integrated.
Market)
Agri Stack & AI-Based Advisory Drone-based precision farming, digital soil health mapping.
KARMAYOGI IAS
Unified Market Plaworm (UMP) Facilitates direct farmer-to-buyer sales (Implemented in Karnataka, to be
expanded).
Smart Warehousing Ini?a?ve IoT-enabled cold storages & logis*cs hubs for perishable commodi*es.

Sustainable Agriculture & Climate Resilience

Ini?a?ve Objec?ve Budget & Target (2024-25)
Natural Farming Mission Promo?ng chemical-free farming. ₹2,000 crore allocated.
Na?onal Adapta?on Fund for Strengthening climate resilience in ₹1,800 crore investment in drought-
Climate Change farming. prone states.
Green Energy for Agriculture Encouraging solar-powered 1.5 lakh solar pumps to be installed
irriga*on pumps. under PM-KUSUM.
Zero Budget Natural Farming Reducing dependency on synthe?c Pilot projects in 11 states.
(ZBNF) fer?lizers.

Agricultural Exports & Trade (2023-24)

Indicator Details
Total Agricultural Exports $50.21 billion (19.92% growth from FY22).
Major Export Items Rice ($9.65 billion), Marine Products ($8 billion), Sugar ($4.6 billion), Spices ($4
billion).
Key Import Subs?tu?on Reduc*on in edible oil imports (palm oil, soybean oil) via domes?c oilseeds
Strategy expansion.
Export Targets (2030) $100 billion agriculture exports by 2030.

Agricultural Credit & Insurance

Scheme Details (2024-25) Target
Kisan Credit Card (KCC) ₹22 lakh crore disbursed (2023-24). Expand coverage to 1.5 crore
new farmers.
Agriculture Infrastructure Fund ₹1.66 lakh crore loans sanc?oned for post- ₹2.5 lakh crore target by FY27.
(AIF) harvest infra.
PM Fasal Bima Yojana (Crop ₹23,000 crore allocated, covers 28.8 Expand coverage to 40 million
Insurance) million farmers. farmers.

Landholding PaXerns & Women’s Par?cipa?on

Indicator Details
Total Land Holdings (2015-16 Census) 146.45 million holdings (5.86% increase from 2010-11).
Average Farm Size 1.08 ha (declining trend).
Small & Marginal Farmers 86.08% of total farmers own 47.34% of land.
Women’s Landholding Share 13.96% (2015-16), rising gradually.

Taxa?on & Policy Measures

Aspect Details
Income Tax on Agriculture Exempt under Sec*on 10(1) of Income Tax Act, 1961.
Customs Duty on Edible Oils To protect domes*c oil processing industry.
Subsidy on Fer?lizers ₹1.64 lakh crore allocated (FY24-25).
Export Ban on Certain Commodi?es Ban on wheat & non-basma* rice exports (due to food security concerns).

Cropping Intensity & PaXerns

Parameter Defini?on Key Features
Cropping Number of crops cul?vated in a piece of Higher cropping intensity indicates be]er land
Intensity land per annum. u?liza?on and food security.
Cropping Different crops grown in an area at a Based on climate, soil type, and economic factors.
Pa]ern par?cular ?me.
KARMAYOGI IAS
Types of Cropping PaXerns
Cropping Defini?on Examples in India (2024-25)
Pa]ern
Mul?ple Growing more than two crops in a year in Punjab & Haryana: Rice-Wheat-Maize;
Cropping succession. Tamil Nadu: Sugarcane-Rice-Pulses.
Inter Cul?va?ng two or more crops simultaneously with Example: Maize with Beans, Mustard with
Cropping dis?nct row arrangements. Wheat.
Mixed Cul?va?ng mul?ple crops in the same field without Example: Co]on + Groundnut, Wheat +
Cropping row arrangements (risk mi?ga?on). Mustard.
Strip Plan?ng crops in alternate parallel strips. Example: Alternate strips of Maize and
Cropping Soybean.
Contour Ploughing/plan?ng along eleva?on contours to Example: Tea and Coffee planta?ons in the
Bunding reduce soil erosion. Western Ghats.

Overview of Major Crop Produc?on (2023-24)

Crop Produc?on Trend Acreage Rain-fed vs. Irrigated
(Million Tonnes) (Million (%)
Hectares)
Rice 137.8 Record high; supported by MSP 43.79 50% irrigated,
& PM-KISAN. majorly rain-fed in
Eastern India.
Wheat 113.3 Stable; impacted by erra?c 30.5 90% irrigated.
weather in 2022-23.
Maize 37.6 Stable; growing in demand for 9.8 85% rain-fed.
ethanol blending.
Pulses 24.2 Supported by MSP hike (Len?ls 29.17 80% rain-fed.
up by 89%).
Oilseeds (Soybean, 41.3 Rising; ₹12,000 crore for edible 22.6 60% rain-fed.
Mustard, oil self-sufficiency.
Groundnut)
Sugarcane 455.3 India is the largest global 5.56 90% irrigated.
producer; ethanol blending
push.
Co]on 325.2 lakh bales Fluctua?ons; declining in 120.69 lakh ha 67% rain-fed.
Maharashtra, increasing in
Telangana.
Millets (Jowar, Bajra, 17.5 Increasing due to government 12.5 85% rain-fed.
Ragi, etc.) push (Interna?onal Year of
Millets 2023).
Fruits 112.73 India leads in Mango & Banana 8.5 80% irrigated.
produc?on.
Vegetables 205.80 Growth in Potato & Tomato 10 75% irrigated.
produc?on.

Cropping Systems in India

Farming Descrip?on Key Features (2024-25)
System
Wetland Crops grown in con?nuously irrigated land. 12% of India's cul?vated area.
Farming
Dryland Dependent on rainfall, with moisture conserva?on 68% of cul?vated land; produces 44% of
Farming techniques. food grains.
Rainfed Crops grown in areas with over 750 mm rainfall. 52% of net sown area.
Farming
Mixed Farming Combina?on of crops, livestock, poultry, and Contributes 20% to agri-GDP.
fisheries.
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Agricultural Sustainability & Climate-Resilient Farming

Ini?a?ve Objec?ve Budget & Impact (2024-25)
Na?onal Mission for Sustainable Climate-smart agriculture, ₹3,000 crore allocated.
Agriculture (NMSA) drought resilience.
Per Drop More Crop (Micro-Irriga?on Efficient water use in farming. 83.46 lakh hectares covered under
under PMKSY) drip irriga?on.
Zero Budget Natural Farming (ZBNF) Reducing chemical fer?lizers. Pilots in 11 states; ₹2,000 crore.
Solar-Powered Agriculture Pumps (PM- Renewable energy for irriga?on. 1.5 lakh solar pumps to be installed.
KUSUM)

Agricultural Exports & Trade (2023-24)

Export Category Value (US$ Billion) Growth Trend
Total Agri Exports 50.21 19.92% YoY increase.
Rice 9.65 India is the #1 rice exporter globally.
Marine Products 8.00 Robust demand from China & US.
Sugar 4.60 Ethanol blending policy impac?ng exports.
Spices 4.00 Strong global demand for turmeric & cardamom.

Agricultural Credit & Infrastructure Support

Scheme Objec?ve 2024-25 Budget
Alloca?on
Kisan Credit Card (KCC) Low-interest credit to farmers. ₹22 lakh crore
disbursed.
PM Fasal Bima Yojana (Crop Crop failure protec?on. ₹23,000 crore allocated.
Insurance)
Agriculture Infrastructure Fund Cold storage, post-harvest infrastructure. ₹1.66 lakh crore
(AIF) sanc?oned.
Na?onal Rural Livelihood Mission Financial support to FPOs (Farmer Producer ₹18,000 crore.
(NRLM) Organiza?ons).

Landholding & Farm Mechaniza?on

Indicator Details (2024-25)
Total Land Holdings (2015-16 Census) 146.45 million holdings (5.86% growth from 2010-11).
Average Farm Size 1.08 ha (declining trend).
Small & Marginal Farmers 86.08% of total farmers own 47.34% of land.
Women’s Landholding Share 13.96% (2015-16), gradually increasing.
Farm Mechaniza?on 47.8% (target: 75% by 2030).

Taxa?on & Policy Measures

Policy Aspect Details (2024-25)
Agricultural Income Tax Exempt under Sec?on 10(1) of the Income Tax Act, 1961.
Fer?lizer Subsidy ₹1.64 lakh crore allocated.
MSP Policy ₹2.18 lakh crore for direct MSP procurement.
Ban on Wheat & Rice Exports Imposed to ensure domes?c food security.

Future Roadmap for Indian Agriculture (2030 Vision)

Target Objec?ve
$100 billion Agri Exports Expanding organic, processed food exports.
70% Irrigated Land Expansion of micro-irriga?on projects.
Fully Digi?zed Farm Economy AI-based soil & weather analy?cs, digital mandi integra?on.
Agri Mechaniza?on >75% Expanding drone & precision farming.
KARMAYOGI IAS
Green Revolu?on: Overview and Historical Context
Aspect Details
Origins & Ini?ated in the 1960s to counter food shortages due to repeated droughts (1957-58, 1965-66).
Development Programs like Intensive Agricultural District Programme (IADP, 1960) and High Yielding
Varie*es Programme (HYVP, 1966) were introduced. The revolu?on was spearheaded by M.S.
Swaminathan, influenced by Norman Borlaug’s wheat research.
Key Features Use of HYV Seeds: Wheat (Kalyan Sona, Sonalika) and Rice (IR-8, Jaya, Pusa).
Chemical Inputs: Increased use of fer?lizers (NPK) and pes?cides.
Mechaniza*on: Adop?on of tractors, tube wells, pump sets, and harvesters.
Mul*ple Cropping System: Three cropping seasons introduced - Rabi, Kharif, and Zaid.
Irriga*on Expansion: Canal irriga?on and tube wells increased agricultural produc?vity.
Focus Areas Ini?ally, Green Revolu?on was concentrated in Punjab, Haryana, and Western UP, later
expanded to Madhya Pradesh, Andhra Pradesh, and Tamil Nadu.
Crops Benefi]ed Mainly wheat and rice, while pulses, oilseeds, and coarse cereals received li]le a]en?on.
Financing & Ins?tu?onal credit provided through NABARD (1982), Land Development Banks, and
Credit Support Coopera*ve Banks.

Posi?ve & Nega?ve Impacts of the Green Revolu?on

Impact Area Posi?ve Impacts Nega?ve Impacts
Food Security India transformed from a food-deficit to a Regional Dispari*es: Benefits
food-surplus na*on. Wheat produc?on concentrated in Punjab, Haryana, and
increased from 10.3 MT (1960) to 113.3 MT Western UP; Eastern and Southern states
(2023-24). lagged.
Rural Economy Farmers' income improved, leading to higher Farmer Inequality: Large farmers
living standards and rural employment. Agro- benefi]ed the most; small and marginal
processing and input industries expanded. farmers struggled with high input costs.
Environmental Agricultural expansion supported by irriga*on Soil Degrada*on & Water Crisis: Overuse
Impact led to consistent grain produc?on. of fer?lizers and groundwater deple?on
worsened sustainability.
Irriga?on & Water Expansion of canal networks and borewells Groundwater Deple*on: 90% of India’s
Use improved irriga?on, reducing dependence on freshwater is used for irriga?on, causing
monsoons. deser*fica*on in Punjab and Haryana.
Biodiversity Monoculture of HYVs increased yields, Loss of Indigenous Varie*es: Tradi?onal
reducing dependence on low-produc?vity crop biodiversity declined; pest resistance
varie?es. increased.
Mechaniza?on & Use of tractors, harvesters, and pumps Rural Job Loss: Mechaniza?on reduced
Employment increased produc?vity and created non-farm labor demand, impac?ng landless
employment. agricultural workers.
Climate Resilience Increased crop output stabilized food supply Climate Impact: Wheat yields affected by
against droughts and floods. rising temperatures, leading to lower
nutri?onal quality.

Green Revolu?on 2.0: Sustainable & Modern Agriculture (2024-25 Ini?a?ves)

Aspect Green Revolu?on 1.0 (1960s-1990s) Green Revolu?on 2.0 (2020s-2030s)
Approach Produc*on-centric, maximizing food Sustainability-focused, integra?ng digital farming,
output with chemical inputs. precision agriculture, and organic methods.
Technology HYV Seeds, chemical fer?lizers, GM Crops, Drones, AI-based monitoring, digital
tractors, and deep well irriga?on. agriculture plaworms.
Soil & Water Excessive fer?lizer & pes?cide use; Soil Health Cards (SHC), Micro-Irriga*on (PMKSY),
Management over-irriga?on. Per Drop More Crop.
Diversifica?on Focused on wheat & rice. Promo?ng millets, pulses, and hor*culture
(Interna?onal Year of Millets 2023).
Climate-Resilient Dependent on stable monsoons. Research into heat-resistant wheat, flood-tolerant
Crops rice (Swarna Sub-1), drought-resistant maize.
KARMAYOGI IAS
Agro-Ecology & Chemical-intensive farming. Zero Budget Natural Farming (ZBNF), Organic
Sustainability Farming, Integrated Pest Management (IPM).
Digital & Smart Manual decision-making. e-NAM, AI-driven AgriTech planorms, IoT for
Farming precision irriga*on.

Regional Impact of Green Revolu?on in India

Region Impact Key Observa?ons
Level
Punjab, Haryana, Western UP High Major beneficiaries; mechaniza?on, irriga?on expansion,
increased produc?vity.
Madhya Pradesh, Rajasthan Moderate Expanded wheat & mustard produc?on; irriga?on
coverage increased post-2000s.
Eastern India (Bihar, WB, Odisha, Low Lack of irriga?on, small landholdings, slow adop?on of
Assam) HYVs.
Southern India (Tamil Nadu, Andhra Moderate Shiv to pulses, oilseeds, and co]on; limited rice yield
Pradesh, Karnataka) improvements.
Northeast & Tribal Areas Minimal Tradi?onal farming methods persisted; lack of irriga?on &
extension services.

Government Policies for Sustainable Agriculture (Budget 2024-25 & Economic Survey 2023-24)
Policy Ini?a?ve Objec?ve Budget Alloca?on (2024-25)
PM Fasal Bima Yojana (PMFBY) Crop insurance for farmers. ₹23,000 crore.
PM Kisan Samman Nidhi (PM-KISAN) Direct cash transfer to small farmers. ₹75,000 crore.
Na?onal Mission for Sustainable Climate-resilient & organic farming ₹3,000 crore.
Agriculture (NMSA) prac?ces.
Agriculture Infrastructure Fund (AIF) Post-harvest storage, cold chains. ₹1.66 lakh crore (since
launch).
Per Drop More Crop (Micro-Irriga?on Efficient water usage & drip ₹10,000 crore.
under PMKSY) irriga?on.
Zero Budget Natural Farming (ZBNF) Reducing dependency on chemical Pilots in 11 states.
fer?lizers.
Agri Digitaliza?on (e-NAM, AI, IoT, Big Smart farming, price transparency. ₹500 crore for AI-driven
Data) agriculture.

Future Roadmap for Indian Agriculture (2030 Vision)

Goal Objec?ve Implementa?on Strategy
$100 Billion Agri Diversifica?on into processed & Export promo*on schemes, GI Tag cer*fica*on,
Exports organic foods. agro-processing hubs.
Climate-Resilient Minimize yield loss due to Heat & flood-resistant crops, climate-smart
Farming extreme weather. irriga*on.
75% Farm Increase produc?vity with Subsidies for AI-based farm equipment & precision
Mechaniza?on advanced tools. farming.
Digi?zed Agricultural Improve price realiza?on & Integra*on of e-NAM, blockchain-based supply
Markets market access. chains.
Farmer Income Reduce input costs & improve Direct Benefit Transfers (DBT), soil health
Doubling profitability. management, and credit expansion.

HORTICULTURE SECTOR
Classifica?on of Hor?culture
Sub-Discipline Defini?on Key Features
Pomology Study & cul?va?on of fruits Covers major fruit crops like mango, banana, apple, and
citrus fruits
KARMAYOGI IAS
Olericulture Study & cul?va?on of Includes seasonal vegetables like onion, potato, tomato, and
vegetables leafy greens
Floriculture Study & cul?va?on of Focuses on ornamental flowers (rose, jasmine, orchids) for
flowers domes?c and export markets
Landscape Use of plants for aesthe?c Enhances urban greenery, public parks, and ver?cal
Hor?culture landscaping gardening

Major Hor?culture Crop Overview (2023-24 Es?mates)

Crop Area Under Produc?on Top Producing States Major Exports
Cul?va?on (Million (Million Tonnes)
Ha)
Fruits 25 99 U]ar Pradesh, Maharashtra, Mango, Banana,
Andhra Pradesh, Tamil Nadu Grapes
Vegetables 13 185 West Bengal, U]ar Pradesh, Onion, Tomato,
Madhya Pradesh, Odisha Okra
Spices 4.8 11 Kerala, Andhra Pradesh, Pepper, Cardamom,
Karnataka Turmeric
Flowers 0.3 1.9 Tamil Nadu, Karnataka, West Jasmine, Rose
Bengal
Coconut 2.2 19 billion nuts Kerala, Tamil Nadu, Karnataka Copra, Coconut Oil
Cashew 1.5 0.81 Kerala, Karnataka, Maharashtra Cashew Nuts,
Kernels
Tea 0.4 1,325 million kg Assam, West Bengal, Tamil Nadu UK, Russia, USA
Coffee 0.4 340,000 tonnes Karnataka, Kerala, Tamil Nadu Italy, Germany, USA

Government Ini?a?ves in Hor?culture (Budget 2024-25 & Policy Updates)

Ini?a?ve Launch Objec?ve Key Features Budget
Year Alloca?on
(2024-25)
Mission for Integrated 2014-15 Boost hor?culture 85% Govt. funding (100% for NE ₹2,500 crore
Development of Hor?culture sector & improve & Himalayan states); crop
(MIDH) produc?vity diversifica?on, skill development
Na?onal Hor?culture 2005 Improve Provides financial & technical Part of MIDH
Mission (NHM) hor?culture in key assistance for fruit & vegetable
states produc?on
Hor?culture Mission for 2001 Develop hor?culture Special assistance for cold ₹500 crore
North East & Himalayan in NE & Himalayan storage, infrastructure, and
States (HMNEH) states organic farming
Na?onal Hor?culture Board 1984 Implement & Funds nurseries, post-harvest ₹1,200 crore
(NHB) promote management, and protected
hor?culture projects cul?va?on
Na?onal Bamboo Mission 2018 Promote bamboo Subsidies for bamboo ₹800 crore
(NBM) produc?on & planta?on, marke?ng, and
processing processing industries
Paramparagat Krishi Vikas 2015 Promote organic Encourages cer?fica?on of ₹700 crore
Yojana (PKVY) farming & reduce organic farms & supports farmer
chemical use collec?ves
Pradhan Mantri 2020 Strengthen agro- Helps small food processing ₹1,500 crore
Formalisa?on of Micro Food processing units units with branding & market
Processing Enterprises (PM- linkage
FME)

Key Strategies and Ac?vi?es under MIDH (2024-25 Focus Areas)

Strategy Objec?ve Implementa?on Mechanism
KARMAYOGI IAS
End-to-End Approach Covering produc?on, processing, storage, Involvement of FPOs, FPCs, and
and marke?ng of hor?culture products Coopera*ve Socie*es
Research & Innova?on Improving seed quality, pest control, and Collabora?on with ICAR, KVKs, and
cold-chain storage Agricultural Universi*es
Farmer Empowerment Skill development and training in high- Establishing hor*culture training centers
tech farming in states
Organic & Sustainable Reducing chemical use, promo?ng natural Encouraging Zero Budget Natural
Prac?ces farming Farming (ZBNF) and Vermicompos*ng
Cold Chain & Post- Preven?ng losses and improving storage Cold storage subsidies, processing
Harvest Management infrastructure zones, and export promo*on
Irriga?on & Water Improving water-use efficiency in Promo?ng drip irriga*on and rainwater
Management hor?culture harves*ng under PMKSY

Export Poten?al of Indian Hor?culture Products

Category Top Exported Products Major Export Des?na?ons 2023-24 Export Value (USD
Billion)
Fruits Mango, Banana, Grapes, UAE, EU, USA, Bangladesh 2.4
Pomegranate
Vegetables Onion, Tomato, Okra, Green Chilli UAE, Bangladesh, Malaysia, 1.8
Nepal
Spices Black Pepper, Cardamom, Turmeric, USA, Vietnam, China, UK 4.5
Chilli
Flowers Jasmine, Rose, Marigold, Orchids Netherlands, UK, UAE 0.3
Tea Black Tea, Green Tea Russia, UK, Iran, UAE 0.9
Coffee Arabica, Robusta Italy, Germany, Belgium, USA 1.1

Hor?culture Growth & Produc?vity Trends (Economic Survey 2023-24)

Parameter 2021- 2022-23 2023-24 Growth Trend
22 (Projected)
Hor?culture Produc?on (Million 330.5 334.9 340.5 Steady Growth 📈
Tonnes)
Area Under Hor?culture (Million Ha) 27.5 28.1 29.0 Expanding 🌱
Agri-Export Growth (%) 16.3% 19.92% 21.4% Boost in Global Demand 🌍
Cold Storage Capacity (Million Tonnes) 38.0 42.5 48.1 Improving Infrastructure
🏭
Investment in Hor?culture (₹ Crore) 3,500 4,200 5,000 Increased Funding 💰

Future Roadmap for Hor?culture in India (2030 Vision)

Focus Area Objec?ve Implementa?on Strategy
Agri-Exports Growth Boost hor?culture exports to $20 Expanding export zones, improving cold-chain
billion by 2030 logis*cs, securing GI Tags
Precision & Smart Use AI, IoT, and Blockchain for crop Encouraging digital planorms like eNAM, farm
Farming monitoring sensors, and AI-driven solu*ons
Post-Harvest Loss Reduce food wastage from 30% to less Investment in cold storage, processing, and
Reduc?on than 10% FPO networks
Sustainable & Organic Increase organic farming area to 10 Expanding ZBNF, vermicompos*ng, and
Hor?culture million ha agroforestry models
Climate-Resilient Develop drought-resistant varie?es of Gene*c research & AI-based climate
Hor?culture fruits, spices, and vegetables monitoring

Indian Seed Sector: A Comprehensive Overview

KARMAYOGI IAS
The seed sector plays a vital role in Indian agriculture, with quality seeds contributing significantly (15-
20%, potentially 45% with efficient management) to overall crop production.

Development & Key Policies:

• Early Initiatives (1960s-1991): Foundation laid by the National Seeds Corporation (NSC) and the
National Seed Project, creating a structured seed industry.
• New Seed Development Policy (1988-89): Opened the door for high-quality international seeds,
attracting private and multinational investment in R&D.
• Technological Advancements: Introduction of Bt Cotton (2002) and focus on high-value hybrid
seeds boosted productivity.

Seed Production System (Limited Generations):

• Breeder Seed: Produced by ICAR institutions; ensures high genetic purity, source for foundation
seed.
• Foundation Seed: Progeny of breeder seed, produced by NSC, SFCI, and State Seed
Corporations; meets seed certification standards.
• Certified Seed: Progeny of foundation seed, distributed to farmers; tested for purity, germination,
and genetic identity.

Varietal Protection:

• Legal Framework: Protection of Plant Varieties and Farmers' Rights Act, 2001 (PPV&FR Act),
aligned with TRIPS Agreement.
• PPV&FR Authority (since 2005): Registers plant varieties, ensures benefit-sharing, conserves
genetic resources, and facilitates compulsory licensing.

Seed Certification:

• Purpose: Ensure high-quality seeds with physical identity and genetic purity.
• Standards & Process: Field inspections, seed testing, adherence to Indian Minimum Seed
Certification Standards (1988).
• Seed Replacement Rate (SRR): The percentage of cropped area sown with certified seeds
(compared to farm-saved seeds). A higher SRR increases production and productivity.
• Seed Village: A village where trained farmers produce seeds for themselves and nearby villages,
meeting local seed requirements.

IRRIGATION
Classifica?on of Irriga?on Schemes
Type of Scheme Cul?vable Command Area (CCA) Examples
Minor Irriga?on ≤ 2,000 hectares Check dams, tube wells, farm ponds
Medium Irriga?on 2,000 - 10,000 hectares Liv irriga?on, minor canal projects
Major Irriga?on > 10,000 hectares Bhakra-Nangal, Sardar Sarovar

Types of Irriga?on in India

Irriga?on Type Descrip?on Coverage in Key States
India (%)
Canal Irriga?on Water diverted from rivers into canals and ~22% Punjab, Haryana, UP, TN,
distributed to fields Bihar
KARMAYOGI IAS
Tube Well/Bore Uses underground water lived by ~46% Punjab, Haryana, UP,
Well electric/diesel pumps Rajasthan
Tank Irriga?on Water stored in natural/man-made tanks ~4% TN, Karnataka, AP, Odisha
Sprinkler Water is distributed through pipes and ~2% Rajasthan, Gujarat, MP
Irriga?on sprayed over crops
Drip Irriga?on Provides water directly to plant roots via ~4% Maharashtra, Gujarat, AP,
emi]ers Karnataka
Open Wells & Tradi?onal wells and small water sources ~22% Rajasthan, Maharashtra, TN
Others
Modern Includes fer?ga?on, rain guns, and AI-based <2% Used in high-tech farming
Techniques systems zones

Government Ini?a?ves for Irriga?on (2024-25 Focus)

Scheme Objec?ve Key Features Budget
Alloca?on (₹
Crore)
Pradhan Mantri Krishi Ensure water for every farm Convergence of irriga?on ₹8,400
Sinchayee Yojana (PMKSY) ("Har Khet Ko Pani") investments, water-use
efficiency
Accelerated Irriga?on Benefits Fast-track comple?on of Focus on long-pending projects ₹5,000
Programme (AIBP) major & medium irriga?on
projects
Command Area Development & Improve water-use Par?cipatory irriga?on ₹2,700
Water Management (CADWM) efficiency in command management
areas
Per Drop More Crop (PDMC) Promote micro-irriga?on Financial aid to farmers for ₹3,600
(drip & sprinkler) micro-irriga?on adop?on
Na?onal Watershed Develop water conserva?on Soil & water conserva?on ₹1,500
Development Project for structures in rainfed regions measures, check dams
Rainfed Areas (NWDPRA)
Long-Term Irriga?on Fund (LTIF) NABARD-backed financing Funding under PMKSY for ₹7,000
for irriga?on projects states to accelerate irriga?on
infrastructure

Sub-Programs Under PMKSY (2024-25 Updates)

Component Implemen?ng Ministry Key Focus
Accelerated Irriga?on Benefit Ministry of Jal Shak? Expedi?ng irriga?on projects for early
Programme (AIBP) benefits
Watershed Development Ministry of Rural Development Soil conserva?on & groundwater
recharge in rainfed areas
On-Farm Water Management Ministry of Agriculture & Enhancing field-level water-use efficiency
(OFWM) Farmers’ Welfare
Micro-Irriga?on Fund (MIF) NABARD Subsidy & support for drip/sprinkler
irriga?on adop?on

Major River-Based Irriga?on Projects in India

Project Name River States Benefited Type
Bhakra-Nangal Satluj Punjab, Haryana, Rajasthan Mul?purpose (Irriga?on +
Power)
Indira Gandhi Canal Sutlej-Beas Link Rajasthan Largest Canal Network
Sardar Sarovar Project Narmada Gujarat, MP, Maharashtra, Mega Irriga?on &
Rajasthan Hydropower
Hirakud Dam Mahanadi Odisha, Chha~sgarh Flood Control & Irriga?on
KARMAYOGI IAS
Krishna-Godavari Liv Krishna- Telangana, AP Water Transfer
Irriga?on Godavari
Kaleshwaram Project Godavari Telangana World’s Largest Liv Irriga?on

Water Availability & Irriga?on Status (Economic Survey 2023-24)

Parameter 2021-22 2022-23 2023-24 (Projected) Trend
Net Irrigated Area (Million Ha) 71.5 72.9 74.3 📈 Increasing
Groundwater Irriga?on Share (%) 64% 63.5% 62.8% 📉 Declining
Surface Water Irriga?on Share (%) 36% 36.5% 37.2% 📈 Rising
Micro-Irriga?on Coverage (Million Ha) 13.5 15.2 17.0 📈 Expanding
Irriga?on Efficiency Improvement (%) 55% 58% 62% 📈 Improving

Na?onal Water Mission (2024-25 Focus Areas)

Mission Component Objec?ve Implementa?on Strategy
Water Conserva?on & Reduce water wastage Promo?on of drip & sprinkler irriga?on
Efficiency
Groundwater Recharge Improve aquifer levels Ar?ficial recharge projects & rainwater
harves?ng
River Basin Management Sustainable river resource River interlinking & flow regula?on
u?liza?on
Urban & Industrial Water Minimize freshwater demand Manda?ng water recycling & reuse policies
Reuse

Future Roadmap for Irriga?on (Vision 2030)

Focus Area Target by 2030 Key Strategies
Micro-Irriga?on Expansion Cover 30% of net irrigated area Incen?ves for drip & sprinkler systems
Sustainable Water Reduce groundwater dependence Strengthen surface irriga?on & rainwater
Management by 20% harves?ng
Canal System Moderniza?on Improve water delivery efficiency Digital monitoring & AI-based water
alloca?on
Desalina?on & Wastewater Expand treated water for Large-scale desalina?on & wastewater
Reuse agriculture treatment plants

FERTILIZER
Classifica?on of Fer?lizers in India
Category Nutrient Composi?on Examples Usage & Key Features
Nitrogenous High in Nitrogen (N) Urea, Ammonium Sulphate, Boosts leafy growth; most
Ammonium Nitrate commonly used fer?lizer
Phospha?c High in Phosphorus (P) Single Super Phosphate (SSP), Di- Essen?al for root
Ammonium Phosphate (DAP), Triple development & flowering
Super Phosphate (TSP)
Potassic High in Potassium (K) Potassium Nitrate, Muriate of Potash Improves drought
(MOP), Chile Saltpetre resistance, disease
tolerance
Micronutrient- Contains Boron (B), Zinc Zinc Sulphate, Borax, Ferrous Sulphate Enhances enzyme
Based (Zn), Copper (Cu), etc. func?ons and soil fer?lity
Complex Contains a mix of NPK NPK 10:26:26, 12:32:16 Balanced fer?liza?on for
Fer?lizers nutrients mul?ple crops
Bio-Fer?lizers Contains beneficial Rhizobium, Azotobacter, Mycorrhiza Improves nitrogen
microbes fixa?on, enhances soil
fer?lity
KARMAYOGI IAS
Fer?lizer Consump?on & Imbalance in India (Economic Survey 2023-24)
Parameter 1991-92 2021-22 2023-24 (Projected) Recommended Ra?o
NPK Ra?o 5.9:2.4:1 7.7:3.1:1 8.1:3.4:1 4:2:1
Urea Usage (%) 58% 66% 68% <50% for balanced nutri?on
DAP Consump?on (%) 25% 22% 21% Balanced P use needed
MOP Consump?on (%) 10% 8% 7% Deficiency affec?ng soil health
Micronutrient Deficiency (%) 40% 48% 52% Increasing trend, impac?ng crop yields

Government Fer?lizer Policies & Subsidy Schemes (2024-25)

Policy/Scheme Year of Objec?ve Key Features
Introduc?on
Reten?on Pricing 1977 Regulate fer?lizer Fixes uniform price for fer?lizers to ensure
Scheme (RPS) prices affordability
New Pricing Scheme 2003 Subsidy ra?onaliza?on Divided into stages (NPS-I, II, III) to
(NPS) gradually deregulate fer?lizer pricing
Nutrient-Based Subsidy 2010 Promote balanced Links subsidy to nutrient content instead of
(NBS) Scheme fer?liza?on product cost
Neem-Coated Urea 2015 Reduce nitrogen loss Mandatory 100% neem-coated urea to
Policy prevent misuse
New Urea Policy (NUP) 2015 Increase domes?c Encourages energy-efficient urea plants &
produc?on ra?onalizes subsidy
Urea Subsidy Scheme Ongoing Keep urea affordable Urea provided at ₹242 per 45kg bag, with
for farmers government covering cost difference

Fer?lizer Self-Sufficiency & Import Dependency (2023-24)

Fer?lizer Type Domes?c Produc?on Import Dependency Top Impor?ng Countries
(%) (%)
Urea 80% 20% Oman, China, UAE
DAP (Di-Ammonium 50% 50% Saudi Arabia, Morocco,
Phosphate) Jordan
MOP (Muriate of Potash) 0% 100% Canada, Belarus, Russia
NPK Complex 70% 30% China, Russia, Lithuania

Organic Farming vs. Zero Budget Natural Farming (ZBNF)

Aspect Organic Farming [UPSC 2018] Zero Budget Natural Farming (ZBNF)
Defini?on Farming without synthe?c chemicals, relying Chemical-free farming using locally prepared
on organic inputs natural inputs
Input Cost High due to organic fer?lizers, compost, and Extremely low, relying on farm-made inputs
bio-fer?lizers
Fer?lizer Use Uses bio-fer?lizers like compost and green Uses cow dung-based formula?ons like
manure Jeevamrutha
Pest Control Neem oil, bio-pes?cides Natural pest repellents like Agniastra &
Dashparni Ark
Soil Management Organic manure, green mulching No plowing, focuses on soil microorganisms
Water Use Tradi?onal irriga?on methods Whapasa technique (soil moisture
conserva?on)
Government Paramparagat Krishi Vikas Yojana (PKVY), Bhara?ya Prakri?k Krishi Paddha? (BPKP)
Schemes MOVCD-NER

Key Government Ini?a?ves in Organic & Natural Farming

Scheme Implemented By Key Features
Paramparagat Krishi Vikas Yojana Ministry of Agriculture & ₹12,200/ha support for organic clusters,
(PKVY) Farmers’ Welfare financial aid for cer?fica?on
KARMAYOGI IAS
Mission Organic Value Chain Ministry of Agriculture Focus on organic farming in the Northeast region
Development (MOVCD-NER)
Bhara?ya Prakri?k Krishi Paddha? Ministry of Agriculture ₹12,200/ha for natural farming, focuses on
(BPKP) indigenous techniques
Soil Health Card Scheme Ministry of Agriculture Tests soil for nutrient deficiencies & provides
customized fer?lizer recommenda?ons

Miscellaneous Fer?lizer & Soil Health Facts

Concept Descrip?on UPSC Relevance
Fer?ga?on Injec?ng water-soluble fer?lizers into the UPSC 2020
irriga?on system
Green Manure Using leguminous plants to naturally enhance soil UPSC 2018
fer?lity
Market Development Promotes alterna?ve fer?lizers like organic Encouraging bio-fer?lizer
Assistance Policy compost adop?on
Soil Health Card Scheme Provides farmers with soil reports every 2 years UPSC 2017
Phosphoric Acid & Sulphur Key raw materials for DAP produc?on, imported UPSC 2020
from oil refineries

AGRICULTURE CREDIT AND MARKETING 🚜🌾

Agricultural Credit & Finance in India

Aspect Details
Share in Agricultural Credit Scheduled Commercial Banks (76%), Regional Rural Banks (11.9%),
(2023-24) Coopera?ves (12.1%)
Total Agricultural Credit Target ₹20.50 lakh crore
(2024-25)
Interest Subven?on Scheme (ISS) 3% subven?on on short-term crop loans up to ₹3 lakh
Kisan Credit Card (KCC) [UPSC Provides short-term credit for crop cul?va?on, allied ac?vi?es, working capital,
2020] and consump?on needs
Priority Sector Lending (PSL) 40% of bank loans allocated to agriculture, MSMEs, educa?on, etc. (75% for
RRBs, SFBs)
Agriculture Infrastructure Fund ₹1 lakh crore facility for post-harvest and community farming infrastructure
(AIF) (2020-21 to 2029-30)
SHG-Bank Linkage Programme Encourages banks to lend to Self-Help Groups (SHGs), par?cularly women-led
groups
Micro-Irriga?on Fund (NABARD) Supports adop?on of drip and sprinkler irriga?on
Role of NABARD Refinancing, SHG-Bank linkage, rural infrastructure development (RIDF), and
coopera?ve credit support

Ins?tu?onal Framework for Agricultural Credit

Ins?tu?on Role & Func?ons
Scheduled Commercial Banks (SCBs) Provide the majority of agricultural credit through
direct lending
Regional Rural Banks (RRBs) Focus on priority sector lending in rural areas
Coopera?ves Provide credit at lower interest rates to small and
marginal farmers
District Central Coopera?ve Banks (DCCBs) Finance Primary Agricultural Credit Socie*es (PACS) at
the village level
Na?onal Bank for Agriculture and Rural Development Regulates rural financing, refinances RRBs & SCBs,
(NABARD) supports rural infrastructure
KARMAYOGI IAS
Small Farmers Agri-Business Consor?um (SFAC) Promotes Farmer Producer Organiza*ons (FPOs),
implements e-NAM
APEDA (Agricultural & Processed Food Products Export Promotes agricultural exports, supports sugar import
Development Authority) monitoring
Farmer Producer Organiza?ons (FPOs) Encourages collec?ve farming, be]er market access

Crop Insurance in India: Evolu?on of Schemes

Scheme Period Descrip?on Coverage & Impact
First Individual Approach 1972- General Insurance Corpora?on of India Limited coverage, focused
Scheme 1978 pilot on select crops
Pilot Crop Insurance Scheme 1979- Loanee farmers insured under the "Area Confined to specific
(PCIS) 1984 Approach" regions & farmers
Comprehensive Crop Insurance 1985- Na?onwide coverage linked to First large-scale
Scheme (CCIS) 1999 ins?tu?onal credit implementa?on
Na?onal Agricultural Insurance 1999- Replaced CCIS, covering crop loss due to Increased coverage across
Scheme (NAIS) 2016 natural calami?es states & UTs
Modified NAIS (MNAIS) 2010- Pilot implementa?on in 50 districts Aimed to improve
2011 accessibility & efficiency
Pilot Weather-Based Crop 2007 Provided insurance based on adverse Large-scale
Insurance Scheme (WBCIS) weather pa]erns implementa?on
Pradhan Mantri Fasal Bima 2016 Comprehensive crop insurance against Largest crop insurance
Yojana (PMFBY) [UPSC 2016] natural calami*es, pests, and diseases scheme in India

Pradhan Mantri Fasal Bima Yojana (PMFBY) [UPSC 2016]

Feature Details
Launch Year 2016
Budget Alloca?on (2024-25) ₹14,600 crore
Objec?ve Crop insurance against natural calami*es, pests, diseases, and post-harvest losses
Premium Rates Kharif: 2%, Rabi: 1.5%, Commercial/Hor*cultural Crops: 5%
Eligibility Mandatory for loanee farmers, voluntary for non-loanee farmers since 2020
Technology Use Satellite imagery, drones, AI-based monitoring for faster claim processing
Revamped PMFBY 2.0 (2020) Strengthened claim se]lement, enhanced transparency, and state-wise flexibility
Challenges in Northeast India Administra?ve constraints, delayed claim processing, insurance penetra?on issues

Key Ins?tu?ons in Agricultural Policy & Credit Flow

Ins?tu?on (Year of Establishment) Objec?ve Key Roles & Features
Commission for Agricultural Costs & Recommends Minimum Works under Ministry of Agriculture &
Prices (CACP) - 1965 Support Prices (MSPs) Farmers’ Welfare
NABARD (1981) Provides & regulates rural credit Refinancing, microfinance, SHG linkage,
RIDF funding
SFAC (1994) Promotes FPOs, agri-business Implements e-NAM, provides financial
support
APEDA (1985) Facilitates agricultural exports Supports agri-export infrastructure,
monitors sugar imports
AGMARK (1937) Agricultural quality cer?fica?on Ensures product quality for domes?c &
export markets

Minimum Support Price (MSP) Mechanism

Parameter Details
Number of Crops Covered 22+ major crops annually
MSP Determina?on Body CACP (Commission for Agricultural Costs & Prices)
Formula Used A2+FL method (Cost of inputs + Family Labour)
Latest MSP (2024-25) Increases Len*ls (89% MSP increase over produc*on costs), Pulses & Oilseeds Focus
Government Procurement Agencies Food Corpora*on of India (FCI), NAFED, Colon Corpora*on of India (CCI)
KARMAYOGI IAS

Financial Inclusion Initiatives in Agriculture

Scheme/Ini?a?ve Purpose Key Features

Kisan Credit Card (KCC) [UPSC Short-term farm Working capital, consump?on needs, flexible
2020] credit withdrawals
Agriculture Infrastructure Fund Credit for agri-infra ₹1 lakh crore loan facility, 3% interest subven*on
(AIF)
Micro-Irriga?on Fund (NABARD) Water conserva?on Subsidies for drip & sprinkler irriga*on
SHG-Bank Linkage Programme Women-led credit Encourages Self-Help Groups (SHGs) to access formal
credit
Priority Sector Lending (PSL) Credit accessibility 40% of ANBC allocated for agriculture & MSMEs

Public Distribu?on System (PDS) & Food Security in India

Aspect Details
Legal Framework Na*onal Food Security Act, 2013 (NFSA)
Na?onwide Portability One Na*on-One Ra*on Card (ONORC) System
Coverage (NFSA) Covers 66% of the popula*on (75% rural, 50% urban)
Central Issue Price (CIP) Rice - ₹3/kg, Wheat - ₹2/kg, Coarse Grains - ₹1/kg
Pradhan Mantri Garib Kalyan Anna Yojana Free ra?on to 80 crore beneficiaries ?ll December 2024
(PMGKAY)
Fair Price Shops (FPS) 5.33 lakh FPS opera?onal under PDS
Challenges Leakages, corrup*on, exclusion errors, transporta*on
inefficiencies
Reforms Suggested Direct Benefit Transfers (DBT), Smart PDS, End-to-End
Computeriza*on

Nego?able Warehouse Receipts (NWR) & e-NWR System

Feature Details
Launched 2011, by Ministry of Consumer Affairs, Food & Public Distribu*on
Objec?ve Enables farmers to get credit against stored produce
Regulated By Warehousing Development and Regulatory Authority (WDRA)
Electronic System e-NWR System (2017) for paperless warehouse receipts
Advantages Reduces post-harvest losses, Improves price discovery, Enhances liquidity

Agricultural Markets & Reforms

Aspect Details
APMC System (State-based) Regulates agricultural markets, Eliminates middlemen, Ensures
fair pricing
E-NAM (Electronic Na?onal Agricultural Market) Launched: 2016, Pan-India online trading portal for farm
[UPSC 2017] produce
Objec?ves of E-NAM Improves price discovery, Reduces market fragmenta*on,
Na*onwide access
Challenges in APMC Markets Limited private par*cipa*on, High commissions, Carteliza*on
by traders
Reform Measures Model APMC Act, 2017, Market Infrastructure Fund, Private
Mandis Encouraged

Procurement Mechanisms in India

Procurement Type Defini?on Example Objec?ve
Price Support Government buys at MSP if market MSP for 23 crops Protects farmers from
System (PSS) price falls below it (Wheat, Rice) price fluctua?ons
KARMAYOGI IAS
Deficiency Price Farmers compensated for the difference PDPS under PM- Reduces direct
Payment between MSP & market price AASHA government procurement
Market Assurance Government guarantees buyers support State-level Encourages private
Program if prices fall below a level ini*a*ves par?cipa?on
State-Specific MSPs States declare MSPs higher than Punjab, Haryana Aligns MSP to state crop
centrally fixed rates bonuses priori?es
Price Stabiliza?on Government intervenes to prevent price Used for Onion, Maintains price stability
Fund (PSF) crashes Potato
Income Support Direct transfers instead of MSP-based PM-KISAN (₹6,000 Provides direct financial
Schemes support per year) aid

Minimum Support Price (MSP) System

Aspect Details
Recommended By Commission for Agricultural Costs & Prices (CACP)
Approved By Cabinet Commilee on Economic Affairs (CCEA)
Nodal Procurement Agency Food Corpora*on of India (FCI)
Produc?on Cost Considered A2 (Paid-out cost), A2+FL (Paid-out + Family Labour), C2 (Comprehensive
cost)
MSP Coverage Cereals (7), Pulses (5), Oilseeds (8), Sugarcane (Fair & Remunera*ve
Price - FRP)
MSP Formula (Swaminathan Recommended MSP = 1.5 *mes C2 cost
Commi]ee)

Role of Food Corpora?on of India (FCI) in Procurement & Distribu?on

Process Descrip?on
Procurement from Farmers FCI purchases grains at MSP during harvest
Storage & Buffer Stock Grains stored in FCI godowns, warehouses
Alloca?on to States FCI distributes food grains for PDS under NFSA
Fair Price Shops (FPS) States transport grains from FCI depots to FPS
Cost Components MSP + Procurement cost + Storage + Transporta*on + Distribu*on
Challenges Storage issues, Leakages, Delays in farmer payments

Shanta Kumar CommiXee Recommenda?ons (2014) on FCI Reforms

Recommenda?on Objec?ve
Decentralized Procurement Transfer procurement responsibility to State Governments
Strategic Food Reserves Maintain 5 MMT emergency stock for crises
Cash Transfers Instead of PDS Shiv to Direct Benefit Transfer (DBT) for urban consumers
Private Sector Par?cipa?on Allow private players in procurement & storage
Reducing NFSA Coverage Reduce NFSA coverage from 66% to 50% for be]er targe?ng

MSP for Minor Forest Produce (MFP) [UPSC 2023]

Feature Details
Launched By Ministry of Tribal Affairs
Objec?ve Ensures fair prices for tribal communi*es
No. of Items Covered Ini?ally 12 items, now 70+ (Tamarind, Mahua, Honey, Neem, Medicinal Plants)
Implemen?ng Body TRIFED (Tribal Coopera*ve Marke*ng Federa*on of India)

LAND REFORMS
Defini?on & Objec?ves of Land Reforms
Aspect Details
Defini?on Policy and legal measures to redistribute land, improve tenure security, and ensure equitable access
to land resources.
KARMAYOGI IAS
Objec?ves Enhance agricultural produc*vity, reduce land inequality, uplip rural poor, improve land records,
and promote sustainable land use.

Key Components of Land Reforms

Reform Type Descrip?on Impact
Aboli?on of Eliminated intermediaries (Zamindars), Increased land ownership among peasants.
Zamindari System making cul?vators direct landowners.
Tenancy Reforms Provided security of tenure, rent Reduced tenant exploita?on and enhanced
regula*on, and ownership rights to farm investments.
tenants.
Ceiling on Imposed maximum limits on land Land redistribu?on to landless farmers;
Landholdings ownership to prevent land concentra?on. surplus land was oven poorly implemented.
Land Consolida?on Merged fragmented holdings into Improved mechaniza?on and irriga?on
economically viable units for efficient efficiency.
farming.
Land Leasing Laws Legalized leasing, allowing tenants access Encouraged landowners to lease land
to land for cul?va?on. without fear of losing ownership.

Major Land Reform Ini?a?ves in India (Chronological)

Period Key Reforms Objec?ve
1950- Bhoodan & Gramdan Movements Voluntary land dona?ons to landless farmers.
1972
1973- Drought Prone Area Programme (DPAP, 1973) Land management in drought-prone regions.
1985
Integrated Rural Development Programme (IRDP, Land and watershed development for rural areas.
1978)
Na*onal Rural Employment Programme (NREP, Wasteland development, soil conserva?on,
1980) afforesta?on.
1985- Ceiling on Landholdings Revised (1985) Strengthened surplus land redistribu?on.
2001
Na*onal Wasteland Development Board (NWDB, Reclaimed degraded land for agriculture.
1985)
Panchaya* Raj Act (1988) Empowered local governance for land
management.
Post- Urban Land Policy (2007) Ensured efficient land use in urban areas.
2001
Right to Fair Compensa*on & Transparency in Fair compensa?on, 80% to 51% consent
Land Acquisi*on Act (2013) requirement for private projects.
Agricultural Land Leasing Act (2016) Allowed leasing with ins?tu?onal support for
farmers.

Digital & Modern Land Reforms in India

Ini?a?ve Launch Descrip?on Impact
Year
Na?onal Land Records 2008 Digi*zed land records & Reduced land disputes,
Moderniza?on Programme modernized land administra*on. increased transparency.
(NLRMP)
Digital India Land Records 2008 Centralized land records, cadastral Enhanced land transac*on
Moderniza?on Programme mapping, and Record of Rights efficiency.
(DILRMP) (RoR).
SVAMITVA Scheme 2021 Used drones to map rural land Gave legal ownership to rural
holdings; issued property cards. property holders.
ULPIN (Bhu Aadhaar) 2022 Assigned unique ID numbers to Improved land governance
land parcels for standardiza*on. and reduced fraud.
KARMAYOGI IAS
Na?onal Land Mone?za?on 2023 Mone*zed surplus government & Generated revenue,
Corpora?on (NLMC) PSU land. prevented land
mismanagement.

Challenges in Land Reforms

Challenge Descrip?on Impact
Fragmented Land 85% of Indian farmers have small/marginal Limits mechaniza?on & produc?vity.
Holdings holdings (<2 hectares).
Slow Implementa?on Land ceiling laws poorly enforced; surplus land Favors large landowners, leaving
oven not redistributed effec*vely. poor landless.
Weak Tenancy Rights Informal leasing is widespread but remains Tenants lack security, leading to
legally uncertain in many states. reluctance in investments.
Lack of Updated Land Many land records outdated due to poor Causes land disputes and hinders
Records maintenance. digitaliza?on.
Urban Land Land acquisi?on for infrastructure projects faces Affects development and
Constraints delays due to legal & social conflicts. compensa?on fairness.

Way Forward for Land Reforms

Recommended Ac?on Proposed Benefit
Fast-track digi?za?on of land records Reduces land disputes and increases transparency.
Expand SVAMITVA scheme across India Grants legal property rights to rural landholders.
Strengthen tenancy laws & promote secure land Encourages landowners to lease land without fear of losing
leasing ownership.
Implement Na?onal Land Use Policy (NLUP) Ensures sustainable urban & rural land management.
effec?vely
Encourage land pooling models for urban Prevents unplanned urbaniza?on and promotes equitable
expansion land sharing.
Use AI & GIS mapping for be]er land resource Enhances decision-making for land alloca?on &
management infrastructure.

Agriculture Allied Sectors in India

Fisheries Sector in India

Aspect Details
Growth Rate (2014-15 to 2021-22) 8.61% per annum
Gross Value Added (GVA) Contribu?on 1.069% to Na*onal GVA, 6.86% to Agriculture GVA
Increase in Agricultural GVA Contribu?on From 4.75% (2013-14) to 6.86% (2021-22) (+44.42%)
Major Fish Producing States Andhra Pradesh, West Bengal, Gujarat, Tamil Nadu, Kerala
Government Support PMMSY (Financial & Infrastructure Support)

Dairy & Poultry Sector

Aspect Top Producing States Contribu?on (%)
Milk U]ar Pradesh, Rajasthan, Madhya Pradesh, Gujarat, 15.72%, 14.44%, 8.73%, 7.49%,
Produc?on Andhra Pradesh 6.70%
Egg Produc?on Andhra Pradesh, Tamil Nadu, Telangana, West Bengal, 20.13%, 15.58%, 12.77%, 9.94%,
Karnataka 6.51%

Government Schemes & Achievements in Allied Sectors

Scheme Objec?ve Key Features & Achievements
Pradhan Mantri Matsya Sampada Fisheries Infrastructure Supports fish produc*on, cold storage, and
Yojana (PMMSY) & Growth processing infrastructure.
Pradhan Mantri Kisan Sampada Food Processing & Value Provides financial support for food processing
Yojana (PMKSY) Addi*on units, cold chains, and storage.
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Kisan Credit Card (KCC) for Animal Credit Access for 4.26 lakh KCCs sanc*oned for fisheries, 47 lakh
Husbandry & Fisheries Farmers for animal husbandry (2024).

Food Processing Sector in India

Aspect Details
Role Adds value to agricultural produce, enhances food security, promotes exports.
Key PMKSY, Integrated Cold Chain & Value Addi*on Infrastructure Scheme.
Schemes
Impact Infrastructure support, cold storage, 13,000+ DPIIT-recognized start-ups in AI, robo*cs, and food
tech.

Credit Support for Allied Sectors

Credit Scheme Sector Covered Sanc?ons (2024)
Kisan Credit Card (KCC) Fisheries & Animal Husbandry 4.26 lakh (Fisheries), 47 lakh (Animal Husbandry)

Infrastructure Development in Allied Sectors

Ini?a?ve Objec?ve Key Features
PMMSY Fisheries Growth Cold storage, processing units, enhanced fish
produc*on.
Cold Chain Infrastructure Reduce Post-Harvest Storage, processing, and transport support for
(PMKSY) Losses perishable goods.
Animal Husbandry Dairy & Meat Sector Subsidized loans for modern processing & storage.
Infrastructure Fund Growth

Challenges & Way Forward

Challenges Solu?ons
Low Produc?vity in Fisheries Expand cold storage, modernize fishing fleets, introduce technology-driven
aquaculture.
Poor Infrastructure in Animal Increase credit support, modern processing units, encourage FPOs.
Husbandry
Post-Harvest Losses in Food Strengthen cold chain infrastructure, improve logis?cs, promote food start-
Processing ups.
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INDUSTRY, MANUFACTURING AND INFRASTRUCTURE
Industrial growth is key to economic progress, providing employment and fostering moderniza?on. Early Five-Year
Plans focused on industrial development to diversify beyond limited industries like co]on tex?les and iron and steel.
• Economic Control: At independence, the private sector lacked capital, so the government intervened to
develop key industries.
• Socialist Model: The Second Five-Year Plan emphasized government control over cri?cal industries, with the
private sector in complementary roles.

Industrial Policy Resolu?on 1956 – Updated Overview

Aspect Details
Objec?ve Framework for planned industrial growth, regional balance, public sector dominance in core
sectors, and SME promo?on.
Classifica?on - Schedule A (Public Sector): Strategic sectors (defense, railways).
- Schedule B (Mixed Sector): Public & private co-existence (machine tools, chemicals).
- Schedule C (Private Sector): Rest of industries, regulated by the government.
Licensing Industrial licensing mandated to control loca?on, scale, and technology use.
SSI Focus Protected Small-Scale Industries (SSI) with investment cap raised to ₹5 crore in 2023 for
MSME classifica?on.
Import Focused on self-reliance via tariffs & quotas; reduced in 1991 reforms.
Subs?tu?on
Current Post-1991, focus shived to liberaliza*on, priva*za*on & globaliza*on (LPG); PLI schemes
Relevance now support key sectors.

Industrial & Manufacturing Performance (FY24)

Indicator Value/Status (FY24)
Overall GDP Growth 8.2% (Provisional GDP, May 2024)
Industrial Growth 9.5% (FY24)
Manufacturing Growth 7.8% (FY24)
Manufacturing Share in GVA 14.3%
Manufacturing PMI Consistently above 55 (indica?ng robust expansion)
Index of Industrial Produc?on (IIP) 4.9% (April-Dec 2023)
Gross Fixed Capital Forma?on (GFCF) 29.2% of GDP (FY24)
Industrial Exports Merchandise exports reached $437 billion (FY24)

Sector-Wise Manufacturing Growth (FY24)

Sub-Sector Growth Rate (FY24)
Automobile & Auto Components 9.2%
Pharmaceu?cals 8.4%
Electronics Manufacturing 17.2% (PLI-driven boom)
Tex?les & Apparel 2.8% (sluggish due to global slowdown)
Renewable Energy Equipment 10.1%
Steel & Metals 6.9%

Key Challenges in Manufacturing Sector (2024)

Challenge Details
Logis?cs Costs 13-14% of GDP, higher than global average (8-9%).
Low R&D Investment Private sector R&D is only 0.34% of GDP.
Skill Mismatch ~40% workforce lacks required industry skills.
Regulatory Bo]lenecks Land acquisi?on, environment clearances s?ll delayed in some sectors.
Energy Costs Industrial power tariffs remain high compared to ASEAN compe?tors.
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Major Government Ini?a?ves (2024)
Scheme/Policy Key Features & Achievements (2024)
Produc?on-Linked Incen?ve (PLI) ₹1.97 lakh crore across 14 sectors; ₹1.03 lakh crore investments
commi]ed.
PM Ga? Shak? Integrated mul*-modal logis*cs plan reducing logis?cs cost by 5%.
Credit Guarantee Scheme for Credit guarantee coverage enhanced to ₹2 crore.
MSMEs
Na?onal Logis?cs Policy (2022) Focus on digital logis*cs planorm, warehousing standardiza?on.
Startup India Ini?a?ve Over 1 lakh DPIIT-registered startups, ~7,000 manufacturing startups.
Make in India 2.0 Focus on 25 sectors including defense, tex?les, electronics, food
processing.

Public Sector Enterprises – Types & Trends

Type Defini?on Examples
Departmental Enterprises Directly under ministries, no separate legal en?ty. Indian Railways, Post Office
Statutory Corpora?ons Created by special acts of Parliament with LIC, FCI, Air India (before
opera?onal autonomy. priva*za*on)
Government Companies Registered under Companies Act, govt holds 51%+ ONGC, SAIL, NTPC
stake.
Navratna, Maharatna, Graded by financial strength & opera?onal ONGC (Maharatna), EIL
Miniratna autonomy. (Navratna)

Import Subs?tu?on vs. Export Promo?on (2024 Focus)

Aspect Import Subs?tu?on Export Promo?on
Focus Domes*c self-sufficiency Global market integra*on
Policy Tools Tariffs, quotas, licensing SEZs, FTAs, export incen*ves
Outcome Protected domes?c industry Improved compe??veness, foreign exchange earnings
Current Emphasis PLI schemes, defense indigeniza?on FTAs with UAE, Australia, UK (under nego*a*on)

Key Manufacturing & Industrial Trends (Economic Survey 2023-24)

Trend Observa?on
Manufacturing Revival GVA share rebounded to 14.3% aver COVID slump.
PLI Performance Over ₹80,000 crore investment mobilized under PLI schemes.
Electronics Boom Mobile exports crossed $11 billion (FY24).
Green Manufacturing Focus on balery storage, green hydrogen, solar equipment.
Diversifica?on Growth in medical devices, semiconductors, drones.

Budget 2024-25 Alloca?ons for Industrial Sector

Scheme/Program Alloca?on (₹ Crore)
MSME Credit Support & Finance ₹23,400 crore
PLI Schemes (14 sectors) ₹1.97 lakh crore (cumula*ve)
Na?onal Industrial Corridor Development ₹10,000 crore
PM Ga? Shak? (Logis?cs Infra) ₹75,000 crore

Role of MSMEs in Industrial Growth

Aspect Details (2024)
Share in GDP 30% (including services sector MSMEs)
Employment 11 crore jobs (both manufacturing & services)
Export Share 45% of total exports
Support Measures - Emergency Credit Line Guarantee Scheme (ECLGS)
- Vivad se Vishwas for pending payments
Digital Transforma?on Over **2 lakh MSMEs onboarded on Open Network for Digital Commerce (ONDC).
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Global Industrial Compe??veness – India’s Posi?on
Indicator Rank/Observa?on
Global Manufacturing Index 2023 (UNIDO) 5th
Global Innova?on Index 2023 40th
Ease of Doing Business (Last Ranking 2020) 63rd
Logis?cs Performance Index (2023) 38th
FDI Inflows (FY24) $70 billion+

TYPES OF PSU

Category Criteria Autonomy Granted Examples

Miniratna I Profitable for 3 years continuously. Net Capital expenditure up to Varies
profit of ₹30 crore+ in one of those 3 years. ₹500 crore or net worth (Dynamic)
(whichever is lower)
without government
approval.
Miniratna Profitable for 3 years continuously. Positive Capital expenditure up to Varies
II net worth. ₹300 crore or 50% of net (Dynamic)
worth (whichever is lower)
without government
approval.
Navratna Miniratna-I status. "Excellent" or "Very Invest up to ₹1,000 crore Bharat Heavy
Good" MoU rating in 3 of last 5 years. without approval. Enter Electricals Ltd,
Composite score of 60+ on performance joint ventures/mergers BPCL, Power
indicators (Net Profit to Net Worth, without clearance. Grid
Manpower Cost, PBDIT to capital, Profit to Corporation
turnover, EPS, Inter-Sectoral Performance).
Maharatna Navratna Status, Listed on Indian Stock Invest up to ₹5,000 crore Coal India Ltd,
Exchange with minimum public without approval. Form Indian Oil
shareholding under SEBI regulations, joint ventures abroad Corporation,
Global Presence/international operations. without clearance. Raise ONGC
Net worth > ₹15,000 crore for the last 3 project resources
years. Avg. turnover > ₹25,000 crore for the independently.
last 3 years. Operating profit > ₹5,000 crore
for last 3 years

MSMEs in India
Aspect Details (2025)
Defini?on & Micro Enterprise: Investment ≤ ₹1 crore; Turnover ≤ ₹5 crore
Classifica?on (As per Small Enterprise: Investment ≤ ₹10 crore; Turnover ≤ ₹50 crore
MSME Development Medium Enterprise: Investment ≤ ₹50 crore; Turnover ≤ ₹250 crore
Act, 2006 & Revised
in 2020)
Economic Contribu?on to GDP: ~30.5% (FY25)
Contribu?on Share in Manufacturing Output: ~36.7%
Contribu?on to Exports: ~46.3% (FY25)
Total Employment: ~11.1 crore (FY25)
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Sectoral Composi?on Manufacturing MSMEs: ~30%
Trade & Services MSMEs: ~52%
Agro-Allied & Rural Enterprises: ~18%
MSME Registra?on Total Registered MSMEs (July 2025): 4.69 crore
(Udyam Portal) Formalisa?on Rate: ~72%
Udyam Assist Plaworm onboarded 1.2 crore informal micro units
Bank Credit to Total Credit Flow (FY24-25): ₹14.2 lakh crore
MSMEs MSMEs under Priority Sector Lending (PSL): ~₹9.8 lakh crore
[CSE 2023] Credit to Micro Enterprises: ₹5.2 lakh crore
Credit to Small Enterprises: ₹3.6 lakh crore
Credit to Medium Enterprises: ₹2.1 lakh crore
Credit Guarantee Total Guarantees Sanc?oned (FY25): 17.24 lakh guarantees worth ₹2.03 lakh crore
Scheme (CGTMSE) Total Guarantees Approved (Since Incep?on): 91.76 lakh guarantees worth ₹6.78 lakh
crore
Key Government - Prime Minister’s Employment Genera*on Programme (PMEGP): FY25 - Supported
Schemes 89,118 micro-units, genera?ng 7.13 lakh jobs
- Credit Guarantee Fund for MSEs: ₹10,000 crore infusion enabling ₹2.4 lakh crore
addi*onal loans (Budget 2025)
- Interest Subven*on Scheme: Extended ?ll March 2026, with 2% interest subven*on for
micro & small units
- RAMP (Raising and Accelera*ng MSME Performance): World Bank-assisted project
enhancing MSME compe??veness
- Champions Portal: MSME grievance redressal and support
Formalisa?on Push Integra?on with GSTN, EPFO, E-Shram, GeM, ONDC plaworms for real-?me data sharing
Linked with 37 government portals to streamline access to finance, market, and skilling
support
Technology & Digital - MSMEs onboarded on ONDC: ~13 lakh (target 2025)
Adop?on - Digital Payments Adop*on: ~82% MSMEs using UPI/payment gateways
- TReDS (Trade Receivables Discoun*ng System): ₹90,000 crore worth invoices
discounted (FY25)
State-wise Ular Pradesh: 90.3 lakh (19.6%)
Distribu?on (Top 5) Maharashtra: 85.4 lakh (18.5%)
Tamil Nadu: 61.7 lakh (13.4%)
Gujarat: 51.2 lakh (11.1%)
West Bengal: 43.9 lakh (9.6%)
Employment MSMEs provide 45% of industrial employment
Genera?on Over 7 lakh jobs created under PMEGP alone in FY24-25
Exports Contribu?on MSME exports share: ~46.3% (FY25)
Top sectors: Tex*les, Engineering Goods, Pharmaceu*cals, Handicraps
Key Challenges - Delayed Payments: ₹14,200 crore pending payments reported on Samadhaan Portal
(June 2025)
- Credit Access: 40% micro units s?ll dependent on informal sources
- Low R&D Spend: Less than 0.4% of turnover on average
- Limited Tech Adop*on in micro segment (only 6% using AI, IoT, automa?on)
Budget 2025 - ₹9,000 crore alloca*on to Credit Guarantee Fund
Ini?a?ves - ₹1,250 crore for MSME Skill Development (PM Vishwakarma Yojana)
- ₹1,200 crore for MSME Export Hubs (Districts as Export Hubs Ini*a*ve)
- ₹2,500 crore for Green MSME Fund to promote sustainability and circular economy
Green & Sustainable - MSMEs cer?fied under Green Manufacturing Standards: 8%
MSMEs - Solar adop*on, waste recycling, energy efficiency incen*ves under Green MSME Fund
2025
Opportuni?es Ahead - Integra?on into Global Value Chains (GVCs) via export hubs
- Increased e-commerce par?cipa?on via ONDC
- Par?cipa?on in PLI schemes across electronics, automo*ve, pharma, tex*les
- Government support for cluster development & technology upgrading
KARMAYOGI IAS
MSME Digital - Udyam Portal linked with 37 planorms for credit, market access, and skilling
Integra?on (2025) - E-Shram linkage formalising informal workforce
- Increasing onboarding to GeM & ONDC for enhanced market access
Support for Women - 20% of registered MSMEs are women-owned enterprises (FY25)
Entrepreneurs - Special credit schemes & mentoring under Women Entrepreneurship Planorm (WEP)
Employment by - Manufacturing MSMEs: 45% employment
Sector (2025) - Services MSMEs: 48% employment
- Agri-allied MSMEs: 7% employment

Topic Details and Explanation Facts to Remember for Prelims

Purchasing - Published by S&P Global (formerly IHS Markit) for - Published by S&P Global
Managers’ Index India. (Nikkei was earlier publisher).
(PMI) - Tracks private sector activity (Manufacturing & - Covers 500 private firms only,
Services). not PSUs.
- Does not measure actual production but business - Not used for GDP calculation.
sentiment via monthly surveys.
- Range: 0 to 100.
- PMI > 50 = Expansion; PMI < 50 = Contraction.
- Prelims PYQ: 2020.
Index of - Published by National Statistical Office (NSO). - Released monthly.
Industrial - Base Year: 2011-12. - Covers entire formal sector
Production (IIP) - Tracks actual industrial production across (private + public).
Manufacturing (77.6%), Mining (14.4%), Electricity - Used for GDP calculation.
(7.9%).
- Prelims PYQ: 2012, 2015.
Eight Core - 8 core sectors with 40.27% weight in IIP. - Core sectors’ weight in IIP:
Industries - Order of weight: Refinery Products > Electricity > 40.27%.
Steel > Coal > Crude Oil > Natural Gas > Cement > - Refinery Products have
Fertilizers. highest weight.
- Prelims PYQ: 2012, 2015. - Released monthly by DPIIT
(Ministry of Commerce).
Annual Survey of - Released by Ministry of Statistics & Programme - Most comprehensive dataset
Industries (ASI) Implementation (MoSPI). for formal manufacturing.
- Covers factories with 10+ workers using power, 20+ - Excludes unorganised sector
workers without power. (covered by NSS surveys).
- Provides data on employment, wages, input costs,
and profitability for formal manufacturing sector.
- Tracks manufacturing processes, repair services,
gas, water supply, cold storage.
PMI vs IIP - PMI tracks business sentiment, while IIP tracks - PMI = Sentiment indicator;
Comparison actual production. IIP = Output indicator.
- PMI covers only private sector, IIP covers both - IIP base year: 2011-12.
private and public sectors. - PMI is released monthly.
- PMI is less comprehensive than IIP.
- PMI covers Manufacturing + Services, while IIP
covers only Manufacturing.
Reimagining - Ground Coverage Restrictions: Indian regulations - India’s FAR (Floor Area
Building allow only 40-60% land usage, while Hong Kong allows Ratio): 1.3.
Regulations for up to 100%. - Ground coverage: 40-60%
Manufacturing - Setback Rules: Loss of up to 90% land for micro- allowed.
(Economic Survey enterprises in some states. - Promotes rationalisation for
2023-24) - Parking Rules: 12-70% land lost for off-street better land use.
parking.
- Floor Area Ratio (FAR): India caps FAR at 1.3,
Singapore allows 15X plot size.
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PMI Performance - Manufacturing PMI (April 2024): 58.7 (Expansion). - PMI above 50 = Expansion.
in FY24 - PMI consistently stayed above 50 throughout FY24, - Published monthly by S&P
indicating expansion in manufacturing activity. Global.
Steel Sector - Finished steel production grew 38.2% in FY24. - India is 2nd largest producer
Growth - Consumption growth: 13.7%; Exports growth: of crude steel (after China).
(Economic Survey 13%; Imports growth: 11.5%. - PM Gati Shakti will boost
2023-24) steel demand.
Government - Reduce land use restrictions, simplify FAR and - Increased land availability =
Suggestions for setback rules. Lower production cost.
Industrial - Adopt flexible norms for building factory - Regulatory flexibility is crucial
Reforms infrastructure based on technology adoption (e.g., fire- for MSMEs.
(Economic Survey resistant materials).
2023-24) - Encourage inter-state comparison to adopt best
practices.

Topic Details and Explanation Facts to Remember for Prelims

One District One - Launched: 2018. - First initiated in UP, later
Product (ODOP) - Objective: Promote unique products of each district expanded nationally.
Initiative to boost self-reliance and reduce regional economic - Part of Aatmanirbhar Bharat
disparities. Abhiyan.
- Coverage: 1102 products identified across 761 - Unity Malls promoted under
districts. Budget 2023-24.
- Product Categories: Agriculture, handloom, textiles,
food processing, marine, and services.
- Budget 2024-25: Emphasis on "Unity Malls" to
showcase ODOP and GI-tagged products.
- Global Promotion: G20 events promoted ODOP
products globally during India’s Presidency.
ODOP Success - Shopian (Kashmir): Apples - 20% rise in - ODOP items aligned with GI-
Stories production. tagged products for better
- Uttarkashi (Uttarakhand): Red rice - Boosted branding.
organic farming skills. - ODOP linked with District
- Araku Valley (Andhra Pradesh): Coffee - 20% rise Export Hubs initiative.
in output.
- Kandhamal (Odisha): Turmeric - 70% increase in
procurement.
- Bhatinda (Punjab): Honey - 30% increase in
production.
China Plus One - Global shift post-COVID to diversify supply chains - Term coined around 2018.
Strategy away from China. - India’s share in global
- Boston Consulting Group (2023): 90% of North manufacturing still <3%.
American firms moving production to countries like - India among top contenders for
Mexico, Vietnam, India. supply chain relocation,
- Driven by supply chain vulnerabilities, rising costs, especially in electronics and
and geopolitical risks. pharma sectors.
India’s - Large Market: 1.4 billion population, rising - India became 2nd largest
Advantages in incomes. mobile manufacturer globally.
China Plus One - PLI Scheme: Direct incentives linked to incremental - PLI outlay: ₹1.97 lakh crore (14
production and exports (14 sectors). sectors).
- Export Success: Electronics exports to US (USD 8.7 - Top sectors under PLI:
billion surplus in FY24), mobile exports USD 5.7 Electronics, Pharma, Solar PV,
billion (FY24). EVs.
- Apple: 14% of global iPhone production (USD 14
billion) now in India.
India’s - Focus on reducing trade costs & attracting FDI. - DFC reduces logistics cost by
Integration into - Improved Logistics Performance Index (LPI): 30%.
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Global Value Rank 38 (2023). - India’s Logistics Cost: ~13% of
Chains (GVCs) - Industrial Corridors & Dedicated Freight GDP (target: 8% by 2030 under
Corridors (DFC) reduce costs and improve NLP).
movement. - India-UK FTA under
- PLI-linked FDI brings in quality investments. negotiation (2025 focus).
Key Growth & - Renewable Energy Exports: To US, USD 327 - Renewables = 42% of total
Export Sectors million (FY24), up from USD 199 million (FY20). installed power capacity (2024).
under GVC Focus - Green Hydrogen Mission: Focus on exporting - Semicon India Program aims
electrolyzers and green ammonia. for 2+ chip fabs by 2026.
- Semiconductors & Next-gen Tech: Semicon India - PLI Solar PV target: 280 GW
Program (USD 10 billion) attracting fabs (Micron, by 2030.
Tata Electronics).
Balancing - Challenges: USD 70 billion trade deficit (FY24), - Top imports from China:
Relations with dependence on API, electronics, solar components. Electronics, machinery, chemicals,
China - Opportunities: Encourage Chinese FDI into Indian telecom.
manufacturing to substitute imports. - India’s 2024 focus: Diversify
- Lessons from Brazil, Turkey, and EU: Managed solar supply chain under Green
Chinese investments for technology transfer while Hydrogen Mission.
reducing over-reliance.
Long-Term - Focus Sectors: - India aims to be global hub for
Strategic Focus 1. Renewables: Solar, Wind, Green Hydrogen. Green Hydrogen by 2030.
for India’s 2. Advanced Tech: AI, semiconductors, telecom, - Top AI adoption sectors:
Manufacturing space tech. Manufacturing, healthcare,
- Policy Support: Deepen integration with US, EU agriculture.
through tech partnerships (US-India Clean Energy - First domestic chip fab
Initiative, EU-India Trade and Tech Council). (Micron) ready by 2026.

Topic Details and Explanation Facts to Remember for Prelims

Coal Sector - Nationalisation Period: 1971-73 under Indira Gandhi. - UPSC Prelims: 2012, 2019.
Overview - Post-Liberalisation: Coal Mines (Special Provisions) - India = 2nd largest coal
Act, 2015 opened coal mining for private sector through producer globally (after China).
competitive auction. - India has 5th largest coal
- Significance: Provides over 55% of India’s primary reserves globally (319 billion
commercial energy and powers 70% of electricity tonnes).
generation.
- Production (FY24): 997.2 million tonnes (MT).
- Consumption (FY24): 1233.86 MT.
- Imports (FY24): 261 MT.
Production vs - Production CAGR (FY14-FY19): 5.2%. - India’s coal import dependency
Consumption - Consumption CAGR (FY14-FY19): 5.6%. is highest for coking coal (85%).
Trends - Import CAGR (FY14-FY19): 7.1%. - Thermal coal = bulk of
- Production CAGR (FY19-FY24): 6.5%. domestic production.
- Consumption CAGR (FY19-FY24): 5.0%. - India aims to become self-
- Import CAGR (FY19-FY24): 2.1%. sufficient in thermal coal by
- FY24 YoY Growth: Production 11.7%, Consumption 2030.
10.7%, Imports 9.8%.
National Coal - Launched: 2020. - NCI covers non-coking coal
Index (NCI) - Developed by Indian Statistical Institute, Kolkata. only.
- Purpose: To calculate government’s revenue share from - First-of-its-kind composite
coal block auctions based on market prices. price index for coal sector.
- Index Weighting: Based on different grades of coal and
their notified prices.
Key Initiatives - Coal Gasification Target: 100 MT by 2030; ₹8,500 - First Mile Connectivity aims to
and Reforms crore viability gap funding (2023-24). eliminate truck transport within
- Integrated Coal Logistics Policy (2024): Focus on 50 km of mines.
multimodal evacuation via rail, road, and conveyor belts. - Coal gasification converts coal
- Amended Coal Blocks Allocation Rules (2023):
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Streamlined auction and operational processes. into synthetic gas, which can
- First Mile Connectivity Projects: High-capacity replace natural gas.
conveyors and silos for faster evacuation.
- Renewable Energy by CIL: 3,000 MW renewable
capacity target by FY26; 8.6 million solar units generated
in FY24.
Critical - Strategic Focus: Acquisition of lithium, cobalt, and - CIL formed a JV with NALCO
Minerals & nickel mines abroad. and Hind Copper for overseas
Diversification - Exploration: CIL diversifying into critical minerals for mineral acquisition (KABIL).
Efforts energy transition. - Critical minerals identified
under National Mineral Policy
2019.
Challenges in - Technological Gaps: Limited use of advanced - Coking coal is critical for steel
the Coal Sector underground mining tech. production.
- Regulatory Delays: Land acquisition, environmental & - Domestic coal reserves have low
forest clearances. calorific value (more ash).
- Coking Coal Dependency: 85% of coking coal still
imported; low domestic beneficiation capacity.
Opportunities - Coal Bed Methane (CBM): Gas trapped in coal seams - India ranks 5th globally in
for Sustainable extracted for cleaner use. CBM reserves.
Coal Use - Coal Mine Methane (CMM): Methane released during - CIL identified 20 CBM blocks
mining captured for energy use. for commercial extraction.
- Coal-to-Liquid (CTL): Converting coal into synthetic - First commercial coal-to-
fuels. methanol plant (CIL project)
- Coal-to-Methanol: Producing methanol for cleaner expected by 2026.
industrial use.
Production as - FY14: 76.6%. - India targets 85% self-
% of - FY19: 78.6%. sufficiency by 2028.
Consumption - FY24: 80.8%. - Coal import reduction part of
Aatmanirbhar Bharat.

Topic Details and Explanation Facts to Remember for Prelims

Industrial Policy of - Economic Model: Mixed economy combining - First industrial policy post-
1948 public and private sectors. independence.
- State’s Dual Role: Entrepreneur + Regulator. - Framework for mixed
- Industry Classification: economy laid down.
1. Strategic Industries: Monopoly of Central Govt - Licence-Quota-Permit Raj
(e.g., atomic energy, arms). originated here.
2. Basic/Key Industries: Public & private
ownership, under central control (e.g., coal, iron &
steel).
3. Important Industries: Private-led, but centrally
regulated.
4. Other Industries: Open to private &
cooperative sectors.
Industries - Objective: Empower government to regulate & - Provides legal basis for
(Development & control industries via licensing. industrial licensing.
Regulation) Act, 1951 - Introduced Industrial Licensing System: - Still governs some sectors like
License mandatory to establish, expand, or defence & explosives.
diversify industries.
Industrial Policy - Core Policy: Laid foundation of Planned - Reinforced socialist approach
Resolution, 1956 Industrial Development in India. (Nehruvian socialism).
- Industry Reservation: - Created Licence-Quota-
1. Schedule A (17 industries): Complete central Permit system.
govt monopoly (e.g., railways, atomic energy). - Formed basis of 5-Year Plans’
2. Schedule B (12 industries): State-owned, but industrial strategy.
private participation allowed.
3. Schedule C: All others open to private sector.
- Promoted Heavy Industries: Focused on capital
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goods, basic & infrastructure industries.
- Emphasized regional balance & small industry
support.
New Industrial Policy, - End of Licence Raj: Industrial licensing - Triggered after BoP crisis
1991 (Economic abolished for all except 5 sectors (e.g., defence, (1991).
Reforms) atomic energy). - UPSC Prelims: 2011
- Public Sector Reform: Only 2 sectors (atomic (Disinvestment).
energy & railways) reserved for public sector. - Created environment for FDI
- Foreign Investment: Automatic approval for FDI & private investment boom.
in most sectors.
- Disinvestment: Systematic sale of PSU shares.
- Liberalisation, Privatisation, Globalisation
(LPG) Model introduced.
Disinvestment (UPSC - Meaning: Sale of PSU assets by Govt. - National Monetisation Pipeline
2011) - Nodal Body: Department of Investment and (NMP) 2021 lists assets for
Public Asset Management (DIPAM). monetisation.
- Types: - Example: Air India’s strategic
1. Token Disinvestment: Govt retains majority (up disinvestment (2021).
to 49% stake sold).
2. Strategic Disinvestment: Govt sells >51%
stake, transferring management control.
National - Goal: Raise manufacturing share in GDP to 25% - Manufacturing’s current
Manufacturing Policy by 2022 (extended to 2030). share in GDP (FY24): ~14.3%.
(2011) - Job Target: Create 100 million jobs. - Policy revised under Make in
- Inclusive Growth: Focus on skilling rural India & PLI schemes.
migrants & urban poor. - Focus sectors: electronics,
- Emphasis on: textiles, pharmaceuticals,
1. Enhancing value addition in manufacturing. automotive.
2. Technological depth.
3. Global competitiveness.
Recent Policy Focus - Make in India: Launched 2014 to position India - PLI allocated ₹1.97 lakh crore
(Post-2014) as global manufacturing hub. across 14 sectors.
- Production Linked Incentive (PLI) Scheme: - India’s EoDB rank improved
Linked financial incentives to incremental sales in from 142 (2014) to 63 (2023).
key sectors like semiconductors, electronics, - PLI added $21 billion to
pharmaceuticals. India’s exports (FY24).
- Ease of Doing Business (EoDB): Regulatory
simplification, online approvals & single-window
clearances.
Current Challenges in - Infrastructure Gaps: Logistics & power - National Logistics Policy 2022
Industrial Policy bottlenecks. aims to cut logistics cost from
- Regulatory Complexity: Multiple clearances for 13% to 8% of GDP.
land, labour, environment. - National Single Window
- Technology Deficit: Low R&D investment System launched 2021 for
(~0.7% of GDP). unified approvals.
- MSME Competitiveness: Integration with global - PLI focus sectors: 50%
supply chains still weak. electronics & 50% in other
sectors.

Critical Minerals in India and District Mineral Foundation (DMF)

Topic Details and Explanation Facts to Remember for Prelims

Critical Minerals - Definition: Critical minerals are essential for - Critical Minerals List (India):
in India economic development, strategic industries (e.g., Beryllium, Lithium, Cobalt, Rare Earth
defence, renewable energy), and supply chain Elements (REEs), Titanium, Tantalum,
resilience. Germanium, Niobium, Strontium,
- Import Dependence: India imports 7 out of 12 Zirconium, Tungsten, and Rhenium.
KARMAYOGI IAS
critical minerals, including Lithium, Cobalt, - India’s Lithium Reserve (J&K): 5.9
Tantalum, and Germanium. million tonnes discovered in 2023.
- Domestic Availability: Limited to light rare - UPSC Prelims: 2016 (DMF)
earths (LREE) and Beryllium (found in
Jharkhand).
- Applications: Used in Electric Vehicles (EVs),
Solar Panels, Aerospace, Defence, Nuclear
Energy, Medical Imaging, and Digital
Technologies.
- Global Dependency: China is the leading
supplier for 6 of 12 critical minerals essential for
India’s clean energy and technology sectors by
2030.
Recent Initiatives - Critical Minerals Strategy (2023): Ministry of - KABIL Countries: Argentina, Chile,
Mines released a roadmap for domestic sourcing, Australia.
exploration, and reducing import dependency. - India’s 1st Lithium Reserves: Found
- KABIL (Khanij Bidesh India Ltd): JV in Reasi district, J&K (5.9 million
between NALCO, HCL, and MECL to secure tonnes).
strategic mineral assets abroad (in Australia, - National Geoscience Data
Argentina, and Chile). Repository (NGDR): Centralized
- PLI for Advanced Chemistry Cell (ACC) platform for geological data sharing.
Batteries: Supports domestic manufacturing of
battery components, reducing reliance on
imported lithium-ion cells.
District Mineral - Established: Under the Mines and Minerals - DMF Funds Collected (as of 2024):
Foundation (Development and Regulation) Amendment ₹73,000 crore.
(DMF) (UPSC Act, 2015. - Top States (Collections): Odisha,
2016) - Purpose: Welfare of mining-affected people and Jharkhand, Chhattisgarh.
areas (focus on environmental & social impacts). - Legal Basis: Mines and Minerals
- Contribution Rates: (Development and Regulation) Act,
- Leases granted post 12 Jan 2015: 10% of 2015.
royalty. - Funds Used for: Schools, health
- Leases granted pre 12 Jan 2015: 30% of centres, drinking water projects,
royalty. afforestation, and rural roads.
- Funds Utilisation:
- 60% for high-priority sectors: Health,
Education, Drinking Water, Sanitation,
Environment, Women & Child Welfare, etc.
- 40% for physical infrastructure, skill
development, and social welfare.
- Gram Sabha Approval: Mandatory in
Schedule V & VI Areas for project approval and
beneficiary identification.
Key Issues in - Supply Chain Vulnerability: Heavy reliance - Critical Minerals in Renewable
Critical Minerals on China for key minerals risks supply disruption Energy: Lithium (batteries), Cobalt
Sector during geopolitical tensions. (EV batteries), Rare Earths (Wind
- Exploration Gaps: Domestic exploration is Turbines).
limited due to technological and financial - India Critical Minerals Inventory:
constraints. Developed by Geological Survey of
- Environmental Concerns: Mining critical India (GSI).
minerals often causes ecological damage, - India’s Rare Earth Processing:
especially in biodiversity-rich areas. Limited; IREL (India) Ltd. is the only
- Technology Deficit: India lags in advanced significant processor.
processing and refining technologies for rare earth
elements.
Way Forward - Strengthen Exploration: Expand exploration - Urban Mining Potential: India
through private investment and PPP models. generates over 3 million tonnes of e-
- International Partnerships: Secure long-term waste annually (UN Global E-waste
supply agreements with friendly countries Monitor 2024).
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(Australia, Chile). - PLI for EV Batteries: ₹18,100 crore
- Technology Development: Encourage domestic allocated.
R&D in refining and recycling critical minerals. - Critical Minerals Partnership
- Circular Economy: Promote e-waste recycling (CMP): India joined this US-led
to recover valuable metals (Urban Mining). strategic group in 2023 to secure global
- DMF Reform: Improve transparency in fund mineral supplies.
utilization and enhance monitoring through geo-
tagging projects.

Labour Laws in India and New Labour Codes:

Topic Details and Explanation Facts to Remember for Prelims

Constitutional Basis of - Labour is a Concurrent List subject (Entry - Concurrent List - Entry 22:
Labour Laws 22, 23, 24 in List III, Seventh Schedule). Trade unions, industrial disputes.
- Both Centre and States can make laws on - DPSP Reference in UPSC:
labour welfare, wages, conditions, social security, Prelims 2017, 2020 (Articles 41,
etc. 42).
- Directive Principles of State Policy (DPSP):
Article 41 (Right to Work), Article 42 (Just and
Humane Conditions), Article 43 (Living Wage),
Article 43A (Worker Participation in
Management).
Labour Reforms - New - Objective: To simplify and rationalize India’s - Number of Labour Codes: 4.
Labour Codes complex labour laws (29 laws subsumed into 4 - Number of Laws Merged: 29.
codes). - Current Status (2025): Not
- Labour Codes Passed: 2019-2020 (but fully implemented (some states
implementation deferred for final rules & state finalizing rules).
coordination).
- Expected Impact: Uniformity in laws, ease of
compliance, and enhanced labour rights.
Code on Wages, 2019 - Key Provisions: - National Floor Wage:
- Establishes a national floor wage (minimum ₹178/day (as of 2024; varies by
wage) applicable across sectors. state).
- States can fix higher minimum wages based on - Merged Acts: Minimum
local conditions. Wages Act, Payment of Wages
- Mandates equal remuneration for men and Act, Payment of Bonus Act,
women (Equal Remuneration Act merged). Equal Remuneration Act.
- Defines wage components – Basic Pay,
Dearness Allowance (DA), Retention Allowance.
- Wages to be paid within 2 working days of
wage period completion.
Occupational Safety, - Consolidates 13 laws related to worker safety, - Covers all establishments with
Health and Working health, and working conditions. 10+ workers.
Conditions Code, 2020 - Covers Factory Act, Mines Act, Dock - Key Focus: Worker welfare,
Workers Act, etc. occupational safety, and
- Provides for safety committees, working hours, employer accountability.
and health standards. - Merged Laws: Factories Act,
- Empowers Inspectors-cum-Facilitators for Mines Act, Contract Labour Act,
compliance checks. etc.
- Includes Inter-State Migrant Workers and
provides travel allowances.
Social Security Code, - Consolidates 9 laws including EPF Act, ESI - Covers over 50 crore workers.
2020 Act, Maternity Benefit Act, and Unorganized - First-time coverage for: Gig
Workers Social Security Act. workers, platform workers, inter-
- Applies to both organized and unorganized state migrants.
sector workers. - Merged Laws: EPF Act, ESI
- Expands universal social security coverage via Act, Maternity Benefit Act,
EPF, ESI, pensions, disability, and maternity
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benefits. Building & Other Construction
- Facilitates portability of benefits across jobs & Workers Act, etc.
states.
- Includes provisions for gig and platform workers
for the first time.
Industrial Relations - Combines: Trade Unions Act, Industrial - Fixed-term employment
Code, 2020 Disputes Act, and Standing Orders Act. introduced.
- Provides for registered trade unions and - Threshold for layoffs: 100
collective bargaining. workers (state discretion to
- Defines “fixed-term employment” (contract increase).
workers entitled to same benefits as regular - Merged Laws: Trade Unions
workers). Act, Industrial Disputes Act,
- Reduces approval threshold for layoffs from 300 Industrial Employment (Standing
to 100 workers (state discretion). Orders) Act.
- Mandates works committees in establishments
with 100+ workers for grievance resolution.
Key Labour Welfare - PM Shram Yogi Maan-Dhan Yojana: - E-Shram Registered Workers
Schemes Voluntary pension scheme for unorganized (2024): Over 29 crore.
workers with monthly contributions (pension of - PM-SYM Target: Workers
₹3,000). earning below ₹15,000 per
- E-Shram Portal (2021): National database for month.
unorganized workers; linked to welfare schemes.
- Samarth Scheme: Skilling and employment
generation for textile sector workers.
Major Labour Laws - Factories Act, 1948 - Prelims PYQ: 2017 (Minimum
before Codes - Minimum Wages Act, 1948 Wages Act), 2016 (EPF Act),
- EPF Act, 1952 2020 (Labour Welfare).
- ESI Act, 1948 - Labour subject: Concurrent
- Payment of Bonus Act, 1965 List.
- Trade Unions Act, 1926
Labour Codes - Labour Codes enacted but implementation - Labour Codes Passed: 2019
Implementation Status delayed due to pending rules by states. (Wages), 2020 (IR, OSH, SS).
(2025) - 25 states/UTs have pre-published draft rules for - Key Pending State Rules:
all 4 codes (as of Jan 2025). Tamil Nadu, Kerala, West
- Full implementation expected in 2025-26. Bengal.

National Investment and Manufacturing Zones (NIMZs) and Special Economic Zones (SEZs)

Topic Details and Explanation Facts to Remember for Prelims

National Investment and - Introduced under: National Manufacturing - First Approved NIMZs:
Manufacturing Zones Policy, 2011. Prakasam (AP), Sangareddy
(NIMZs) - Objective: To accelerate manufacturing sector (Telangana), Kalinganagar
growth, enhance domestic value addition, create (Odisha).
100 million jobs, and contribute 25% to GDP by - Current Number of NIMZs
2025. (2025): 16 approved.
- Design: Large integrated industrial townships - NIMZs = Large Industrial
with residential, commercial, and social Townships (min 5000 ha).
infrastructure. - Key Focus: Domestic
- Focus: High-value manufacturing, advanced Manufacturing + Exports.
technology adoption, and industrial ecosystem - NIMZ vs SEZ: NIMZ allows
development. both domestic and export
- Area Requirement: Minimum 5,000 hectares production, unlike export-
(flexibility for smaller zones in hilly/NE states). exclusive SEZs.
- Incentives: Similar to SEZs but more focused
on domestic industrialization alongside
exports.
- Environmental Impact Assessment (EIA):
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Conducted by State Government.
- Governance Model: Special Purpose Vehicle
(SPV) manages infrastructure and operations.
Special Economic Zones - Governing Law: SEZ Act, 2005. - SEZ Act Year: 2005.
(SEZs) - Objective: Promote exports, attract foreign - First SEZ in India: Kandla
investment, and improve trade competitiveness (converted from EPZ).
by offering tax incentives and simplified - Number of SEZs (2025): 270
processes. operational SEZs (as per latest
- Concept: Evolved from Export Processing data).
Zones (EPZs); first EPZ in Kandla (1965). - Deemed Foreign Territory:
- Design: Deemed foreign territory for trade Special fiscal and trade treatment.
purposes, offering infrastructure, fiscal benefits, - Focus: Primarily Export-
and regulatory ease. Oriented.
- Area Requirement: Varies by type (10-1000
hectares); max 5000 hectares.
- EIA Responsibility: Project developer (private
entity).
- Single-Window Clearance: Fast-track
approvals and streamlined processes.
- Tax Incentives: - Customs and excise duty
exemptions.
- Corporate tax holidays (100% for first 5 years,
50% for next 5 years).
- Exemption from GST on inputs used for
exports.
Comparison: NIMZ vs - NIMZ Focus: Domestic and export production, - Prelims PYQ References:
SEZ large-scale industrial townships. UPSC 2012, 2015 (SEZs and
- SEZ Focus: Primarily export-oriented with EPZs).
export-linked incentives. - NIMZ = Larger than SEZ (min
- Governance: NIMZs governed by State SPVs, 5000 ha).
SEZs governed by Development - SEZ Act Passed in: 2005.
Commissioners. - NIMZ Originated in: 2011
- Incentives: Both offer tax exemptions, land National Manufacturing Policy.
allotment support, infrastructure funding, and - First EPZ: Kandla, 1965.
single-window clearances.
- EIA Responsibility: State for NIMZ;
Developer for SEZ.
- Land Size: NIMZ (min 5000 ha); SEZ (10-
5000 ha).
Export Processing Zones - Predecessor to SEZs, introduced in 1965. - First EPZ in India: Kandla
(EPZs) - Focused on export promotion with simplified (1965).
customs procedures and tax incentives. - EPZ Transitioned to SEZ
- Transitioned into SEZs under the SEZ Act, under SEZ Act 2005.
2005. - Core Focus: Exports only.
- Key Export-Oriented Units (EOUs) initially
located in EPZs.
Key Challenges for - Land Acquisition Delays. - SEZ Employment (2025): Over
NIMZs and SEZs - Environmental Clearances (especially in 24 lakh direct jobs.
coastal SEZs). - Exports from SEZs (FY24):
- Export Dependence (SEZ) creates ₹9.16 lakh crore (approx 25% of
vulnerability to global demand fluctuations. total exports).
- Infrastructural Gaps in some NIMZs. - NIMZ Employment Target:
- Competition from ASEAN SEZs offering 100 million by 2025 (not fully
better incentives. met).
Way Forward - Integrate NIMZs with PM Gati Shakti - Latest Data from Budget 2025:
(Economic Survey 2024- (National Master Plan) for seamless logistics. - NIMZ-specific funding increased
25) - Ease Land Acquisition through innovative by 14%.
models like Land Pooling Schemes. - SEZ Act to be amended for
- Promote Green Industrial Zones with
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incentives for clean tech and renewable energy greater flexibility in domestic
industries. sales from SEZs.
- Enhance Trade Agreements to maximize SEZ
export potential.
- Use PLI schemes to attract anchor industries in
both SEZs and NIMZs.

MAKE IN INDIA AND STARTUPS

Topic Details and Explanation Facts to Remember for

Prelims
Make in India (2014) - Launched: 2014 to make India a global manufacturing - Launch Year: 2014
hub. Focused on enhancing Ease of Doing Business, - Objective: Raise
infrastructure, and FDI. manufacturing GDP share
- Sectors Covered: Initially 25, expanded to 27 sectors in to 25%
Make in India 2.0 (15 manufacturing & 12 services - Sector Coverage (27)
sectors like defence, textiles, electronics, IT). - Prelims PYQ: UPSC
- Key Objectives: Raise manufacturing sector contribution 2016 (Objectives and
to 25% of GDP by 2025, create 100 million jobs, and Focus Sectors)
improve industrial infrastructure.
- Focus on Digital Manufacturing: Integration of IoT, AI,
and advanced robotics into Indian industries.
- Performance (2024): India emerged among the Top 3
global FDI destinations with FDI inflows exceeding $600
billion since 2014.
Mains Angle: Analyze the role of 'Make in India' in
reducing import dependence and boosting employment.
Startup India (2016) - Launched: 2016 to promote innovation, entrepreneurship - Launch Year: 2016
& job creation across sectors. - Recognised Startups:
- Benefits: Tax holiday for 3 years, simplified compliance, 1.25 lakh (2024)
self-certification for labour laws, and fast-track patent - Prelims PYQ: UPSC
filing with 80% fee rebate. 2017 (Tax benefits)
- Performance (2024): Over 1.25 lakh DPIIT-registered
startups across 55 sectors; 45% startups from Tier 2/3
cities; 47% startups with at least one woman director.
- Global Ranking: 3rd largest startup ecosystem
globally (2024).
Mains Angle: Assess how Startup India has contributed to
technology-driven inclusive growth in India.
Stand-Up India (2016) - Launched: 2016 to promote entrepreneurship among - Launch Year: 2016
SC/ST and women entrepreneurs. - Focus: SC/ST & Women
- Features: Provides bank loans between ₹10 lakh to ₹1 Entrepreneurs
crore for greenfield enterprises in manufacturing, services - Prelims PYQ: UPSC
or agri-allied sectors. 2016 (Objectives and
- Performance (2024): 1.8 lakh loans sanctioned worth Coverage)
₹42,000 crore, promoting diversity in entrepreneurship.
Mains Angle: Evaluate the success of Stand-Up India in
promoting inclusive economic growth.
Patent and Innovation - Patent Rules (2024): Streamlined application process to - Patent Surge: 5,978
Ecosystem boost innovation & ease of patent filing. (2015) to 1.03 lakh (2024)
- Growth in Patents (2024): Patents granted rose to 1.03 - Prelims Link:
lakh (2023-24) from 5,978 in 2014-15. Intellectual Property
- Registered Designs: 30,672 in 2023-24 (4X since 2015). Trends
- Startup Patent Filings: Over 12,000 patent - Prelims PYQ: UPSC
applications filed by startups since 2016. 2020 (Patent Trends)
Mains Angle: Critically examine the link between patent
growth, innovation and economic development in India.
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Anusandhan National - Established: 2023 to promote high-level collaborative - Budget: ₹50,000 crore
Research Foundation research between industry, academia & research (2023-28)
(ANRF) institutions. - Prelims Link: ANRF
- Budget (2023-28): ₹50,000 crore. Role & Structure
- Governing Body: Chaired by the PM.
Mains Angle: Analyze the role of ANRF in promoting
innovation-driven growth in India.
Fund of Funds for - Launched: 2016 under Startup India to support early- - Fund Size: ₹10,500
Startups (FFS) stage and growth-stage startups via Alternate Investment crore
Funds (AIFs). - Administered by:
- Performance (2024): ₹10,500 crore committed to 135 SIDBI
AIFs, leveraging ₹18,000 crore investment into startups. - Prelims Link: Direct
Mains Angle: Examine the effectiveness of the Fund of govt investment channel
Funds mechanism in promoting innovation in MSMEs.
Global Innovation - India's Rank (2023): 40th globally, 1st among Central - Rank: 40 (2023)
Index (GII) & South Asian economies. - Prelims Link: GII
- India leads in: Domestic Market Scale & ICT Services Parameters
Exports. - Prelims PYQ: UPSC
Mains Angle: Discuss India’s rise in Global Innovation 2019 (GII Trends)
Index and its impact on economic transformation.
Production Linked - Launched: 2020 under Aatmanirbhar Bharat to boost - Launch Year: 2020
Incentive (PLI) manufacturing, exports & import substitution. - Outlay: ₹1.97 lakh crore
Scheme - Sectors Covered: 14 sectors like Electronics, Pharma, - Prelims PYQ: UPSC
Textiles, Solar PV, Advanced Chemistry Cells, Auto 2023 (PLI Focus Sectors)
Components.
- Outlay: ₹1.97 lakh crore.
- Achievements (2024): - Investments: ₹1.28 lakh crore
- Production: ₹10.8 lakh crore
- Jobs: 8.5 lakh
- Exports: ₹4 lakh crore
Mains Angle: Critically assess how the PLI scheme is
transforming India into a global manufacturing hub.
PLI - Sector Highlights - Top Sectors: Electronics, Specialty Steel, Pharma, - Top Performer (2024):
(2024) Textiles. Electronics
- Specialty Steel: ₹15,519 crore investment, adding 24.78 - Prelims Link: Sector-
MTPA capacity. wise investment under PLI
- White Goods (ACs & LEDs): ₹3,181 crore investment,
₹13,320 crore sales.
- Electronics: 62.5% YoY growth in exports (2024).
Mains Angle: Evaluate the impact of sector-specific PLI
schemes on India's competitiveness in global value chains.

INFRASTRUCTURE

Topic Details and Explanation Facts to Remember for Prelims

Definition & Scope of - No single definition in India but broadly covers - No statutory definition (important
Infrastructure Physical (transport, energy), Social (health, for prelims framing).
education), Digital (telecom, data centres) - Prelims Link: Infrastructure impact
infrastructure. on economic growth (UPSC 2019)
- Infrastructure directly influences industrial
productivity, ease of doing business, and
quality of life.
- Economic Survey 2023-24 highlights that
infrastructure CapEx crowds in private
investment.
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Road Infrastructure - CapEx in Roads (FY24): 1% of GDP (up - India’s Road Network: 2nd largest
(Highways & from 0.4% in FY15). globally.
Expressways) - National Highway Length (2024): 1.46 lakh - Bharatmala Length: 34,800 km.
km (up from 91,000 km in 2014). - Prelims PYQ: UPSC 2018
- Bharatmala Pariyojana: Target 34,800 km (Bharatmala & logistics).
(Phase-I). - Trend: Increased CapEx +
- Budget 2025: Highest-ever road CapEx multimodal connectivity under PM
allocation – ₹2.8 lakh crore. GatiShakti
- Logistics Cost Reduction: Target to bring
down to 8% of GDP by 2030 from current
~14%.
Railways - CapEx (FY25): ₹2.55 lakh crore. - Prelims PYQ: UPSC 2018 (DFC).
Infrastructure - Electrification: 96.4% of BG network - Trend: Shift towards higher freight
electrified (2024). revenue via DFC + focus on semi-
- Vande Bharat Trains: 34 operational; 200 by high speed passenger trains.
2025.
- Dedicated Freight Corridors (DFC): Western
DFC 99% complete, Eastern DFC 97%
complete.
- Amrit Bharat Station Scheme: 1309 stations
under modernization.
Port & Waterways - Sagarmala Programme: 802 projects; ₹5.5 - India’s World Bank LPI Rank
lakh crore investment. (International Shipments): 22nd
- Port Capacity (2024): 1,617 MTPA (doubled (2023), improved from 44 in 2014.
since 2014). - Prelims PYQ: UPSC 2016
- Gati Shakti Cargo Terminals: 145 terminals (Sagarmala).
operational (2024 target: 300). - Trend: Shift to port-led industrial
clusters under PM GatiShakti.
Aviation - UDAN Scheme: 494 operational routes (as of - Prelims PYQ: UPSC 2020 (UDAN).
Infrastructure 2024); 76 airports connected. - Trend: Strong Tier-2 & Tier-3
- CapEx (FY20-FY25): ₹26,000 crore for airport connectivity focus under
airport modernisation. UDAN 4.0.
- DigiYatra: 100% biometric boarding at key
airports.
Power Sector - Installed Capacity (2024): 442.8 GW. - Prelims PYQ: UPSC 2018
- Renewable Share: 43.12% (190.57 GW). (Saubhagya).
- Saubhagya: 2.86 crore households electrified. - Trend: Transition from generation
- RDSS Scheme: ₹3.04 lakh crore (reduce focus to distribution reforms
AT&C losses to 12-15% by FY25). (RDSS).
Smart Cities Mission - 100 cities selected. - Prelims PYQ: UPSC 2016 (Smart
- ₹1.64 lakh crore allocated; 8011 projects Cities).
sanctioned. - Trend: Integration with AMRUT
- Focus: Mobility, waste management, water 2.0 & PM GatiShakti for seamless
supply, digital governance. urban-rural connectivity.
Water Sector (Jal - Tap Water Coverage (2024): 76.12% (up - Prelims PYQ: UPSC 2020 (JJM).
Jeevan Mission) from 17% in 2019). - Trend: Convergence with Swachh
- Connected Households: 14.89 crore. Bharat Mission & AMRUT for
- Budget 2025 Allocation: ₹70,000 crore. water-secure villages & cities.
Construction Sector - GVA Contribution (FY24): 9% of total GVA. - Prelims Link: Trends in
Trends - Technology Integration: PM GatiShakti, Construction
BharatMaps, PRAGATI, Bhuvan. - Trend: Shift towards digital
- Budget 2025: Emphasis on faster approvals, GIS-based project
environmental clearances via PARIVESH 2.0 monitoring, and climate-resilient
portal. construction.
Digital Infrastructure - Telecom Towers (2024): 8.02 lakh. - Prelims PYQ: UPSC 2022 (Digital
- 5G Rollout: 2.75 lakh 5G sites live. India).
- Digital India Initiatives: DigiLocker (26.28 - Trend: Focus on digital public
crore users), UMANG (2,019 services). infrastructure + BharatNet for
rural connectivity.
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Metro & RRTS - Metro Network (2024): 1,884 km across 27 - Prelims PYQ: UPSC 2022 (RRTS).
Projects cities. - Trend: Expanding RRTS to
- **Delhi-Meerut RRTS Phase-1 operational. regional hubs for faster intercity
transit.
Renewable Energy & - RE Installed (2024): 190.57 GW. - Prelims PYQ: UPSC 2022 (Green
Green Hydrogen - Green Hydrogen Target: 5 MMT by 2030. Hydrogen Mission).
- Pumped Storage Projects: 24 approved, 16 - Trend: Linking RE with green
under development. hydrogen, energy storage & EV
ecosystems.
Waterways & Inland - National Waterways (2024): 111 notified. - Prelims PYQ: UPSC 2019 (National
Transport - Jal Marg Vikas Project: NW-1 development Waterways).
(Haldia-Varanasi). - Trend: Shift from roads to
multimodal river-rail-road
connectivity.
Public-Private - PPPAC Approved (FY15-24): 77 projects - Prelims Link: PPP Models
Partnerships (PPP) worth ₹2.4 lakh crore. - Trend: Greater use of Hybrid
- IIPDF (2022): ₹150 crore for project Annuity Model (HAM) for infra
development support. projects.

Infrastructure and Logistics Policies and Initiatives in India

Topic Details and Explanation Facts to Remember for Prelims

National Logistics - Launched: 2022 to reduce logistics costs from - Prelims Link: Logistics cost target
Policy (NLP) 14% to <10% of GDP by 2030. (PYQ Expected).
- Focus: Multi-modal transport, warehousing, - India's logistics cost 2nd highest
supply chain digitization, regulatory among major economies (14%),
simplification. China at ~8%, US at ~7%.
- Integrates PM GatiShakti & ULIP (Unified
Logistics Interface Platform) for real-time
logistics visibility.
National - Launched: 2021. - Prelims Link: Asset monetisation
Monetisation - Objective: Unlock ₹6 lakh crore from models (Expected PYQ).
Pipeline (NMP) monetisation of roads, railways, airports, - ₹2.6 lakh crore monetised till mid-
power grids, ports by FY25. FY24 (43% of target).
- Monetisation via TOT (Toll-Operate-
Transfer), InvITs, asset recycling & PPPs.
Inland Waterways - Total National Waterways (2024): 111. - Prelims PYQ: UPSC 2019 (National
- Key Waterways: Waterways).
NW-1 (Ganga), NW-2 (Brahmaputra), NW-3 - Trend: Focus on multi-modal
(Kerala), NW-4 (Kakinada-Pondicherry). connectivity with ports & industrial
- Share in freight: Target to increase to 5% by hubs under PM GatiShakti.
2030 from <2% currently.
UDAN Scheme - Launched: 2016 to promote regional air - Prelims PYQ: UPSC 2020.
connectivity. - Trend: UDAN 5.0 expanding to
- 494 routes operational, 76 airports connected unserved heliports and water
(by 2024). aerodromes.
- Focus: Tier-2 & Tier-3 cities, hilly/tribal
regions, and islands.
Industrial Corridors - 11 corridors planned under National Industrial - Prelims Link: Corridor states &
Corridor Programme. funding agencies (Expected PYQ).
- Key Corridors: DMIC (Delhi-Mumbai), CBIC - DMIC assisted by Japan, ECEC by
(Chennai-Bengaluru), AKIC (Amritsar-Kolkata), ADB.
BMIC (Bengaluru-Mumbai), ECEC (East Coast).
KARMAYOGI IAS
- Integration with PM GatiShakti for last-mile
connectivity.
Sagarmala - Focus: Port-led development along 7,500 km - Prelims PYQ: UPSC 2016.
Programme coastline. - Trend: Coastal shipping share to
- 802 projects identified, ₹5.5 lakh crore rise from 6% to 10% by 2030.
investment planned (2024).
- Components: Port modernisation, port
connectivity, coastal economic zones, skill
development.
Bharatmala - Launched: 2017 to improve road connectivity - Prelims PYQ: UPSC 2018.
Pariyojana & logistics efficiency. - Trend: 27,000 km already awarded
- Economic corridors, border & coastal roads, (as of Jan 2024).
expressways, greenfield projects.
- Target: 34,800 km under Phase 1.
Dedicated Freight - EDFC (Eastern Corridor): Punjab to West - Prelims PYQ: UPSC 2018.
Corridors (DFC) Bengal (1,337 km). - Trend: 97% work complete on
- WDFC (Western Corridor): Dadri to JNPT EDFC, 99% on WDFC (Jan 2024).
(1,506 km).
- Benefits: Freight cost reduction by 30%,
speed up to 70 kmph.
National - Announced: 2019, covers ₹111 lakh crore - Prelims Link: Funding split
Infrastructure investments till 2025. (Expected PYQ).
Pipeline (NIP) - Focus: Energy (24%), Transport (19%), - Total projects: ~9,000;
Water (18%), Social (16%). implementation rate: 70%
- 39% Centre, 39% States, 22% Private Sector (Economic Survey 2024).
funding.
PM GatiShakti - Launched: 2021 to integrate infrastructure - Prelims Link: Digital Infra
National Master Plan planning across 16 ministries. Integration (Expected PYQ).
- GIS-based platform linking roads, railways, - Trend: ₹30 lakh crore worth
ports, airports, power grids, etc., for seamless projects aligned with PM GatiShakti
project implementation. (2024).
Viability Gap - Supports socially desirable but financially - Prelims PYQ: UPSC 2017.
Funding (VGF) unviable PPP projects. - Trend: ₹64,926 crore VGF
- 60% Centre: 40% State funding for social approved (FY15-FY24).
sectors.
- Sectors: Healthcare, education, water supply,
waste management, etc.
Infrastructure - Structure: Pool funds from investors into - Prelims Link: InvIT definition
Investment Trusts income-generating infra assets (roads, power). (UPSC 2020).
(InvITs) - Key InvITs: NHAI InvIT, PowerGrid InvIT. - Trend: Strong interest from global
- Raised ₹1.11 lakh crore since 2019. pension funds & SWFs.
REITs (Real Estate - Structure: Investment in income-generating - Prelims Link: REITs sectors
Investment Trusts) commercial real estate. (Expected PYQ).
- 4 REITs operational in India (Mindspace, - Trend: Focus shifting to data
Brookfield, etc.). centres & warehousing REITs.
- ₹18,840 crore raised (2019-2024).
Urban Infrastructure - ₹2.77 lakh crore for 500 cities (2021-2026). - Prelims PYQ: UPSC 2020
(AMRUT 2.0) - Focus: Water supply, sewage, climate (AMRUT).
resilience. - Trend: Convergence with Smart
- 100% tap water coverage in urban areas by Cities & JJM.
2026.
Space Infrastructure - 55 active satellites (2024): 20 Earth - Prelims Link: Space sector
observation, 18 communication, 9 navigation, 5 privatization (Expected PYQ).
scientific, 3 meteorological. - Trend: Launch Vehicle Mark-3
- Private sector role via IN-SPACe: 440 now used for global commercial
proposals received. launches.
KARMAYOGI IAS
TREND TABLES AND GRAPHS FOR INFRASTRUCTURE AND LOGISTICS (BASED ON LATEST BUDGET & ECONOMIC
SURVEY)

Infrastructure Spending Trends (Budget Allocation Trend)

Year Union Capex (₹ Lakh YoY Growth Infra % of Total Focus Areas
Crore) (%) Expenditure
FY21 4.39 - 12% Roads, Railways, Power, Water
FY22 5.54 26.1% 15% PM Ga?Shak?, Defence Infra
FY23 7.28 31.4% 19% Transport, Green Energy, Digital Infra
FY24 10.0 37.3% 23% Connec?vity, Green Infra, Urban Infra
FY25 11.11 11% 23.4% Roads, Railways, Urban Infra, Digital
(BE) Public Infra

Logistics Cost Trends (As % of GDP)

Year Logis*cs Cost (% of GDP) Key Drivers

2018 ~14% High dependence on road transport, fragmented supply chains
2022 12-13% Mul?-modal focus under NLP, PM Ga?Shak?
2024 11-12% (est.) Logis?cs Parks, DFCs, Coastal Shipping focus
Target (2030) ~8% Improved rail-road balance, tech integra?on, ULIP

Road Sector Investment and Expansion Trend

Year Na*onal Highways Length (Km) Capex (₹ Lakh Crore) Road Freight Share (%)
FY14 91,287 0.8 66%
FY19 1,32,499 1.4 65%
FY24 1,46,000+ 2.62 62%
FY25 Target 1,53,000+ 2.78 60% (Target)

Railways Investment and Electrification Trend

Year Capex (₹ Lakh Crore) Network Electrified (%) Freight Share (%)
FY14 0.64 37% 35%
FY19 1.59 61% 33%
FY24 2.62 96.4% 30%
FY25 Target 2.75 100% 33% (Revival)

Port Infrastructure and Coastal Shipping Trend

Year Major Port Capacity (MT) Cargo Handling (MT) Coastal Shipping Share (%)
FY14 800 555 ~6%
FY19 1,500 704 ~7%
FY24 1,750 850+ ~9%
2030 Target 2,000 1,000+ 10%
KARMAYOGI IAS
Renewable Energy Capacity Trends

Year Renewable Capacity (GW) RE % of Total Capacity Solar Capacity (GW)

FY14 31.7 12% 2.6
FY19 77.6 22% 28.2
FY24 190.6 43% 82.6
2030 Target 500 50%+ 280+

Airport Infrastructure & UDAN Connectivity

Year Airports Opera*onal UDAN Routes Opera*onal Air Passenger Growth (Cr)
FY14 74 0 12
FY19 101 194 17
FY24 149 494 22.8
FY25 Target 160 530+ 24+

Digital Infrastructure (BharatNet, 5G Rollout)

Year BharatNet Coverage (GPs Connected) Total Towers (Lakh) 5G Coverage (Ci*es)
FY14 9,200 4.3 0
FY19 1.19 lakh 5.8 0
FY24 2.0 lakh 8.0 700+
FY25 Target 2.5 lakh 8.5+ All Ci*es & Tier 2/3 Towns
KARMAYOGI IAS
LPG REFORMS AND SERVICE SECTOR
Topic Details Facts to Remember for Prelims
🏛 LPG ✅ Context: Economic crisis (1991), forex reserves 📌 Reform Year: 1991 📌 Core
Reforms depleted to 2 weeks of imports. Architects: Manmohan Singh &
Overview ✅ New Economic Policy (NEP) 1991 introduced LPG Narasimha Rao 📌 Forex Reserves
reforms — focusing on dismantling the License Raj, 1991: $1.2 billion 📌 Prelims Tip:
opening up to foreign investments, and reducing Immediate triggers — Gulf War Oil
government ownership. Shock, Fiscal Deficit 8.4% of GDP
✅ Prelims Link: PYQ 2012 on LPG Reforms
✅ Trigger: Balance of Payments (BoP) Crisis — India
pledged gold to secure emergency IMF loans
📈 ✅ Meaning: Removal of government control over 📌 MRTP Act Repealed: 2002 📌
Liberalisation industries, deregulation, free pricing, easier entry for FDI Cap (2024): 100% in most
private & foreign firms. sectors (defence capped at 74%) 📌
✅ Pre-1991 Scenario: Heavy licensing, MRTP Act Prelims Tip: Key Committees -
curbed firm expansion, import substitution focus. Narasimham for Banking,
✅ Post-1991: Most industrial licenses abolished Rangarajan for Monetary Policy
(except for strategic sectors), FDI & FII entry eased,
import licensing removed.
✅ Prelims Link: PYQ 2020 on Industrial Licensing
🏢 Privatisation ✅ Meaning: Transfer of ownership/control of public 📌 DIPAM: Nodal agency (2016) 📌
sector enterprises (PSEs) to private entities. Privatisation Targets FY25: ₹50,000
✅ Methods: Disinvestment (minority stake sale), crore 📌 CPSE Count (2024): 254
Strategic Disinvestment (51%+ stake sale), Asset (reduced due to closures & sales) 📌
Monetisation (lease/sale of assets). Prelims Tip: CPSE Categorisation
✅ Pre-1991: Public sector dominance with minimal Criteria (Profit, Net Worth, Global
private ownership. Presence)
✅ Post-1991: Disinvestment began (Bharat
Aluminium, VSNL).
✅ Strategic Sale: Air India, Neelachal Ispat Nigam.
✅ Classification: CPSEs categorised as Maharatna,
Navratna, Miniratna based on size, autonomy,
profitability.
✅ Prelims Link: PYQ 2011 on Disinvestment
🌍 ✅ Meaning: Integration of Indian economy with the 📌 WTO Member: Since 1995 📌
Globalisation global economy through trade, investments, and Services Exports FY24: $345 billion
technology flows. 📌 Share in Global Services Exports:
✅ Pre-1991: Import substitution, high tariffs, limited 4.3% 📌 Prelims Tip: Globalisation
foreign investment. Indicators - Trade to GDP Ratio, LPI
✅ Post-1991: Trade liberalisation (reduced tariffs from Rank (38th in 2023)
150% to ~10%), FDI/FPI inflows, export focus.
✅ Impact: India integrated into Global Value Chains
(GVCs) — IT/BPO boom, pharma exports, auto
component exports.
✅ Prelims Link: PYQ 2016 on Globalisation
✅ Global Ranking: India ranks 2nd in global IT
services exports (2024).

Topic Details Facts to Remember for Prelims

📊 Sectoral ✅ Pre-1991 Growth (1980-91): Industry: 7.1%
Growth Agriculture: 3.6%
Trends (GDP
%)
KARMAYOGI IAS
🏦 Services ✅ Classification: 📌 Service Sector Share in GVA:
Sector 📍Union List: Telecom, financial services, highways, 54% 📌 Service Exports (FY24):
Evolution mining. $345 billion (IT & business services
📍State List: Healthcare, real estate, agriculture services. 73%) 📌 PMI Services Index (Mar
📍Concurrent List: Education, electricity, professional 2024): 61.2 📌 Prelims Tip: India’s
services. rank in Global Capability Centres
✅ Prelims Link: Service sector questions asked in PYQs (GCCs): 1st 📌 FDI Share in
2013, 2016, 2020. Services (2024): 53% of total FDI 📌
✅ Growth Engine: Share in GDP rose from ~30% Contact-intensive Services: Tourism,
(1980) to ~55% (2024). hospitality, transport, real estate
✅ Digital India Impact: Explosive growth in e-
commerce, fintech, OTT platforms.
✅ Global Leader: India ranks 2nd in global IT &
business services exports (2023-24).
✅ Economic Survey 2023-24: Services exports rose to
$345 billion in FY24, 44% of total exports.
📈 Service ✅ Bank Credit: Services sector credit growth at 22.9% 📌 Services Credit Share in Total
Sector - YoY, ₹45.9 lakh crore (Mar 2024). Bank Credit: 29% 📌 Top FDI
Financing ✅ Top Sectors Receiving Credit: Aviation (56%), Real Sources for Services (FY24):
Trends Estate (29%), Tourism (22%). Singapore, US, Mauritius 📌 ECB
✅ External Commercial Borrowing (ECB): Services Share in Total ECB (FY24): 53% 📌
sector received $14.9 billion in FY24, 53% of total ECB Prelims Tip: Key sectors driving
inflows. services exports - IT, financial,
✅ Prelims Link: UPSC 2021 on ECB mechanism. business services 📌 Logistics
✅ Economic Survey Insight: Decline in FDI in services Performance Index (2023): Rank 38
(FY24) due to rising global protectionism, geopolitical (improved from 54 in 2014)
tensions, and higher interest rates.
✅ GCC Boom: Global Capability Centres (MNC back-
office hubs) in India projected to grow from 1,580 (2023)
to 2,000+ by 2026.
🌍 Service ✅ Pre-COVID Boom: 2010-20 saw strong growth in IT 📌 Services Export Share in Total
Sector Trade exports, tourism receipts. Exports: 44% 📌 India’s Rank in
& External ✅ COVID Impact: Sharp dip in 2020-21 (-8.4% GVA), Global Services Exports (2024): 6th
Trends especially in contact-intensive services. 📌 Top Service Export Sectors: IT,
✅ Post-COVID Recovery: Double-digit growth in travel, transport 📌 Prelims Tip:
FY22 (8.8%) & FY23 (7.9%). Current Account Impact - Higher
✅ Prelims Link: PYQ 2015 on sectoral growth, focus on service exports reduced CAD 📌
trade. Prelims Tip: WTO Classification -
✅ Service Exports (FY24): $345 billion, 44% of total Commercial Services (includes
exports. IT & business services contribute 73% of total transport, travel, business, financial,
service exports. ICT, construction)
✅ Tourism Rebound: 24.6% YoY growth in travel
services in FY24.
✅ Digital Services Surge: India’s share in global
digitally delivered services rose to 6% in 2023.
📊 More Data ✅ GST Collections: ₹20.18 lakh crore (FY24), 11.7% 📌 Share of Contact vs Non-Contact
Points & YoY growth. Services: 60:40 📌 India’s Share in
Trends ✅ Toll Collection Growth: 18.9% (FY24) Global Outsourcing: 55% 📌 PMI
✅ Rail Freight Growth: 5.3% (FY24) Service Consistently >50 since
✅ Prelims Link: PYQ 2022 on Logistics & Services. August 2021 📌 Prelims Tip: Top 5
✅ GCCs: 45% of global GCCs are in India. Service Sectors in FDI - IT, Finance,
✅ Services-led FDI: Services accounted for 65% of Telecom, Real Estate, Tourism 📌
cumulative FDI between 2000-2024. Services Sector Share in
✅ World Bank Ease of Doing Business (Logistics) Employment: 31%
Rank: 38th in 2023.
KARMAYOGI IAS

SECTORAL FOCUS

Topic Details Facts to Remember for Prelims

🚛 ✅ Cargo Transport: 📌 NHAI targets 60 km/day road
Roadways - Waiting time at tolls reduced from 734 seconds (2014) to construction in 2024.
47 seconds (2024) through ANPR & GNSS tracking. 📌 Green Highway Corridor (₹7,000
- PM Gati Shakti integrates multimodal transport using big crore under WB loan).
data (Economic Survey 2023-24). 📌 Bharatmala: 35,000 km road
- Access-controlled highways improve freight speed. network planned.
- Single-window clearance accelerates highway project 📌 NH Length: 1.47 lakh km
approvals. (FY24).
✅ Safety Focus: 4E strategy (Engineering, Enforcement,
Emergency care, Education) to reduce accidents.
✅ Prelims Link: Questions on Gati Shakti & highway
infra asked in UPSC 2022, 2023.
✈ Aviation ✅ Air Cargo Growth: 7% YoY (FY24), handling 33.7 📌 India is 3rd largest aviation
lakh tonnes. market globally.
✅ UDAN Scheme: 500+ routes operational, 75+ new 📌 140+ operational airports (FY24).
airports developed. 📌 Cargo Hubs: Delhi, Mumbai,
✅ Digi Yatra: 2.5 crore passengers used contactless Chennai.
biometric boarding. 📌 Air Cargo Policy 2023 aims for
✅ Women Pilots: 15% of Indian pilots are women (global 10 million tonnes by 2030.
avg: 5%).
✅ Prelims Link: UPSC 2018 on regional connectivity
(UDAN).
🌐 Tourism ✅ Growth: India ranked 39th in WEF Travel & Tourism 📌 Tourism GDP Contribution: ~7%
Development Index 2024. (FY24).
✅ Foreign Tourist Arrivals: +43.5% YoY (2023), Forex 📌 57 destinations covered under
receipts ₹2.3 lakh crore (+65.7% YoY). Swadesh Darshan 2.0.
✅ Schemes: 📌 Prelims Tip: PRASAD covers
- PRASAD: Pilgrimage infra enhancement. pilgrimage sites only.
- Swadesh Darshan 2.0: 57 destinations, sustainability 📌 G20 Presidency boosted cultural
focus. tourism branding.
- E-Marketplace: Direct tourist-guide booking platform.
- SAATHI: Safety certification for hotels.
✅ Prelims Link: UPSC 2020 on Swadesh Darshan &
tourism infra.
🏠 Real ✅ Economic Contribution: 7% of GVA (FY24). 📌 Real Estate employs 70 million
Estate ✅ Urban Housing: PMAY-U - 1.2 crore houses people.
sanctioned. 📌 Residential sales: 4.1 lakh units
✅ Funding Support: Affordable Housing Fund, SWAMIH (2023).
Fund for stalled projects. 📌 PMAY-U Funding: ₹8 lakh crore
✅ Digitization Drive: Single-window construction (since 2015).
clearance & land record digitization (DILRMP). 📌 Prelims Tip: SWAMIH Fund for
✅ Future Trends: 50% population to live in cities by stalled projects only.
2050, driving demand.
✅ Prelims Link: UPSC 2019 on PMAY & urban infra.
📡 Telecom ✅ Teledensity: Increased from 75.2% (2014) to 85.7% 📌 Telecom Contribution to GDP
(2024). Target: 8% by 2025.
✅ 5G Rollout: Started Oct 2022, now 15th globally in 📌 5G Subscriber Base (2024): 15
speed. crore.
✅ BharatNet: 6.8 lakh km optical fiber; 2 lakh+ Gram 📌 PM WANI Wi-Fi hotspots: 1
KARMAYOGI IAS
Panchayats connected. lakh+.
✅ Reforms: Telecommunications Act 2023 eased spectrum 📌 Prelims Tip: BharatNet is world’s
charges & allowed 100% FDI. largest rural broadband project.
✅ Prelims Link: UPSC 2020 on BharatNet & Digital
India.
💻 IT & ✅ GVA Share: IT services share rose from 3.2% (FY13) to 📌 India is world’s largest
GCCs 5.9% (FY23). outsourcing hub (55% global share).
✅ GCC Boom: 1,580 Global Capability Centres in India, 📌 Top IT Export Destinations: US,
employing 16.6 lakh (FY23). EU.
✅ Prelims Link: Global IT outsourcing in UPSC 2021. 📌 Prelims Tip: GCCs (MNC back-
✅ Startups & Digital Exports: 1,000 new tech startups offices) thrive in India due to skilled
(2023). SaaS exports surging (Economic Survey 2023-24). workforce & cost advantage.
🚀 Startups ✅ Startup India (2016): ₹10,000 crore Fund of Funds; 📌 India: 3rd largest startup
1.25 lakh DPIIT-recognized startups (2024). ecosystem globally.
✅ Seed Fund Scheme: Supports prototype to product 📌 Top Sectors: EdTech, FinTech,
launch. HealthTech.
✅ NIDHI: Incubators & innovation hubs. 📌 Prelims Tip: Fund of Funds does
✅ National Startup Awards: Recognizes excellence NOT directly fund startups — it
annually. invests in SEBI-registered AIFs.
✅ Prelims Link: UPSC 2017 on Startup India.
✅ Economic Survey 2023-24: 45% startups from Tier 2/3
cities; 47% have women directors.
👩💻 Gig ✅ Growth: 15 million gig workers (FY24), fastest growth 📌 Prelims Tip: Gig = temporary,
Economy in delivery, healthcare, IT sectors. flexible jobs outside traditional
✅ Social Security Code 2020: Extended benefits like employment.
health insurance & pensions to gig workers. 📌 Largest Gig Sectors: E-commerce
✅ Prelims Link: Gig workers & social security asked in delivery, ride-hailing, freelance IT.
UPSC 2021. 📌 2024 Update: E-Shram portal
✅ NEP: National Employment Policy under formulation to registered 28 crore unorganized
formalize gig work (Economic Survey 2023-24). workers, including gig workers.

Topic Details Facts to Remember for Prelims

(with Emojis)
🛒 E- ✅ Market Growth: 📌 India’s E-commerce GMV
commerce – E-commerce market projected to exceed USD 350 billion (Gross Merchandise Value) to
by 2030 (Economic Survey 2024). reach ₹8 lakh crore by 2030.
– Driven by Digital India, UPI, ONDC, and rising 📌 ONDC = Non-platform-centric
smartphone/internet penetration. open network, DPIIT-backed.
✅ Challenges: 📌 Consumer Protection (E-
– Data privacy issues tackled via Digital Personal Data Commerce) Rules, 2020 =
Protection Act, 2023. Ensures transparency in pricing &
– Online frauds and need for skills development for rural reviews.
MSMEs. 📌 GeM (2016) = B2G
✅ ONDC Initiative: marketplace for govt procurement.
– Open Network for Digital Commerce (2022) democratizes
e-commerce by enabling small businesses, especially from
Tier 2/3 towns and rural areas, to list and sell products
online.
– FY24: 18% growth in restaurant orders, 52% in grocery
orders on ONDC.
✅ Prelims Link: UPSC 2023 covered Digital India and
UPI evolution.
KARMAYOGI IAS
🚀 Technology ✅ Startups Growth: 📌 India = 3rd largest startup
Startups – Startups grew from 2,000 (2014) to 31,000+ (2023) ecosystem globally 🌐.
(NASSCOM). 📌 UPI-led BFSI innovation =
– 1,000 new startups added in 2023. critical enabler.
✅ Top Sectors: 📌 45% startups from Tier 2/3
– EdTech (16%), Enterprise Tech (12%), BFSI (10%), cities.
with RetailTech, HealthTech, and AI sectors thriving. 📌 Prelims Tip: Fund of Funds =
✅ Drivers: Does NOT directly invest in
– UPI (2016) drove BFSI innovation. startups but via AIFs.
– Cloud adoption, SaaS boom, 21 SaaS unicorns (FY24).
– HealthTech & EdTech rose post-COVID.
✅ Global Recognition:
– India 3rd globally in startup ecosystem (NASSCOM).
– 16% of global AI talent based in India (FY24).
✅ Government Initiatives:
– ₹10,000 crore Fund of Funds.
– Startup India Seed Fund (2021) for early-stage support.
– Drone Shakti & EV custom duty exemptions promote
innovation.
✅ Deep Tech Surge:
– 13,000+ deep tech startups in AI, IoT, robotics, etc.
✅ Prelims Link: Startup India asked in UPSC 2017;
AI/Deep Tech potential in 2023.
🛡 Insurance ✅ Insurance Penetration: 📌 India Insurance Penetration:
Sector – Life Insurance Penetration: 3.2% of GDP (2023). 4% (2023).
– Non-life Insurance Penetration: ~0.8% of GDP (2023). 📌 Target: 5% penetration by
✅ LIC’s Dominance: 2025.
– LIC holds 70% market share in first-year premium 📌 SECC data = Beneficiary base
income. for PM-JAY.
✅ Government-backed Schemes: 📌 IRDAI Act (1999) =
– PM Jeevan Jyoti Bima Yojana: ₹2 lakh cover at Regulatory framework for
₹436/year premium. insurers.
– PM Suraksha Bima Yojana: ₹2 lakh cover for ₹20/year 📌 Prelims Tip: PMFBY =
premium. Voluntary for farmers borrowing
– Ayushman Bharat PM-JAY: ₹5 lakh health cover for 10 institutional credit.
crore+ families.
✅ Agriculture Insurance:
– PM Fasal Bima Yojana (PMFBY) covers crop losses,
benefiting over 4 crore farmers annually (2023).
✅ Digital Push:
– Bima Sugam (2024): One-stop insurance marketplace.
✅ Reforms & Regulatory Shift:
– Malhotra Committee (1993) recommended opening up
insurance to private players.
– IRDAI (1999) established for regulation.
✅ Prelims Link: UPSC 2017 asked about PMFBY;
Ayushman Bharat in 2019.
KARMAYOGI IAS
HUMAN CAPITAL, UNEMPLOYMENT, SKILLING AND POVERTY
AND RELATED TOPICS

Topic Details Facts to Remember for Prelims

🌱 Human Capital: ✅ Definition: Collective skills, knowledge, 📌 Human Capital = Intangible
Meaning and health, and abilities enabling economic Asset.
Significance contribution. 📌 Key Sectors: Education 📚,
✅ Transformation Process: Like physical Healthcare 🏥, Skills 💻.
capital through investment, human resources 📌 Amartya Sen’s Capability
become human capital via education, Approach = Focus on Freedom &
health, and skilling. Capability over just income (UPSC
✅ Benefits: Higher personal income (private 2018).
benefits) & increased economic productivity
(social benefits).
✅ Prelims Link: UPSC 2018 asked on
Physical Capital vs Human Capital.
🆚 Human Capital vs ✅ Human Capital: Means to economic end 📌 Human Development Report
Human Development (productivity focus). (UNDP) = Global ranking based on
✅ Human Development: End in itself, HDI (Human Development Index).
focuses on dignity & holistic well-being. 📌 HDI Factors: Health 🏥, Education
✅ Human Capital = Economic Growth 📚, Income 💰.
Driver, while Human Development =
Rights-based Welfare Approach.
✅ Prelims Link: UPSC 2018 asked
Capability Approach (Amartya Sen).
🔗 Sources of Human ✅ Education: Formal & vocational 📌 NCERT, UGC, AICTE =
Capital Formation education enhances cognitive & technical Education governance bodies.
skills. 📌 Skill India Digital Platform
✅ Health: Productivity linked to better launched (2023) to integrate all
health; PM Ayushman Bharat plays key role. skilling initiatives under one
✅ On-the-Job Training: Industry skilling umbrella.
boosts efficiency.
✅ Migration: Access to better economic
opportunities (with risks like brain drain).
✅ Information: Digital platforms (e-Shram,
NCS Portal) improve market access.
✅ Prelims Link: UPSC often asks about
govt health & education schemes (e.g., RTE
Act 2009 in UPSC 2021).
🏛 Government Role in ✅ Policy Framework: Schemes like 📌 Budget 2024: ₹1.27 lakh crore
Human Capital Samagra Shiksha, PM Ayushman Bharat, allocated for Education & ₹90,000
Formation and PMKVY align with SDG 4 (Education) crore for Health.
& SDG 3 (Health). 📌 School dropout rate (FY24):
✅ Quality Assurance: Accreditation via 12.6% at secondary level (UDISE+
NAAC, NBA in education & NABH in 2023-24).
healthcare ensures quality.
✅ Expenditure Trends: Education = 2.9%
of GDP (2023-24); Health = 2.1% of GDP.
✅ Prelims Link: Education expenditure
trend asked in UPSC 2023.
⚠ Challenges in Human ✅ Poverty: Restricts access to quality 📌 India’s Rank in HDI 2023:
Capital Formation education & health. 134/191 📊.
✅ Skill Mismatch: Industry demand-supply
KARMAYOGI IAS
gap despite demographic dividend. 📌 Gini Coefficient (Income
✅ Regional Disparities: NE, BIMARU Inequality): 0.48 (2023-24).
states lag behind.
✅ Prelims Link: Poverty & HDI trends
asked in UPSC 2022.
🧑🎓 Human Capital ✅ Definition: Enhancing workforce 📌 Skill India Digital Platform
Formation & Skilling productivity via formal education, (2023): Central repository for all skill
vocational training & on-job learning. programs.
✅ Key Programs: Skill India Mission, 📌 Rural Skill Centres: 823 under
PMKVY 4.0 (2024), Jan Shikshan Jan Shikshan Sansthan (2024).
Sansthan.
✅ Sectoral Focus: IT, Healthcare, Green
Jobs, Construction.
✅ Prelims Link: UPSC 2016 asked about
Skill India Mission.
💼 Skilling & ✅ Structural Unemployment: Addressed by 📌 Unemployment Rate (PLFS
Unemployment Link bridging skill gaps in evolving sectors (e.g., 2023): 3.1% (rural), 5.4% (urban).
EV, semiconductors, renewable energy). 📌 Female Labour Force
✅ Employability: Higher skilled workers Participation Rate (LFPR): 37%
find jobs faster in high-growth sectors like (2024).
IT, HealthTech, Manufacturing.
✅ Prelims Link: Skill-gaps &
unemployment trends asked in UPSC 2023.
💰 Skilling & Poverty ✅ Higher Wages: Skilled workers earn 2-3 📌 Multidimensional Poverty Index
Link times more than unskilled (NSO Survey (MPI) 2023: 11.2% population still
2023). multidimensionally poor.
✅ Poverty Alleviation: Skilled workers’ 📌 Top 3 states in skilling (2023):
families experience better health & Maharashtra, Tamil Nadu, Gujarat.
education outcomes, breaking
intergenerational poverty.
✅ Regional Impact: Special focus on
Northeast, Aspirational Districts to
empower marginalized communities.
✅ Prelims Link: Skill-development &
poverty trends often combined in UPSC
essays (2020, 2022).
🔄 Human Capital ✅ Social Mobility: Education & health 📌 PMKVY 4.0 (2024): Targets 15
Formation, investments help uplift vulnerable sections. lakh youth skilling in new-age tech.
Unemployment & ✅ Economic Multiplier: Skilled workforce 📌 NEP 2020: Strong skilling focus
Poverty Link → higher incomes → more savings & from school level (6th standard
investments → economic growth. onwards).
✅ Entrepreneurship: Skilling fosters
startups/self-employment, reducing
dependence on formal jobs.
✅ Prelims Link: UPSC 2023-24 asks
linkages between HDI, Poverty &
Unemployment.
🚀 Current & Future ✅ Digital Shift: e-learning, hybrid skilling 📌 India’s Demographic Dividend
Outlook platforms growing post-pandemic. (2024-45): Largest working-age
✅ Green Skilling: Focus on EV, renewable population.
energy jobs in Budget 2024. 📌 Skill Gap Reports (NSDC): India
✅ Global Opportunities: India sending needs 110 million skilled workers by
skilled workforce abroad via G2G MoUs 2028.
(Japan, UAE, Germany).
✅ Prelims Link: Green Jobs & Global
Mobility trends likely in future UPSC exams.
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Sector/Theme Details Facts to Remember for Prelims

📚 Education – ✅ Samagra Shiksha Abhiyan (SSA): 📌 Budget 2024 Allocation: ₹36,453
School Level Comprehensive school education from pre- crore for SSA, ₹11,600 crore for PM
primary to higher secondary. POSHAN.
✅ PM eVIDYA: Digital learning via DIKSHA, 📌 Prelims Link: SSA (UPSC 2018).
TV channels, and One Class One Channel. 📌 Target: Universal foundational
✅ PM POSHAN (Mid-Day Meal): Nutritional literacy & numeracy by 2026-27.
support in schools.
✅ NIPUN Bharat: Focus on foundational
literacy & numeracy.
✅ Eklavya Model Residential Schools: Focus
on tribal education.
✅ Balvatika: Pre-primary school program in
anganwadis.
🎓 Education – ✅ Rashtriya Uchchatar Shiksha Abhiyan 📌 Budget 2024 Allocation for Higher
Higher Level (RUSA): Quality improvement in state Education: ₹44,094 crore.
universities. 📌 Prelims Link: RUSA (UPSC 2019).
✅ IMPRINT & GIAN: Research & innovation 📌 Global Initiative of Academic
focus. Networks (GIAN): 1800+ courses
✅ National Research Foundation (NRF): offered.
₹50,000 crore corpus to boost research (Budget
2024).
✅ Study in India: Promote India as an
education hub for foreign students.
🏥 Health ✅ Ayushman Bharat - PM-JAY: ₹5 lakh per 📌 Budget 2024 Health Allocation:
family insurance. ₹90,659 crore.
✅ National Health Mission (NHM): Rural & 📌 Prelims Link: NHM (UPSC 2012).
urban health services. 📌 Ayushman Bharat: 7.79 crore
✅ Ayushman Bharat Health Infrastructure hospitalizations by 2024.
Mission (ABHIM): Strengthening health
infrastructure.
🛠 Skilling ✅ PMKVY 4.0: Industry-relevant skilling in 📌 Budget 2024 Allocation: ₹13,000
AI, robotics, 3D printing, green jobs. crore for PM Vishwakarma.
✅ SANKALP: Skill awareness & training. 📌 Prelims Link: Skill India (UPSC
✅ PM Vishwakarma Kaushal Samman 2018).
Yojana: Skilling for artisans. 📌 Focus on Digital & Green Skills in
PMKVY 4.0.
💼 Employment ✅ MGNREGA: 100 days wage employment in 📌 Budget 2024 Allocation: ₹86,000
rural areas. crore for MGNREGA.
✅ PMEGP: Credit-linked subsidy for micro- 📌 Prelims Link: MGNREGA (UPSC
enterprises. 2016).
✅ DDU-GKY: Skilling for rural youth. 📌 Employment Generation
(PMEGP): 7.9 million jobs created.
🏦 Financial ✅ PM Jan Dhan Yojana (PMJDY): Banking 📌 Budget 2024 Allocation: ₹7,500
Inclusion access for all. crore (Mudra).
✅ PM Mudra Yojana: Loans for micro & 📌 PMJDY Accounts (2024): 53.14
small businesses. crore.
✅ Stand-Up India: Credit support for SC/ST & 📌 Prelims Link: Mudra (UPSC 2016).
women entrepreneurs.
🌍 Human ✅ HDI: Health, education, income. 📌 India HDI Rank (2023): 134/191.
Development ✅ Gender Development Index (GDI): Gender 📌 India MPI (2023): 11.2% population
Indices gaps in HDI. multidimensionally poor.
✅ Gender Inequality Index (GII): 📌 Prelims Link: HDI & MPI in UPSC
Reproductive health, empowerment & labor 2020, 2021.
KARMAYOGI IAS
participation.
✅ Multidimensional Poverty Index (MPI):
Multi-dimensional deprivations.
😊 World ✅ Factors: GDP per capita, personal freedom, 📌 India Rank (2024): 126/146.
Happiness Report social support, life expectancy, generosity, 📌 Prelims Link: Covered in UPSC
corruption perception. 2017.
✅ SDSN publishes the report annually.
🌐 Human Capital ✅ World Bank Indicator: Tracks human 📌 India HCI (2023): 0.49 (Moderate).
Index (HCI) capital outcomes (survival, schooling, health). 📌 Prelims Potential Link: World
✅ Tracks future workforce productivity. Bank Indexes often in UPSC Prelims.
🚺 Gender Equality ✅ Gender Gap Index: Economic participation, 📌 India Rank (2024): 127/146.
education, health & political empowerment. 📌 Prelims Link: Gender Gap Index
✅ Published by WEF. (UPSC 2022).
🏥 Rural Health ✅ NRHM: Rural health services. 📌 Health & Wellness Centres (2024):
✅ ASHA Workers: Bridge between community 30,000+ operational.
& health system.
✅ Prelims Link: ASHA workers (UPSC 2012).
👶 Maternal Health ✅ Janani Suraksha Yojana (JSY): Cash 📌 MMR (2023): 97 per lakh live births.
incentives for institutional deliveries.
✅ Prelims Link: JSY (UPSC 2012, 2023).
💻 Digital Skilling ✅ Skill India Digital Platform: One-stop 📌 Registered Workers (2024): 29.8
portal for skill training. crore (E-Shram).
✅ E-Shram: Database for unorganized sector 📌 Prelims Link: E-Shram (UPSC
workers. 2023).
🏞 Digital Literacy ✅ PMGDISHA: Digital literacy in rural areas. 📌 Beneficiaries (2024): 6 crore trained
✅ Part of Digital India initiative. (PMGDISHA).

CARE ECONOM.

Theme Details Facts to Remember for Prelims 📝

🌐 Defining Care ✅ ILO Definition: Includes both paid care 📌 ILO Global Estimates (2023):
Work work (nurses, childcare workers, eldercare staff) Care work accounts for 16.4 billion
and unpaid care work (household duties like hours daily globally—equivalent to 2
childcare, cooking, cleaning, elder care). billion full-time jobs.
✅ Care work is foundational for social 📌 Unpaid Care Work Value in
reproduction, ensuring future workforce health, India: ~15-17% of GDP (ILO
education, and well-being. Report).
📊 Economic ✅ Economic Driver: Formalizing care services 📌 Prelims Link: Link to questions
Importance of Care can boost GDP by ~2%, improve productivity, on informal economy & FLFPR
Economy and increase female labor force participation trends (UPSC 2018).
(FLFPR). 📌 Budget 2024-25 Focus: Increased
✅ High growth potential in childcare, support for anganwadis, creches,
eldercare, and healthcare services. and health infrastructure.
✅ Multiplier Effect: Every ₹1 invested in care
economy generates ₹2 in economic returns
(NITI Aayog).
👵 Demographic ✅ Aging Population: Elderly population (60+ 📌 Prelims Link: Demographic
Drivers – Elderly years) will rise from 10% (2024) to 20.8% trends, aging population issues
Care (2050). (UPSC 2011, 2019).
✅ Dependency Ratio (2022): ~19.8%, 📌 Budget 2024-25: Focus on elder-
expected to cross 30% by 2050. friendly infrastructure, geriatric
✅ Rising Demand for Skilled Caregivers, care services under Ayushman
Bharat.
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assisted living facilities, and home-based elder
care services.
👩⚕ Gender & Unpaid ✅ Time Use Survey 2023: 📌 Prelims Link: Time Use Survey
Care Work • Women: 5.6 hours/day on unpaid care work. (UPSC 2020).
• Men: 30 minutes/day. 📌 FLFPR (2023): ~32.8% (NSSO
✅ Care Work & FLFPR: Disproportionate PLFS).
unpaid care limits women’s workforce
participation, especially in urban areas.
👶 Childcare Services ✅ Public Childcare Models: Palna Scheme, 📌 Prelims Link: Anganwadi &
& Women’s Anganwadi-cum-Crèches, and workplace ICDS programs (UPSC 2016).
Workforce crèches. 📌 Budget 2024-25 Allocation:
Participation ✅ Evidence from Brazil, Mexico shows public ₹21,700 crore for Integrated Child
childcare increases female labor force Development Services (ICDS),
participation by 20-30%. including creches.
📈 Economic Potential ✅ Formalizing unpaid care into paid sectors 📌 Prelims Link: Informal to formal
– Formalizing Care could generate 23 million jobs (ILO India sector transition (UPSC 2020).
Economy Estimate). 📌 Service Sector Growth
✅ Demand rising for home healthcare (Economic Survey 2023-24): 7.6%
services, urban daycare, and community in FY24, partly driven by health &
eldercare centers. social work services.
👵 Elder Care Policies ✅ No Comprehensive National Elder Care 📌 Prelims Link: Maintenance &
– Current Gaps Policy. Welfare of Parents Act (UPSC 2012).
✅ Existing provisions: Maintenance and 📌 Budget 2024 Focus: Support for
Welfare of Parents and Senior Citizens Act, elder-friendly infrastructure under
2007 mandates family support but lacks Smart Cities Mission.
institutional focus.
✅ Need for:
• Caregiver support programs.
• Tax incentives for eldercare businesses.
• Community-based elder care centers.
• Home-based geriatric care integration with
Ayushman Bharat.
💼 Schemes & ✅ Palna Scheme: Anganwadi-based creches. 📌 Budget 2024-25: ₹13,000 crore
Initiatives Supporting ✅ Integrated Child Development Services for PM Vishwakarma (skilling
Care Economy (ICDS): Nutrition, preschool, and care. artisans & caregivers).
✅ National Creche Scheme: Affordable 📌 PMKVY 4.0: Skilling programs in
childcare for working mothers. homecare & geriatric care services.
✅ Maternity Benefit Act: Mandatory crèche
facilities in firms with 50+ employees.
✅ PM Vishwakarma Yojana: Supports
training of homecare workers, healthcare aides.
✅ Skill India & PMKVY: Focus on
healthcare assistants, eldercare training.
💡 Global Best ✅ Japan: Silver Economy Policies – Integrated 📌 Prelims Utility: Global examples
Practices – Value elder care & insurance. can enrich answers in GS2 (Welfare
Addition ✅ Nordic Countries: Subsidized childcare & Schemes) and GS3 (Inclusive
parental leave boost FLFPR to over 60%. Growth).
✅ South Korea: National Long-Term Care 📌 Economic Survey 2023: Calls for
Insurance for elderly. formalizing care services to enhance
✅ Brazil: Bolsa Familia linked with childcare economic growth & gender equity.
& maternal employment.

📊 Key Prelims Takeaways for Care Economy

Indicator Value (2024)

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FLFPR (NSSO PLFS 2024) 32.8%
Unpaid Care Work (Time Use Survey) Women: 5.6 hrs/day, Men: 0.5 hrs/day
Elderly Population (2024) 10% (expected 20.8% by 2050)
Value of Unpaid Care Work ~15-17% of GDP
Job Creation Potential (ILO Estimate) 23 million jobs

🚀 Employment Overview

Aspect Details Facts for Prelims 📌

Employment Structure 🔹 Self-Employed Workers (2023-24): 📌 Prelims Link: Workforce
54% of workforce. participation trends – UPSC 2017,
🔹 Hired Workers (2023-24): 46% of 2018.
workforce.
🔹 Self-Employed Women: 50% (↑ from
46% in 2011-12).
🔹 Self-Employed Men: 58%.
Nature & Stability of Work 🔹 Self-Employed: Irregular income, 📌 Prelims Link: Types of Workers
market-dependent. – UPSC 2022 (Labour Codes).
🔹 Hired Workers: Regular income, job
security.
Key Employment Indicators 🔹 Labour Force Participation Rate 📌 Prelims Link: Periodic Labour
(LFPR) 2023-24: 57.9% Force Survey (PLFS) – UPSC 2020.
🔹 Unemployment Rate 2023-24: 3.2% (↓
from 6.1% in 2017-18)
🔹 Female LFPR (2023-24): 41.7% (↑
from 23.3% in 2017-18).
🔹 Youth Unemployment Rate (15-29
yrs): 10% (↓ from 17.8% in 2017-18).
Workforce Distribution by 🔹 Agriculture: 45% 📌 Prelims Link: Sector-wise
Sector 🔹 Manufacturing: 11.4% employment trends (UPSC 2015,
🔹 Services: 28.9% 2020).
🔹 Construction: 13%
Gender Gap in Care 🔹 Women’s Unpaid Care Work (Time 📌 Prelims Link: Care Economy
Economy & Employment Use Survey 2023): 5.6 hours/day. Concept – Emerging area for UPSC
🔹 Men’s Unpaid Care Work: 30 (Social Sector).
mins/day.
🔹 Care Economy’s Potential Jobs: 11
million jobs (70% for women).
🔹 Care Economy Potential
Contribution: 2% of GDP (ILO).
Government Initiatives (Job 🔹 PM MUDRA Yojana: 47.7 crore loans 📌 Prelims Link: Skill India and
Creation & Skilling) sanctioned (till March 2024). employment schemes (UPSC 2018-
🔹 Stand-Up India: 2.29 lakh loans to 23).
SC/ST and women entrepreneurs.
🔹 Start-Up India: 12.42 lakh jobs created
by DPIIT-recognized startups (2023).
🔹 PM Vishwakarma Yojana: ₹13,000
crore (2024-25) for traditional artisans.
🔹 PMKVY 4.0: Focus on AI, robotics,
and Industry 4.0 skills.
🔹 e-Shram Portal: Database of 29 crore
unorganized workers.
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Employment Types (2023- 🔹 Self-employed: 54% 📌 Prelims Link: Workforce
24) 🔹 Casual Labour: 26% composition (UPSC 2021).
🔹 Regular Salaried Workers: 20%
Unemployment Types (PYQ 🔹 Open Unemployment: Actively 📌 Prelims Link: Types of
Focus) seeking jobs but unable to find any. Unemployment – UPSC 2013, 2019,
🔹 Disguised Unemployment: Prevalent in 2023.
agriculture – extra workers with zero
marginal productivity.
🔹 Seasonal Unemployment: Agricultural
off-seasons.
🔹 Structural Unemployment: Skills-jobs
mismatch.
🔹 Frictional Unemployment: Transition
period between jobs.
🔹 Cyclical Unemployment: Economic
slowdown-induced.
🔹 Technological Unemployment: Job
loss due to automation/AI.
Care Economy 🔹 Palna Scheme: 17,000 Anganwadi- 📌 Prelims Link: Palna Scheme,
Interventions (2024 Update) cum-crèches for working mothers. ICDS (UPSC 2016).
🔹 PM POSHAN (Mid-Day Meal):
₹12,500 crore allocation (2024-25).
🔹 PM Atmanirbhar Bharat Rozgar
Yojana (ABRY): 60.5 lakh beneficiaries.
🔹 Ayushman Bharat: Covers health
aspects of care workers too.
Sector-Specific Employment 🔹 Food Products: 11.1% 📌 Prelims Link: Industry-wise
(Organised Manufacturing) 🔹 Textiles: 10% trends (UPSC 2022).
🔹 Primary Metals, Apparel, Motor
Vehicles: 7% each.
🔹 Electronics, Chemicals: Rapid growth
sectors.
Future of Employment – 🔹 Green Energy Jobs: 3.4 million 📌 Prelims Link: Future of Work,
Green & Digital Economy potential jobs by 2030 (solar, wind). ESG & Climate-linked Jobs (UPSC
🔹 AI Impact: 26% of Indian jobs highly 2023).
exposed; 14% benefit from AI adoption.
🔹 Gig Economy Projection: Expected to
reach 23.5 million workers by 2029-30
(NITI Aayog).
🔹 Heat Hazards (Climate Change): Loss
of 3.8% of working hours globally by 2030.
Labour Market Reforms 🔹 4 Codes Consolidate 29 Laws: 📌 Prelims Link: Labour Codes
(Labour Codes) • Wages Code. (UPSC 2021).
• Industrial Relations Code.
• Social Security Code.
• Occupational Safety, Health, and Working
Conditions Code.
🔹 Focus: Simplified compliance, ease of
hiring, social security coverage for gig &
platform workers.
Technology and Workforce 🔹 Future Skills Prime: National digital 📌 Prelims Link: AI & Digital
Trends skilling platform. Economy Impact (UPSC 2022).
🔹 YUVAi: Youth for AI Initiative.
🔹 India AI Mission: ₹10,300 crore
allocation to boost AI talent.
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🔹 Factory Size Profile (Annual Survey
of Industries 2023): 79.2% of factories
have <100 employees.
57.3% female participation in these smaller
units.

📝 Key Prelims Snapshots for Quick Revision

Indicator (2024) Data

Unemployment Rate 3.2%
FLFPR (Overall) 41.7%
Female LFPR (Rural) 44%
Youth Unemployment Rate 10%
Workforce Size ~56.5 crore
Self-Employed Workers Share 54%
Casual Labour Share 26%
Regular Salaried Workers Share 20%
Care Economy Job Potential (ILO) 11 million
Gig Economy Workers (Projected 2029-30) 23.5 million

Skilling: Leveraging India’s Demographic Advantage

Aspect Details Facts for prelims 📌
Demographic 🔹 Working Age Popula*on (15-64 years): 📌 UPSC PYQ Link: Asked in 2011, 2013
Dividend 68% (2023). (Concept of Demographic Dividend).
🔹 Youth Popula*on (15-29 years): ~27%.
🔹 Dependency Ra*o: Declining from 65% Demographic dividend is the economic
(2000) to ~50% (2024). growth potenKal resulKng from a shiF in a
🔹 Window of Opportunity: Open ?ll 2047. naKon's age structure, specifically when the
working-age populaKon (15-64) is larger
than the non-working-age populaKon. This
situaKon creates an opportunity for
increased producKvity and economic
development if harnessed effecKvely.
Youth Skilling 🔹 Formal Training: 4.4%. 📌 Prelims Link: Workforce & Skilling Sta?s?cs –
(PLFS 2022-23) 🔹 Informal Training: 16.6%. UPSC 2022.
🔹 Women’s Par?cipa?on in Skilling: 52%
(PMKVY 2024).
Global 🔹 India: 4.4% formally skilled. 📌 Mains Link: India’s Skilling Deficit – Compare
Comparison - 🔹 Germany: 50%+ (Dual System). with Germany (UPSC 2021).
Skilling Rates 🔹 South Korea: 80%+ voca?onally trained.
🔹 USA: 50%+ trained workforce.
Focus on 🔹 Integra?on of AI, IoT, Robo?cs, 📌 Mains Link: Skilling for Industry 4.0 – UPSC
Industry 4.0 Automa?on, Green Energy, and Advanced 2020.
Manufacturing into skilling programs.
🔹 New Skill Qualifica?ons for Green
Hydrogen, Electric Vehicles (EVs), and
Digital Economy sectors in 2024.
Interna?onal 🔹 30 Skill India Interna*onal Centres (SIIC) 📌 Mains Link: Skilled Migra?on & India’s
Mobility & Skill – Opera?onal in Varanasi & Bhubaneswar. Global Talent Supply – UPSC 2023.
Export 🔹 Key Sectors: Construc*on, IT, Healthcare,
Hospitality.
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🔹 NSDC Interna?onal facilita?ng skilling
aligned with global standards.

🏫 Government Schemes for Skill Development (2024 Updated)

Scheme Focus Key Achievements (2024)
PMKVY 4.0 Short-term training & cer?fica?on with 🔹 52.3% women par?cipa?on.
on-the-job training 🔹 Focus on AI, Robo?cs, Green
Hydrogen.
Cravsmen Training Scheme (ITI) Long-term voca?onal training 🔹 13.3% women par?cipa?on
(FY24).
Jan Shikshan Sansthan (JSS) Life skills & livelihood training 🔹 82% of beneficiaries are
women.
Na?onal Appren?ceship Promo?on Appren?ceship training with s?pend 🔹 20.7% women par?cipa?on.
Scheme (NAPS) reimbursement
PM Vishwakarma Yojana Training for tradi?onal ar?sans in 18 🔹 4.37 lakh ar?sans trained.
trades 🔹 ₹13,000 crore allocated.
Skill India Digital Plaworm Convergence of skilling, educa?on & 🔹 690+ online courses, 1650+ e-
jobs books integrated.
Agniveer Skill Cer?fica?on Skill cer?fica?on for ex-servicemen 🔹 Focus on reskilling for civilian
jobs post-service.

💼 Industry Collabora?on for Skilling

Ini?a?ve Focus Achievements (2024)
Skill Impact Bonds Public-private model targe?ng youth 🔹 50,000 youth trained; 60% women.
skilling
Flexi MoU Scheme Customized skilling with industry 🔹 Maru?, Toyota, NMDC trained 9,600+
partners youth.
Dual System of Training Combined training in ITIs & industry 🔹 37,865 appren?ces trained (FY22).
(DST)
Corporate Skill Hubs Skilling through CSR partnerships 🔹 Focus on digital, logis?cs, healthcare &
green sectors.

🏭 Sector-Specific & Targeted Skilling (2024 Focus)

Target Sector Key Ini?a?ves Achievements & Focus (2024)
Water Sector (Jal Jeevan Skilling for plumbers, water quality 🔹 Mul?-skilling courses developed.
Mission) technicians 🔹 Integra?on with Skill India Portal.
Green Hydrogen Skilling for produc?on, storage & 🔹 50 new qualifica?ons under Green
transport Hydrogen Mission.
Agriculture & Agro- Skilling for FPOs, logis?cs, food 🔹 Focus on value chain development,
Processing processing sustainable prac?ces.
Tourism & Hospitality Skilling for heritage tourism, 🔹 Integrated with Swadesh Darshan 2.0 &
culinary arts Dekho Apna Desh.
Care Economy Skilling for elder care, childcare, 🔹 Part of PM Vishwakarma & informal sector
health aides skilling.

📊 Skilling Outcomes & Challenges

Aspect Details (2024) Facts for prelims 📌
Skill Gap 🔹 29% of employers report skill shortage (India 📌 Prelims Link: Skills Reports & Data –
Skills Report 2024). UPSC 2023.
🔹 High demand in AI, Cybersecurity, Data Analy*cs,
Green Energy.
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Social 🔹 52% women par?cipa?on in skilling programs. 📌 Mains Link: Inclusive Skilling – Case
Inclusion 🔹 35% SC/ST/OBC par?cipa?on. Study U?lity.
Challenges 🔹 Low awareness in rural areas. 📌 Mains Link: NITI Aayog Skill Gap Report
🔹 Fragmented delivery across ministries. – UPSC 2022.
🔹 Low appren?ceship uptake (only 2.3% of
workforce).
Future Focus 🔹 Digital transforma?on of skilling ecosystem. 📌 Mains Link: Future of Work (ESG Focus)
🔹 Expanding interna?onal cer?fica?ons for mobility. – UPSC 2023.
🔹 Linking skilling to green transi?on & climate
resilience jobs.

📊 Poverty

Aspect Details / Definition / Data (2024)

Definition of Poverty World Bank defines poverty as living on less than $2.15/day (PPP, 2022), focusing on
absolute poverty (minimum survival needs).
SECC 2011 & BPL SECC 2011 used automatic inclusion, exclusion, and deprivation-based ranking
Identification criteria to identify BPL households, linking them to schemes like NFSA, PMAY-G,
Ayushman Bharat.
Automatic Exclusion Households with assets like vehicles, tractors, land above thresholds, or refrigerators
were excluded from BPL.
Automatic Inclusion Vulnerable groups like destitutes, PTGs, manual scavengers, single-women
households were automatically included.
Deprivation Criteria Assessed housing type, demographic vulnerability, gender-based vulnerability,
disability, economic dependence, literacy, and special deprivation for ranking.
SECC Poverty Findings Rural BPL: 30.95%
(2011) Urban BPL: 26.4%
Used for direct beneficiary targeting under schemes.
Multidimensional Developed by UNDP & OPHI, it captures health, education, and living standards
Poverty (MPI) deprivations (aligned with SDGs).
India MPI (NITI Aayog) Tracks 12 indicators across health, education & living standards.
Reduction from 29.17% (2015-16) to 11.28% (2019-21), lifting 415 million people
out of MPI.
Committees for Poverty See Below Table
Estimation

📊 Poverty Estimation Committees (Chronological)

Committee Year Key Approach Key Outcomes / Poverty

Line (per capita/month)
Alagh 1979 Focused on calorie-based norms (2,400 rural & 2,100 Rural: ₹49.1 (1973-74)
Committee urban calories/day). Linked expenditure to meet these Urban: ₹56.7
norms.
Lakdawala 1993 Continued calorie-based norms but introduced state- Rural: 28.3% (2004-05)
Committee specific poverty lines using CPI-AL & CPI-IW for Urban: 25.7%
price adjustment.
Tendulkar 2009 Shifted to uniform basket for rural & urban areas, Rural: ₹446.68
Committee included health & education expenses, better price Urban: ₹578.8 (2004-05)
adjustments.
Rangarajan 2014 Returned to nutrition-based norms (2,155 rural & 2,090 Rural: ₹972
Committee urban calories/day); included housing, clothing, Urban: ₹1,407 (2011-12)
transport, education & health.
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📊 Poverty Categories (Chronic, Transient, Never Poor)

Category Description
Always Poor Always below poverty line, structurally deprived.
Chronic Poor Poor most of the time but sometimes slightly better off.
Churning Poor Frequently move in and out of poverty, e.g., seasonal workers.
Occasionally Poor Usually non-poor but fall into poverty occasionally due to shocks (illness, drought).
Never Poor Consistently have sufficient income and never below poverty line.

📊 Key Poverty Indicators & Indices

Indicator/Index Definition/Formula
Headcount Ratio (H) Percentage of population below poverty line.
Poverty Gap Index Average income shortfall of the poor compared to poverty line.
Sen Index Combines headcount ratio, poverty gap & inequality among the poor.
MPI (Multidimensional Poverty H×AH \times AH×A, where H = headcount ratio and A = average
Index) deprivation intensity.
Gini Coefficient Measures income inequality (ranges from 0 to 1).
Kuznets Curve Hypothesis that inequality rises, then falls with economic development.

📊 Poverty Reduction & India’s Progress (2024)

Source/Report Key Achievement

IMF (2023) 140 million Indians exited extreme poverty (2015-2021) due to economic growth &
welfare.
UNDP (2023) 415 million Indians lifted out of multidimensional poverty (2005-2021).
World Bank Recognized India’s progress in reducing poverty & enhancing financial inclusion.
(2022)

📊 Poverty Alleviation Schemes (2024-25 Updated)

Sector Scheme Objective Latest Update (2024-25)

Rural MGNREGA Guaranteed 100 days of wage ₹86,000 crore allocated (2024-25); 260
Development employment. crore person-days generated.
PMAY-G Pucca houses to rural poor. 2.67 crore houses completed (Nov
2024).
NRLM (SHG Promote self-employment in ₹15,047 crore allocated; 10.05 crore
Scheme) rural areas. women mobilized into SHGs.
Urban DAY-NULM Skill urban poor for self- 13 lakh trained (2024).
Development employment & jobs.
PM SVANidhi Collateral-free loans to street ₹12,035 crore sanctioned (May 2024).
vendors.
Food Security NFSA Subsidized grains to 81 crore Continuation under PMGKAY in 2024-
people. 25.
ICDS Nutrition & pre-school ₹20,000 crore allocated (2024-25).
education.
Health Ayushman ₹5 lakh health insurance per Over 7 crore hospitalizations approved
Bharat family. (2024).
Mission Universal immunization for 5.46 crore children & 1.32 crore
Indradhanush children & pregnant women. pregnant women vaccinated (Dec
2024).
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📊 Special Schemes for Vulnerable Groups

Scheme Target Group Objective Latest Updates (2024)

PM Garib Kalyan Anna BPL Free foodgrains to 81 crore Extended till
Yojana (PMGKAY) Households beneficiaries. December 2024.
Pradhan Mantri Matru Pregnant ₹5,000 cash benefit for first pregnancy 3.35 crore beneficiaries
Vandana Yojana Women to support maternal health. till 2024.
Poshan Abhiyan Children & Improve nutrition outcomes through ₹33,000 crore outlay
Mothers converged services. (2024-25).
PM Ujjwala Yojana BPL Women Free LPG connection for clean Over 9 crore
cooking. connections released.
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📊 IMPORTANT ECONOMY TERMS FOR CSP 2025
Term Defini?on Example Latest Data/Context (2024-
25)
Monetary Policy 6-member RBI body (3 internal, 3 RBI cut Repo Rate to Target: Infla*on at 4% ± 2%;
Commi]ee (MPC) external) se~ng repo rate & 6.25% (Feb 2025). Growth ~7% (2024-25) (RBI).
infla?on targe?ng.
Fiscal Deficit Excess of total expenditure over FD Target: 5.1% of ₹17.3 lakh crore FD in Budget
total revenue (excl. borrowings). GDP in 2024-25. 2024. Target: 4.5% by 2025-
26.
GDP Deflator Ra?o of Nominal to Real GDP — Nominal GDP: ₹301 GDP Deflator: 5.2% (2023-24)
measures overall infla?on. lakh cr, Real: ₹227 (Economic Survey).
lakh cr (FY25).
NPA (Non- Loan overdue for more than 90 ₹10 lakh loan unpaid Gross NPA: 3.1% (Mar 2024) -
Performing Asset) days. for 120 days. Lowest in 10 years.
Twin Balance Sheet Combined stress in bank & IL&FS triggered NBFC Improving due to IBC & Asset
corporate balance sheets. crisis. Quality Review (2024).
Current Account Difference between imports and CAD: 1.5% of GDP $55 billion CAD (2023-24) -
Deficit (CAD) exports (goods, services, (FY24). Narrowed due to service
income). exports boom.
Green Bonds Bonds funding eco-friendly SBI issued $650 India raised $8.3 billion
projects like solar parks. million green bond (2024) (Climate Bonds
(2024). Ini?a?ve).
Gini Coefficient Income inequality index (0 = India’s Gini: ~0.49 Rural: 0.28, Urban: 0.37 -
perfect equality, 1 = perfect (2024). (UNDP 2024 Report).
inequality).
Stagfla?on Stagnant growth + high infla?on 1970s Oil Crisis. India avoided stagfla?on;
+ unemployment. Growth: 7.3%, CPI: 5.4%
(2023-24).
Base Erosion and Tax shiving by MNCs to low-tax Google Ireland case. India’s Digital Services Tax
Profit Shiving (BEPS) na?ons. (2024) combats BEPS.
Masala Bonds Rupee-denominated foreign NHAI issued ₹4,200 cr Total Masala Bonds raised:
bonds. Masala Bonds. ₹47,000 cr (2024).
Produc?on Linked Cash incen?ves linked to output Mobile exports via PLI ₹1.97 lakh crore PLI corpus;
Incen?ve (PLI) in key sectors. up 35% (2024). ₹72,000 cr disbursed (2024).
FRBM Act Law to cap fiscal deficit and debt- Target FD 3% Revised Target: 4.5% by 2025-
to-GDP ra?o. (original). 26 (Budget 2024).
Repo Rate Rate at which RBI lends to banks. Repo cut to 6.25% Part of accommoda*ve
(Feb 2025) to boost stance to boost growth.
liquidity.
Circular Economy Sustainable economic model E-waste recycling Circular Economy Ac?on Plan
using recycling & reuse. targets. launched (2023).
Gig Economy Short-term plaworm-based work Swiggy, Uber drivers. 15 million gig workers (2024)
economy. (NITI Aayog).
External Commercial Foreign loans raised by Indian Reliance raised $1 ECB Inflows: $39 billion
Borrowings (ECB) companies. billion ECB. (FY24) (RBI).
Angel Tax 30% tax on startup equity sold Angel round at 3x Exempt for DPIIT-registered
above fair value. valua?on. startups (Budget 2024).
Climate Resilient Farming adapted to climate risks. Drones for precision ₹1.3 lakh crore allocated for
Agriculture farming. agriculture & rural infra
(Budget 2024).
Skill India Digital Digital skilling plaworm AI, Blockchain, 3D 750+ online courses; 12 lakh
integra?ng NSDC & e-learning. prin?ng courses. enrolled (2024).
Disinvestment Govt selling PSU stake for LIC IPO. ₹50,000 crore target (FY25)
Target revenue & efficiency. (Budget).
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DigiYatra Contactless airport travel using 2 crore passengers Expanded to 16 airports
facial biometrics. used it (2024). (2024).
GIFT City India’s first IFSC for global Global funds & ₹20 billion transac?ons in
finance. fintechs operate here. GIFT IFSC (2024).
Carbon Trading Market-based system to cap & NTPC selling carbon India launched Na*onal
Scheme trade carbon emissions. credits. Carbon Market (2023).
Credit Default Swaps Insurance against corporate bond HDFC issuing CDS. CDS Market: ₹5,500 crore
(CDS) default. (2024).
K-Shaped Recovery Unequal recovery post-crisis IT vs Tourism post- Highlighted in Economic
(some sectors boom, others COVID. Survey 2024.
bust).