Economy

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Pradhan Mantri Urja Ganga Project

Context: GAIL (India) Limited has completed the laying of over 97% of the integrated Jagdishpur-Haldia-Bokaro-Dhamra Pipeline (JHBDPL), under the Pradhan Mantri Urja Ganga Project, which will carry Natural Gas to the eastern and Northern parts of India.

Relevance of the Topic: Prelims: Key facts about Pradhan Mantri Urja Ganga Project. 

Pradhan Mantri Urja Ganga Project

  • Total length of pipeline under the Project is approx. 3384 km, and its components include:
    • Jagdishpur-Haldia-Bokaro-Dhamra Pipeline 
    • Barauni-Guwahati Pipeline 
  • Aim: To expand India’s natural gas grid, promote cleaner energy solutions and ensure efficient natural gas distribution, including LNG. 
  • States covered: Uttar Pradesh, Bihar, Jharkhand, Odisha, West Bengal and Assam. 
  • Implemented by: Gas Agency of India Limited (GAIL).  
  • Utility: The pipeline is currently transporting 12.26 Million Standard Cubic Meters Per Day (MMSCMD) of natural gas including supplies to fertilizer plants, refineries, industrial consumers, and City Gas Distribution networks, along the pipeline route.
Pradhan Mantri Urja Ganga Project

Significance of Urja Ganga Project

  • Spur economic growth in eastern India by providing access to cheapest gas transportation and gas pricing reforms, and regional integration through natural gas grid. 
  • Enhances India’s energy security by diversifying energy mix. 
  • Reduces carbon emissions by providing a cleaner alternative to conventional fossil fuels.

India’s transition to a Gas-based Economy

  • Natural gas is a fossil fuel energy source. The largest component of natural gas is methane. It also contains smaller amounts of natural gas liquids (hydrocarbon gas liquids), and non hydrocarbon gases, such as carbon dioxide and water vapour. It is processed and converted into cleaner fuel for consumption.
  • The Indian Government has set a target to increase the share of gas in the energy mix up to 15% in 2030 to make India a gas-based economy, around 7% at present. Presently, India is importing around 50% of its requirement of natural gas. 

RBI cuts Repo Rate by 25 bps

Context: RBI’s Monetary Policy Committee has decided to cut the repo rate by 25 basis points to 6%. The decision comes amidst heightened global economic uncertainty in the face of reciprocal tariffs announced by the US.  

MPC has slashed the GDP growth to 6.5% in FY26 from 6.7% projected earlier. Retail inflation is expected to be 4% in FY26. 

Relevance of the Topic:Prelims: Repo Rate; Reverse Reo Rate. 

Repo Rate and Reverse Repo Rate

  • Repo Rate: The interest rate that the RBI charges when commercial banks borrow money from it. 
  • Reverse Repo Rate: The interest rate the RBI pays commercial banks when they park their excess cash.

Reduction of Repo Rate: Promotes Economic Activity

  • When the RBI wants to encourage economic activity in the economy, it reduces the repo rates. 
  • This enables commercial banks to bring down the interest rates they charge (on their loans) as well as the interest rate they pay on deposits. Interest rates on home, personal, vehicle loans and deposit loans come down. 
  • This incentivises people to spend money as keeping their savings in the bank pays back a little less interest.
  • Businesses are incentivised to take new loans for new investments as new loans now become cheaper. 

Increase in Repo Rate: Control Inflation:

  • When the RBI wants to control inflation, it increases the repo rate. 
  • Banks charge more interest to their borrowers, as they have to pay more interest to borrow from the RBI. 
  • At a macro level, this inhibits people from borrowing money as well as from spending, which in turn reduces the amount of money in the market, and thus negates inflation.

Repo and Reverse repo rates are often referred to as the “benchmark” interest rates in the economy. Using these rates, the RBI sets the tone for all other interest rates in the banking system, and in the broader economy.

MUDRA Loans hit All Time High

Context: Over 52 crore loans worth more than 32 lakh crore rupees have been sanctioned under Pradhan Mantri Mudra Yojana since the launch of the scheme in 2015. Half of the beneficiaries belong to SC, ST and OBC communities, and over 70% of them are women. 

Relevance of the topic:

Prelims: Pradhan Mantri Mudra Yojana (PMMY)

Mains: Benefits of MUDRA Loans

Pradhan Mantri MUDRA Yojana

  • Launch: April 8, 2015
  • Type: Central Sector Scheme
  • Objective: Providing loans up to Rs. 10 lakh to the non-corporate, non-farm small/micro enterprises. These loans are classified as MUDRA loans under PMMY. 
  • Eligible Member Lending Institutions (MLIs):
    • Public Sector Banks
    • Private Sector Banks
    • State operated cooperative banks
    • Rural banks from regional sector
    • Micro Finance Institution (MFI)
    • Non-Banking Finance Company (NBFC)
    • Small Finance Banks (SFBs) 
    • Other financial intermediary approved by Mudra Ltd. as member financial institutions
  • Eligible borrowers:
    • Individuals
    • Proprietary concern
    • Partnership Firm
    • Private Ltd. Company
    • Public Company
    • Any other legal forms
  • Application: The borrower can also apply online through portal www.udyamimitra.in
  • Interest rate: declared by Member Lending Institutions from time to time as per RBI guidelines based on which applicable interest rate is determined.

Components of MUDRA loans

  • The scheme has been classified as:
Components of MUDRA loans
  • Tarun Plus: From FY 2024-25, the upper cap on Tarun loans was increased to ₹20 lakh, for loanees with a good repayment history, which can be given on the discretion of the banks. This has been one of the drivers for higher quantum of loans.
  • Key facts- MUDRA:
    • MUDRA is a refinancing Institution. 
    • MUDRA does not lend directly to the micro entrepreneurs / individuals. 

Present status of MUDRA Loans

  • All-time high disbursal: The disbursal of MUDRA Loans reached an all-time high at ₹3.39 lakh crore in the third quarter of FY 2024-25, that ended December 2024.
  • Largest share: SBI has the largest share in the distribution of PMMY loans.
  • Reduction in NPAs of PMMY: Aggregate NPAs of PMMY loans decreased to 3.4% in 2023-24 from 4.9% in 2019-20.
image 173

Benefits of MUDRA Loans

  • Financial Inclusion: Extending financial services to those who are traditionally underserved by the formal banking sector, including small entrepreneurs, micro-enterprises, and self-employed individuals. Funding support helps them start, expand, or modernise their operations. 
  • Economic Growth: Contribute to the overall economic growth of the country by boosting the productivity and profitability of micro and small enterprises.
  • Employment Generation: Facilitate creation of job opportunities and promote entrepreneurship, particularly in rural and semi-urban areas, by supporting small businesses and self-employment ventures.
  • Skill Development: Encourage skill development and capacity building among small entrepreneurs and individuals engaged in various trades and businesses.
  • Women Empowerment: Empower women entrepreneurs. Promote their participation in economic activities by offering financial assistance and support.

There are certain challenges such as over-indebtedness and the need for a more comprehensive support system. Addressing these challenges and expanding MUDRA's reach can further contribute to economic growth and inclusive development in India.

New Pamban Rail Bridge

Context: The Prime Minister of India inaugurated the new Pamban railway bridge which connects the Rameswaram island of the Tamil Nadu coast with Ramanathapuram on the mainland.

Relevance of the Topic: Prelims: Location of Pamban rail bridge. 

Key Facts about Pamban Railway Bridge

  • Connects: Rameswaram or Pamban island on Tamil Nadu coast with Ramanathapuram on the mainland Tamil Nadu. 
  • Length: 2.08 km
  • India’s first vertical lift sea bridge. The bridge features a 72.5-meter vertical lift span that can be raised by 17 meters, allowing for ship movement beneath the bridge. 
image 27

Old Pamban Bridge

  • The 2.05-km long Pamban bridge served as the sole transportation link between mainland Ramanathapuram and Rameswaram Island for over 70 years. 
  • It was completed in 1914, and featured a Scherzer rolling lift span, allowing ships to pass underneath. 
image 28

Pamban Island

  • Pamban or Rameswaram Island is located between peninsular India and Sri Lanka. 
  • It is the largest island in Tamil Nadu by area and hosts the pilgrimage centre Rameswaram.
  • At the eastern tip of the island lies Dhanushkodi, a harbour and a pilgrimage centre. 

India-US Trade Deal Negotiations amid Reciprocal Tariffs

Context: The Ministry of Commerce and Industry has stepped up efforts by expanding its NAFTA division (which handles India’s bilateral trade with the United States, Canada, and Mexico) to strike an early trade deal with the US, and potentially sidestep the 26% reciprocal tariffs. 

Relevance of the Topic: Mains: Impacts of Reciprocal Tariffs on India; India-US Trade deal- challenges.  

US Reciprocal Tariffs on India

  • Recently, the US has imposed 26% reciprocal tariffs on all Indian exports to the US.
  • The US goods trade deficit with India was $45 billion in 2024.
  • India's main exports to the US: Drug formulations and biologicals, telecom instruments, precious and semi-precious stones, petroleum products, gold and other metal jewellery, ready-made garments of cotton, and products of iron and steel.
  • India’s Imports from the US: Crude oil, petroleum products, coal, coke, cut and polished diamonds, electric machinery, aircraft, spacecraft and parts, and gold. 

Impacts of Reciprocal Tariffs over India

1. Potential Negative Impacts:

  • The sectors expected to be most impacted include: Electronics and smart phones, Marine products, gold and other metal jewellery, electrical machinery, textiles. 
  • Global Trade Research Initiative (GTRI) estimates that India’s exports to the US might decline by over 6% or around $5.7 billion in 2025.

2. Window of Opportunity: Relative Tariff Advantage 

  • India has a relative advantage over other countries, as the tariffs over India (26%) are lower than that in other countries, like, China (34%), Thailand (36%), Bangladesh (37%), Vietnam (46%) etc. This differential could encourage the US firms to diversify supply chains away from high-tariff economies towards India. 
  • Certain sectors can benefit, particularly electronics manufacturing, Textiles and apparel etc.

India’s Options

  • Selective Tariff Reductions: Identify sectors where tariff reductions would have minimal domestic impact and could accommodate U.S. interests. India is considering slashing tariffs on 55% of the US exports to India, worth about $23 billion.
  • Negotiating bilateral trade agreement: India can push towards negotiating a bilateral trade deal with the US. If India delays, it could risk losing market share in the US to countries (like Vietnam, Cambodia) which are aggressively pursuing trade deals with the US.
  • Trade diversification with other countries and regional groups, like the UK, European Union, African countries, ASEAN countries etc. to reduce the reliance on the US markets. 

Bottlenecks in negotiating bilateral trade agreement

  • Limited progress on Trade Agreements: India has not yet signed a comprehensive trade agreement with any major Western country, including the US, UK or EU. The major hurdle is India's resistance to incorporating labour and environmental standards, which are often prerequisites for Western trade deals.
  • Data localisation norms: The US has raised objections to India’s data localisation requirements for payment service providers, which restrict foreign firms from freely transferring user data abroad.
  • Weak Intellectual Property Rights (IPR) protection: India remains on the US 'Priority Watch List’ due to delays in patent approvals and the absence of strong laws for trade secret protection. This deters American innovators and firms from entering the Indian market.
  • Non-tarriff barriers: E.g., The US is critical of India’s price caps on coronary stents and knee implants. These controls are viewed as non-tariff barriers that hinder US companies’ ability to operate profitably in India. 

Crisis in Cotton Production in India

Context: India’s cotton economy is not in great shape. India has no surplus in cotton and its yield at 450-kilogram per hectare is one of the lowest, against a global average of 800- kilogram plus.

Relevance of the Topic: Mains: Cotton production in India- challenges and opportunities.

Current Status of Cotton Production in India

  • Declining Output: India's cotton production for 2024–25 is projected at 294 lakh bales (lb)- the lowest since 2008–09. This marks a fall from a peak of 398 lb in 2013–14, representing a nearly 100 lb drop in a decade. 
  • Net negative Exports: Once a major exporter, India cotton imports (30 lb) now exceed exports (17 lb). This shift raises concerns for India's textile and spinning industries. 
image 25
image 26

Global Trade Context and Comparative Advantage: 

  • Favorable US Tariffs on Indian Textiles: Under the US’s reciprocal tariff policy, Indian textiles face a relatively lower import duty (27%) compared to China (54%), Vietnam (46%), Bangladesh, Indonesia and Sri Lanka. Despite these favourable trade terms, India’s declining output limits its ability to capitalise on global export markets.

Fall in Cotton Production- Pink Bollworm (PBW) Crisis: 

  • Cotton lint yields rose from 302 kg/ha in 2002–03 to 566 kg/ha in 2013–14, due to Bt cotton adoption. However, since the PBW resurgence, yields have declined to around 436–437 kg/ha over the last two years.
  • PBW is a monophagous pest that feeds exclusively on cotton bolls, damaging seeds and lint leading to yield loss and fibre discolouration.
  • Resistance to GM Bt Cotton: Bt hybrids carry two genes- cry1Ac and cry2Ab- originally effective against multiple pests. However, PBW developed resistance by 2014, making these genes ineffective.
  • Why did PBW adapt faster? Its exclusive diet (cotton only) allowed faster genetic resistance. A short life cycle (25-35 days) enabled 3-4 generations per crop season, speeding up resistance evolution.

Regulatory Process for GM Crop Approval: Stages of GM crop trials in India:

  • Event Selection Trial: Initial screening of gene effectiveness.
  • BRL-1 (2 years): Confined field trials on <1 acre plots.
  • BRL-2 (1 year): Expanded trials on up to 2.5 acres.
  • GEAC Clearance: Post-trial approval needed from the Genetic Engineering Appraisal Committee (GEAC).
  • State Government Approval: Necessary for field trial permissions.

Efforts to increase Cotton Production

  • Development of New GM Hybrids: Indian seed companies are developing hybrids using new Bt genes to combat PBW resistance. These include testing cry8Ea1 gene hybrids (Bioseed Research India); synthetic cry1c gene; chimeric Bt protein etc. However, the challenges include:
    • Bureaucratic delays in regulatory clearances.
    • Opposition from environmental groups.
    • No GM crop commercialised since 2006 in India (after Monsanto’s Bollgard-2 Bt cotton).
  • Government Mission for Cotton Productivity: The 2025-26 Union Budget has announced an ambitious Rs 500 crore five-year plan to boost cotton production, promote extra-long staple cotton varieties, and promote scientific and technological support for cotton farmers. 

Pink Ballworm has created an emergency-like situation in India’s cotton sector. The Central Government needs to adopt a more proactive approach with regard to new GM crop development and extending policy support. 

US-India Agriculture Trade and Reciprocal Tariffs

Context: The US is India’s top market for agricultural goods, with bilateral farm trade totalling $6.6 billion in 2024. The US has imposed a 26% “reciprocal tariff" on Indian imports. The introduction of a ‘reciprocal tariff’ policy may pose certain challenges to agri-exports from India.

Relevance of the Topic:Mains: India-US Agriculture trade- Statistics, Potential, Challenges, Way forward

Key Stats India-US Agri Trade

  • Tariff Disparity: Historically, a tariff disparity of 32% has existed between India and the US. India imposes an average 37.7% tariff, while the US applies only 2.6% on agricultural products. A reciprocal tariff policy could impact the trade dynamics between the two countries.
  • Bilateral Trade Statistics (2024): 
    • Total India-US agricultural trade: $6.6 billion
    • India’s exports to the US: $5 billion
    • US exports to India: $1.5 billion
  • India’s Agricultural Imports from the US primarily include Pulses, vegetable oils, tree nuts and Fresh fruits. Tariff changes could disrupt this trade. 

Impacts of Tariffs on India’s major Agri-Exports to the US

  • Tariffs can hit key agricultural exports, particularly basmati and non-basmati rice, shrimp, wheat, and buffalo meat, which together account for 46% of India’s farm trade with the US.
  • Shrimp (India’s largest seafood export to the US) will become un-competitive in the US market. Currently, it is subjected to around 7% duty including countervailing duty and anti-dumping duty. With the increase (26%) in tariff, Indian exporters would be subjected to 33% tariff.
  • Tariff hike on processed foods, sugar, and cocoa exports will make Indian snacks and confectionery less attractive to US buyers.
  • Dairy products (ghee, butter, and milk powder) would be costlier in the US.

Potential for India’s Agri-Exports to the US: 

  • India can expand its export portfolio by increasing trade in: Rubber and derivatives; Beverages, spirits, and vinegar; Tobacco; Fish and dairy produce; Cotton. 
  • GTRI has suggested that to soften the impact, India can propose a 'zero-for-zero' tariff strategy' to the US, under which both countries would mutually eliminate tariffs on select goods rather than negotiating a full bilateral trade agreement. 

Indo-Pacific Economic Framework for Prosperity (IPEF)

  • Signed in May 2022 between the US and 13 Indo-Pacific countries, including India.
  • Aims to: Strengthen food safety and trade standards; Reduce agri-trade barriers for US agricultural exports.

Challenges Hindering India’s Agri-Export Growth

  • Logistics and Infrastructure Issues: India’s logistical efficiency improved from 54th in 2014 to 38th in 2023 (World Bank’s Logistics Performance Index). However, India still lags behind countries like Canada, China, South Africa, and Malaysia. Cold storage and supply chain infrastructure remain major bottlenecks.
  • High Post-Harvest Losses: 40% of food waste in India due to poor post-harvest management (FAO report). 30% of fruits and vegetables perish due to inadequate storage.
  • Stringent Sanitary and Phytosanitary (SPS) Standards: Trade agreements by the US, European Union etc. require adherence to strict environmental and quality regulations. Attaining compliance remains a major issue in increasing exports to these countries. 
  • Structural Issues in Indian Agriculture: Small and fragmented landholdings reduce economies of scale. Lack of aggregation and processing facilities for small and micro-enterprises results in limited value addition in agricultural produce and makes them less competitive in global markets. 

Way Forward for Strengthening India’s Agri-Exports

  • Modernising supply chains with improved cold storage and logistics.
  • Enhancing compliance with international food safety and environmental regulations.
  • Diversifying export products to reduce dependency on a few commodities.
  • Strengthening trade agreements to secure preferential access to US markets.
  • Supporting small farmers through aggregation models and export incentives.

RBI to buy ₹80,000 Crore Government Securities

Context: The Reserve Bank of India (RBI) has announced an open market operation (OMO) purchase to purchase government securities worth ₹80,000 crore in April 2025. This comes after major expectations of further liquidity operations by the Reserve Bank of India.

Relevance of the Topic: Prelims: Key facts about OMOs; G-Secs; Liquidity Management measures by RBI.

Major Highlights

  • RBI will conduct fresh purchase of government securities under OMOs for an aggregate amount of ₹80,000 crore. This will be carried out in four tranches of ₹20,000 crore each. 
  • The move is in continuation of the RBI's recent measures to inject liquidity into the financial system.
    • Earlier in March 2025, RBI conducted OMO purchases of government securities worth Rs 1 lakh crore in two tranches of Rs 50,000 crore each. 
    • RBI also held a dollar-rupee buy/sell swap auction of $10 billion for 36 months.

Open Market Operations (OMO)

  • OMOs are a key monetary policy tool used by the RBI to regulate liquidity in the banking system by buying or selling government securities (G-Secs) in the open market.
  • When RBI purchases government securities, it injects liquidity into the system. This encourages banks to lend more which can boost economic activity. 
  • When RBI sells government securities, it absorbs excess liquidity and helps to control inflation by reducing the money supply.
  • OMOs are crucial for maintaining stable interest rates, ensuring adequate credit availability, and managing overall financial stability in the economy.

Government Securities (G-Secs)

  • G-Sec is a tradable debt instrument issued by Central government or State governments. It acknowledges the government's debt obligation.
  • Types of G-secs:
    • Short-Term Government Securities (maturity <1 year): Treasury Bills, Cash Management Bills.
    • Long-Term Government Securities (Maturity >1 year): Dated G-Secs.
  • G-Secs are issued through auctions conducted by Reserve Bank of India, through the electronic platform E-Kuber. 

Also Read: RBI’s Liquidity Moves and Forex Market Intervention 

The RBI’s liquidity support is crucial as it comes at a time when economic recovery in India is showing mixed signals, with inflationary pressures, slowing industrial output, and the global economic slowdown affecting business sentiments.

Labour needs as much focus as the Capital

Context: India is facing a growing challenge in creating formal sector jobs despite a labour-abundant economy. 

Relevance of the Topic: Mains: Amid shift towards capital-intensive production - need to focus on labour skilling and reforms.

Employment Trends in India

  • Job Deficit: Since 2017-18, India's working-age population has increased by 9 crore, however,  formal sector jobs have risen by 6 crore, leaving a deficit of 50 lakh jobs annually. 
  • Rise in Informal and Self-Employment: Most employment growth is from self-employment in rural areas and informal services, affecting both quality and quantity of work.
  • Capital-intensive Production process: Production processes, including traditionally labour-intensive manufacturing and services industries, are becoming more capital-intensive (more investment in technology and equipment) and automated. The advent of Artificial Intelligence will further reduce the need for human labour. 

Why is the capital intensity of production rising in a labour-abundant economy?

1. Demand-Side Factors (Industry & Market-Driven): 

  • Need for Higher Productivity & Cost Efficiency: Businesses adopt capital-intensive technologies to improve productivity and reduce long-term costs. Machines provide greater efficiency, precision, and output per unit of input compared to human labour.
  • Global Competition & Quality Standards: Indian firms competing in global markets must meet high-quality standards, which often necessitate automation and capital-intensive methods.
  • Falling Cost of Capital: With advancements in technology, the cost of machinery and automation has decreased, making capital investment more attractive than hiring and training labour.
  • Economies of Scale: Large-scale production benefits from automation as it reduces per-unit costs, making capital-intensive production more viable. 

2. Supply-Side Factors (Labour Market Issues):

  • Low Availability of Skilled Labour: Less than 10% of India’s workforce has formal vocational training. Many educated individuals lack industry-relevant skills, making them less competitive against machines. 
  • Rigid & Costly Labour Regulations: Stringent labour laws, high compliance costs, and restrictions on hiring and firing discourage firms from hiring more workers, making automation a preferable alternative. 
  • High Labour Costs in the Formal Sector: Though India has an abundant workforce, formal sector wages, social security obligations, and compliance costs increase the effective cost of hiring labour.
  • Uncertainty & Labour Unrest: Frequent labour strikes, job security demands, and union pressures lead industries to prefer mechanisation, which ensures uninterrupted production

Some Government Efforts:  

1. Production linked Incentive Scheme: 

  • The government offers incentives of 4% to 6% on incremental/additional sales. For example, earlier a company was selling goods worth Rs. 1 lakh in a year and now its sales increased to Rs. 1.2 lakh. Then the company will get an incentive of 4% on Rs. 20,000= Rs. 800.
  • Challenges:  
    • The current structure of the PLI scheme is primarily focused on expanding production of high-value products with backward linkages, which require high-skilled, specialised labour, and is relatively less focused on low- and middle-skilled labour-intensive sectors.
    • Over 50% of the PLI budget is allocated for large-scale electronics, IT hardware and drone manufacturing. However, the highest number of jobs under the scheme has been created in the food processing and pharmaceutical industries. 

2. Education-Employment Linked Internship (ELI) scheme:

  • The central government incentivises the private sector to hire more labour while also skilling them, through the ELI and other internship programmes. 
  • Challenge: While this policy does reduce the cost of labour by shifting (the initial) burden on to the government, the period of the subsidy or transfers is short (about two to three years) The scheme does not sufficiently focus on upskilling workers, limiting future employability. 

Way Forward

  • Integrated Policy Framework: Establish coordination between ministries of production, labour, and skilling to align production-linked incentive (PLI) schemes with current and future labor market needs.
  • Graded Incentive Structures: Modify PLI incentives from flat to graded, rewarding firms for certifying and upgrading workers' skills through on-the-job training.
  • Strengthen Skill Ecosystem: Enhance training institutes like ITIs by linking their funding and rewards to employment and earnings outcomes based on projected industry demand.
  • Flexible Labour Regulations: Encourage state governments to adopt flexible labor policies to reduce costs and promote labor-intensive technologies

Hence, there is a need to focus on both the quantity and quality of the workforce by investing in skill development programs that cater to high-value manufacturing sectors. India needs to develop dynamic frameworks that adapt to evolving industrial and technological demands, ensuring alignment with the vision of "Viksit Bharat." 

Is Income Inequality widening in India?

Context: A number of recent consumption and asset surveys are showing a fall in inequality in India. 

Relevance of the Topic: Mains: Debate surrounding income inequality in India.

Economic Growth of India

Post-Independence Economic Issues:

  • India inherited a poor economy in 1947 with excessive poverty levels. The first 50 years of independence saw poverty persist due to a lack of substantial economic growth, in spite of the socialist policies for income redistribution.
  • The economy witnessed slow growth, excessive taxation, and policies that focused on wealth redistribution by way of public sector dominance and centralised control. 

Liberalisation in the 1990s: 

  • In the early 1990s, India shifted toward economic liberalisation, opening up its markets, reducing trade barriers, and embracing foreign investments. These reforms led to an annual growth rate of ~6% (1990-2020), lifting 400 million people out of poverty. 
  • By 2021, Indian poverty had declined to 13% of the population, from 40% in 2000, according to the World Bank's $2.15/day poverty line (2017 PPP). This reflects upwards economic mobility.
  • Based on household consumption expenditure surveys (2022-23), urban poverty was at 10%, while rural poverty was at 5%.
  • There has been a significant decline in multidimensional poverty, extending to access to sanitation, electricity, education, and healthcare.

World Inequality Lab (WIL) Estimates: 

  • Inequality Trends in India: According to WIL, the top 1% of earners in India take home 21% of disposable income, while the bottom 50% earn only 13%.

Limitations of WIL Data :

  • WIL's findings are based on income tax data, which represents a small proportion of the population. Surveys conducted by PRICE and NCAER, including both formal and informal sectors, reveal a far more equal distribution of income, with the richest 1% getting 8.8%, and the poorest 50% getting 22.8%.
  • Dependence on income tax data is a major drawback, as India has a relatively low proportion of taxpayers. This skews actual distribution of income and wealth. Other studies, including academic and market surveys, disagree with WIL's report, suggesting the data may not be credible.

Trends suggesting fall of Inequality in India

A number of recent consumption and asset surveys are showing a fall in inequality in India. 

  • More than 450 million individuals have moved past the $2/day income line from 2000 to 2012, with great economic mobility.
  • The proportion of individuals with incomes ranging from ₹5 lakh to ₹31 lakh annually grew from 14% between 2005 and 2021 to 31%, evidencing a large-based increase in income.
  • The ratio of workers in the population went up from 34.7% in FY18 to 43.7% in FY24, indicating better employment participation.
  • Average per capita income touched ₹2 lakh in FY24, which indicates rising economic growth.
  • Small FMCG players reaching price-sensitive consumers grew significantly more than big business, falsifying the premise that inequality is on the increase due to unbalanced consumption behavior.
  • Multidimensional poverty declined with noteworthy improvements in the availability of basic facilities like electricity, sanitation, and healthcare.
  • India has seen massive entry into wealth creation, particularly in the form of start-ups and MSMEs (Micro, Small, and Medium Enterprises). Credit to MSMEs has increased very fast, encouraging the establishment of new enterprises and facilitating wealth distribution among a wider segment of society. 
  • The number of Indian dollar millionaires doubled from 2012 to 2022, though their absolute numbers are few compared to world averages. India's percentage of world millionaires is merely 1.4%, whereas its percentage in world population is 17.2%. This shows that wealth creation is at a nascent stage in India.

Way Forward

  • Focusing on Upward Mobility: Policy and research must aim at enhancing upward mobility in the income distribution, instead of monitoring poverty and inequality alone. Policy must encourage economic engagement and offer opportunities for individuals to climb the income ladder. 
  • Avoiding Excessive Taxation of Wealth Creators: Excessive taxation of wealth creators, as proposed by certain inequality research, may hurt India's growth prospects by discouraging entrepreneurship and innovation. The government must aim at creating conditions where prosperity and upward mobility across income levels are promoted to ensure long-term economic growth.
  • Improving Governance and Infrastructure: To ensure continued growth, India needs to give high priority to governance reforms, particularly in non-metro areas, so that economic benefits are spread widely. Improving infrastructure, decentralisation, and local public service delivery will be key to inclusive and sustainable growth.

Indian growth is primarily based on a broad-based increase in consumption and economic mobility, as opposed to a concentration of wealth at the top. Policies aimed at economic mobility, employment generation, and narrowing inter-regional imbalances will be crucial to continuing this growth trend.  

India’s Coal Reliance has Risen to 79%: MOSPI

Context: India’s coal reliance has risen to 79% in FY2024, as per the MOSPI’s latest Energy Statistics in India. Renewable energy sources have not seen any meaningful rise in the share of the total energy produced in the past decade, despite the push for renewable energy. 

Relevance of the topic:

Prelims: Key highlights of the MoSPI’s Energy Statistics in India 2025.

Mains: Reasons behind high reliance on coal. 

Key Stats in the Energy Sector

  • The share of coal in India’s total energy generation increased to 79% to 16,906 petajoules (PJ) in 2023-24, about two percentage points more than previous year (MoSPI’s Energy Statistics in India 2025). 
  • Coal has consistently accounted for over 70% of India's energy output since 2014-15. Despite increased domestic production, coal import dependence remains high (26%), peaking at 31% in 2019-20.
  • Crude oil’s share has been at 6% in 2023-24. This share has reduced from 2014-15 when it was 11% in 2014-15.
  • Natural gas was 7% of the total energy produced in 2023-24, down from 9% in 2014-15.
  • Renewable energy sources (hydro, solar, nuclear) have not significantly increased their share, standing at 7% in 2023-24 compared to 6% in 2014-15. Their share in total energy production has always been under 10% in the past decade. 
  • Estimated potential for generation of energy from renewable resources has reached 2109 GW as of March 2024. The highest potential for generation of energy comes from wind at 1163 GW (55%), followed by solar energy 749 MW (35.5%) and large Hydro.
    • India’s total renewable energy-based electricity generation capacity: 203 GW (2024).
    • India’s ambitious renewable energy target: 500 GW from non-fossil sources by 2030.
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Major Initiatives related to Renewable Energy Transition: 

  • Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan (PM-KUSUM): Focuses on solarisation of irrigation pumps. 
  • PLI Scheme for Solar PV Modules: Promotes domestic manufacturing of solar panels. 
  • Pradhan Mantri Suryodaya Yojana: Aims to provide rooftop solar to households. 
  • Solar Parks and Ultra Mega Solar Power: Encourages large-scale solar power projects. 
  • Green Energy Corridor Scheme: Facilitates transmission infrastructure for renewable energy. 
  • National Green Hydrogen Mission: Focuses on developing green hydrogen technology. 
  • National Bioenergy Programme: Promotes the use of biofuels. 
  • Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA): Aims to provide electricity to all households. 
  • Green Energy Corridor (GEC): Facilitates the transmission of renewable energy. 
  • National Smart Grid Mission (NSGM) and Smart Meter National Programme: Modernises the electricity grid. 
  • Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME): Promotes the adoption of electric vehicles. 

Reasons for High Reliance on Coal despite Renewable Energy Transition Efforts: 

  • Stable and Reliable Energy Source: Coal-based power plants provide consistent base load electricity, essential for meeting India’s growing energy demands. Unlike intermittent renewable sources (like solar and wind), coal ensures uninterrupted power supply.
  • Economic Viability: Coal is one of the cheapest energy sources in India due to vast domestic reserves. Setting up coal-based power plants has lower upfront costs compared to renewable infrastructure. RE technology requires large capital investment, and large contiguous land, which are in short supply. 
  • Employment and Socio-economic Factors: Coal mining and associated industries provide jobs to millions, especially in coal-rich states like Jharkhand and Chhattisgarh. Phasing out coal would impact livelihoods and local economies, making the transition politically sensitive. 
  • Infrastructure Constraints to scale RE Energy: India has a well-established network of coal-based thermal power plants, which would require significant investment to replace. There is inadequate infrastructure for transmission of RE generated in remote locations to load centres. 

Reforming India’s Textiles Industry

Context: India has set an ambitious target to elevate its textile and apparel (T&A) exports from $34.8 billion in 2023-24 to an eye-popping $100 billion by 2030. This requires game-changing reforms in the textile sector. 

Relevance of the Topic: Mains: Challenges in India’s Textile Sector and way forward

Key Stats in the Textile Sector

  • India has set an ambitious target to increase its textile and apparel (T&A) exports from $34.8 billion in 2023-24 to $100 billion by 2030. 
  • India’s Textile and Apparel exports have grown steadily from $11.5 billion in FY2001 to $34.8 billion in FY24, accounting for only a 4% share in global exports of $774.4 billion.
    • India's apparel export growth has remained stagnant at around 3% of global apparel exports from FY2001 to FY24, despite an increase in export value from $5.5 billion to $14.5 billion. 
    • In contrast, competitors like Bangladesh and Vietnam have significantly increased their global share during the same period. 
  • At this pace, achieving the $100 billion target by 2030 seems a tall order, unless dramatic, game-changing reforms are introduced. 
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Challenges in the Textile Sector

  • Stagnation in Cotton Production:
    • India’s cotton production surged after introducing Bt cotton hybrids (2002), but has declined since 2014. Production is projected to fall to 30 million bales (2024-25), the lowest in 15 years. 
    • India may become a net importer of cotton, with imports (2.6 million bales) surpassing exports (1.5 million bales).
    • Next-gen Ht Bt seeds not approved despite the clearance from Genetic Engineering Appraisal Committee (GEAC).    
  • Outdated Fibre Mix: India’s cotton-to-Man Made Fibre ratio (60:40) contrasts with the global average (30:70), indicating an outdated fibre mix, and the global shift towards man-made fibres.
  • Raw Material Cost: MMF (Man-Made Fibres) such as polyester and viscose are 20% costlier in India compared to competitors (Bangladesh, China, Vietnam). Non-tariff barriers like quality control orders hinder MMF-based apparel growth.
  • Decentralised Production: 80% of India's garment factories are in the decentralised sector, leading to inefficiency and low export potential. 
  • Lack of Modernisation: Slow adoption of modern technology and weak value chain integration.
  • Trade Barriers: High tariff rates on apparel exports to key markets: EU (9.7%) and US (11.47%). In contrast, the EU offers zero-duty access to Bangladesh under the “GSP Everything but Arms” arrangement and imposes a 1.66% tariff on Vietnam’s apparel exports under the “EU-Vietnam FTA”  this creates a competitive disadvantage for Indian exports. 

Reforms needed in India’s Textile Sector

  • India’s garment sector needs to transition into a fashion-driven industry. To support this transformation, it is crucial to incentivise and invest in MMF-based apparel while removing non-tariff barriers, such as the quality control orders on MMF.
  • The PM-MITRA scheme must be fast-tracked to create integrated textile hubs, which will enhance scalability and efficiency in fabric and garment manufacturing.
  • India needs to negotiate Free Trade Agreements (FTAs) with the EU and the US — key markets that account for nearly 66% of India’s apparel exports.
  • India should explore emerging markets like Japan, Russia, Brazil, and South Korea, which offer significant opportunities for products like women’s western wear, intimate wear, swimwear, and outerwear.
  • Improving cotton productivity and fibre quality. Expanding irrigation, promoting high-density planting techniques, and investing in precision farming can help India bridge the productivity gap (435 kg/hectare) with global leaders like China (1,945 kg/hectare) and Brazil.
  • Streamlining the approval process for GM crops and establishing a single-window clearance system to speed up the adoption of high-yield, pest-resistant, next-generation cotton varieties. 

To achieve the ambitious target of $100 billion in textile and apparel exports by 2030, India must address the challenges hampering the sector. This requires modernising production, adopting MMF-based apparel, enhancing value chain integration, removing trade barriers through strategic FTAs and capitalising on emerging markets. 

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