Economy

All (4265)Current Affairs (4243)Mains Practice (77)Mains PYQs by Subjects (40)

Pakistan's Economic Crisis and IMF Bailout

Context: The World Bank has cancelled the $500 million loan of Pakistan for the clean energy programme due to unfulfilled conditions, including revisions to a China-Pakistan Economic Corridor agreement. It has intensified the economic crisis in Pakistan.

Relevance of the topic:

Prelims: Key facts about the International Monetary Fund (IMF).

Mains: Detailed analysis on impacts of IMF bailout on Nation's economy.

Major Highlights:

The past few years have been challenging for Pakistan's economic stability. Political turmoil and miscalculated potential of Chinese investments in projects like China Pakistan Economic Corridor has left the nation under debt burden.
In September 2023, the nation received a $7 billion IMF bailout package on stringent conditions like,
- Stopping further reliance on Chinese investments.
- Bringing retail, agriculture and export sectors into normal tax regime by imposing tax hikes and abolishing exemptions.
Tax hikes, accompanied with the high inflation rates and rising unemployment is leading the youth to switch to other professionally stable destinations.

About IMF Bailouts

The International Monetary Fund (IMF) is an international organisation established under the Bretton Woods Agreement.
Core functions of IMF:
- To monitor global and national economic trends to ensure financial stability.
- Provides financial assistance to nations in the Balance of Payment crisis.
- Provides technical assistance and training to improve governance, tax systems, and economic policies.
- Funded through contributions (quotas) from member nations based on their GDP, openness, economic variability and international reserves.
IMF bailout is financial assistance in conditions of severe economic distress, such as currency collapse, debt default, or balance of payment crisis.
- Recent IMF bailouts Pakistan (2023), Sri Lanka, Argentina and Greece.
Structural Adjustment Programs are the pre-conditions imposed by the IMF to stabilize the economic condition of a nation in order to recover the bailout package amount. It may consist of any or all of the below measures:
- Reducing government spending (Austerity measures)
- Privatising state-owned enterprises
- Liberalising trade and foreign exchange policies
- Increasing taxes or removing subsidies.

Criticism of IMF Bailouts:

Austerity measures can worsen the poverty and inequality situation in the nation.
Sovereignty concerns as the countries lose control over key economic decisions.
Short-term focus on debt repayment overshadows long-term growth and stability targets.
Dependency on IMF assistance without resolving the root cause of the economic crisis, perpetuates economic fragility. E.g., Pakistan’s repeated reliance on IMF assistance instead of resolving root causes like state-sponsored terrorism, law and order fallouts and debt driven economy, contribute to its economic instability.

Conclusion: Despite criticism, IMF bailouts play a crucial role in preventing economic collapse, stabilising the financial system, and fostering confidence among international investors. However, success depends on effective reform implementation and careful consideration of social impacts.

Gujarat Port City Project

Context: Drawing inspiration from international port-cities such as Rotterdam, Dubai, and Antwerp, Gujarat government is revisiting a decade-old idea of building India’s first greenfield port-city spread over 500 sq km. It targets completion by 2047 with a cumulative investment of ₹1.5 lakh crores.

Relevance of the topic:

Prelims: Key facts about Gujarat port-city project; Major Ports in India.

Mains: Development of Port-Cities: Benefits & Challenges.

What are Port-City Projects?

A port-city project refers to a development initiative that focuses on integration and expansion of ports with the surrounding urban areas, enhancing the relationship between the port infrastructure and the city.
These projects aim to address both the economic and social aspects of port operations while improving the urban environment.

About Gujarat’s Port-City Project:

Led by: Gujarat Maritime Board.
Aim: Build a massive port, capable of handling 500 million tonnes per annum (MTPA), integrate port-related industries, marine activities, residential complexes, and recreational activities.
The 500 sq. km greenfield venture will have port facilities, industries, residences, and leisure options.
Four sites have been shortlisted for the planned port-city based on key factors such as proximity to deepwater access, availability of waterfront space, connectivity to robust road and rail networks, and potential to support sustainable industrial growth. These are Porbandar, Bhavnagar, Surat, and Valsad.

Major Ports In India

India has 13 major ports and more than 175 non-major ones. The major ports carry about 70% of the total volume of cargo handled by ports.
Currently, Gujarat accounts for 66% of the cargo handled by non-major ports in India, followed by Andhra Pradesh (14%) and Maharashtra (9%).

Benefits associated with development of Port-Cities:

Boost to Maritime Trade and Logistics:
- Port-city projects can enhance port capacities to handle larger vessels and more cargo. This strengthens India’s position in global trade.
- Improved port infrastructure, coupled with enhanced road, rail, and air connectivity, can streamline supply chains and lower transportation costs.
Job Creation and Economic Diversification:
- Port-city projects create numerous jobs in construction, logistics, port operations, and urban development.
- Growth of ancillary sectors like warehousing, packaging, and IT services also contributes to job creation.
Attract FDI:
- Modernised ports and integrated urban spaces are attractive to foreign investors.
- They can also boost development of Special Economic Zones (SEZs).
Development of Coastal and Hinterland Regions:
- By transforming underdeveloped coastal zones into thriving economic centers, port-city projects can foster balanced regional development.
Promote Sustainable Urban Development:
- Green spaces, renewable energy systems, and eco-friendly construction practices can help India meet its environmental goals while simultaneously boosting its economy by positioning the country as a leader in green development.
Boost to Tourism and Hospitality Industry: Tap into potential of Cruise & Coastal tourism.
Improved Global Competitiveness: Port cities can serve as key regional trade hubs, enhancing India’s standing in global trade.

Challenges:

Implementing port-city projects in India involves various challenges, ranging from logistical and regulatory issues to social and environmental concerns.

Land related Issues: Land scarcity and disputes, high land costs, dense population and India’s complex land acquisition laws can lead to legal battles and delays.
Environmental Concerns: Port-city projects bring with them the risks of coastal degradation and Marine & Coastal pollution.
Congestion and Inefficiency: Many of India’s existing ports have limited capacity to handle large volumes of goods. Upgrading or modernising these facilities and connecting them to the city can be a complex and costly process.
Coordination between stakeholders: Including port authorities, urban development agencies, environmental bodies, and local communities can be difficult, especially when different levels of government have conflicting interests or priorities.
Public-Private Partnerships (PPP) challenges: PPPs face challenges such as mismatched expectations, delays in decision-making, and difficulty in attracting private sector investment
Social and Community Impacts: Displacement of local communities and associated social resistance, inadequate stakeholder engagement can be of concern.

Addressing these issues requires comprehensive planning, strong governance, collaboration between multiple stakeholders, and innovative approaches to ensure the successful integration of port infrastructure with urban development. Overcoming these challenges is critical for realising the full potential of port-city projects and fostering sustainable economic growth in India.

Written off Assets of the Banks

Context: According to the Reserve Bank of India (RBI), the Banks have written off loans worth Rs 10 lakh crores in the last 5 years leading to fall in NPA to 12-year low of 2.8%. However, Banks have recovered only 18% of the written off loans. Banks were unable to recover 82% of the remaining loans despite adopting various recovery measures.

Relevance of the Topic: Prelims: Key concepts- Non-Performing Asset; Wilful Default; Diversion and Siphoning of Loans; Writing off loans.

Non-Performing Asset (NPA):

A loan is categorised as NPA if it is due for a period of more than 90 days. Depending upon the due period, the NPAs are categorized as under:
- Sub-Standard Assets: >90 days and less than 1 year.
- Doubtful Assets: greater than 1 year.
- Lost Assets: loss has been identified by the bank or RBI.

RBI’s Concept of Wilful Default:

Person/company defaults on loan repayment:

Despite having the capacity to repay loans.
Diverts the loan for some other purpose. E.g., Kingfisher Airlines owned by Vijay Mallya diverted the loans for other related businesses such as Kingfisher Calendar and Formula 1 racing Team.
Siphoning of funds. E.g., Nirav Modi took loans for business operations but used the loans for personal purposes.
Sell off the collateral without the knowledge of the Bank.

What is the difference between Diversion and Siphoning of Loans?

In case of “Diversion of Loans”, loans are used for related businesses. However, in case of “Siphoning”, loans are used for unrelated businesses or personal purposes.

Recovery Measures:

Why do Banks write-off loans?

The Bank removes the written off loan from its balance sheet and reports the amount as a loss. Hence, the Banks can show lower profits and hence reduce their tax liability.
E.g., Let's say, the Bank has total profits worth Rs 1000 crores and written off loans worth Rs 100 crores. Then the Net profits (Profits- Written off loans) of the Bank would be Rs 900 crores. Thus, the Bank would be required to pay tax on Rs 900 crores (and not Rs 1000 crores).

Recent controversy over RBI's Framework for Compromise Settlement and Technical Write-offs (2023)

Under this framework, Banks can undertake compromise settlements or technical write-offs of loans of wilful/fraud defaulters. Further, the RBI also allowed wilful defaulters or a company involved in fraud to get fresh loans after 12 months of executing a compromise settlement.
It is considered to be a detrimental step as it only rewards wilful/fraud defaulters but also sends a wrong message to the honest borrowers who strive to meet their financial obligations.

Switzerland revokes India’s MFN Status

Context: Switzerland has withdrawn the Most Favoured Nation (MFN) status of India accorded to India under the Double Taxation Avoidance Agreement or DTAA treaty.

Relevance of the topic:

Prelims: Most Favoured Nation, DTAA and associated terms.

Mains: Scope of analytical question on impacts, benefits and issues associated with DTAA and MFN.

Major Highlights:

This decision comes after an adverse ruling from the Indian Supreme Court (2023) regarding a tax dispute involving Nestlé (the Swiss food giant).
- In 2023, the Supreme Court ruled that India’s Income Tax Act (Section 90) requires explicit government notification to extend benefits of MFN clauses in DTAA agreements.
- In reciprocation to the decision, Switzerland invoked ‘Principle of Reciprocity' and unilaterally withdrew MFN status of India.
From January 1, 2025, Switzerland will levy a 10% tax (instead of the current 5%) on dividends payable to Indian tax residents and entities who claim refunds for Swiss withholding tax.

What is MFN and the Principle of Reciprocity?

Most Favoured Nation (MFN) status if given to a nation allows concessions in tax rates and tariffs. MFN works on the principle of reciprocity i.e., quid pro quo principle where both nations enjoy MFN status of each other.
- MFN status is one of the cornerstones of the World Trade Organisation (WTO) trade law.
- Each member of WTO treats all the other members equally as “most-favoured” trading partners.
- If a country improves the benefits that it gives to one trading partner, it has to give the same best treatment to all the other WTO members.

About Double Taxation Avoidance Agreement (DTAA):

Double Taxation Avoidance Agreement is an understanding between two nations to reduce tax rate over already paid tax in one of the partner nations.
DTAA allows reduction in tax compliance of the multinational firm working in both partner nations as it reduces cascading impact on tax, enhancing ease of doing business.

Indian-Switzerland Trade Relations:

Switzerland's investment flows in India amounted to $9.9 billion from 2003 to 2023.
As per the International Monetary Fund, Swiss investment stocks in India amount to $35 Billion in 2023.

Impacts of MFN Withdrawal:

Tax burden on Indian Firms: As a result of MFN withdrawal, Switzerland will impose a 10% withholding tax on Indian entities. Higher tax liabilities would reduce profit margins.
Reduced investor Confidence: The move may discourage Swiss business and investors from engaging with Indian entities due to the increased tax liabilities.
Negatively Impact global position: The move can potentially affect ongoing Free Trade Agreement negotiations with the European Union.
Increased regulatory barriers: As move can spill over into other trade dynamics leading to sanitary and phytosanitary compliance burden in sectors like pharmaceuticals.
Loss of competitive edge to other competitive nations like China which can fill the vacuum of Swiss trade and investment.
Possible retaliatory measures as India could impose strict measures on Swiss companies, affecting their operations in India and potentially slowing trade growth.

Way Forward:

Renegotiating DTAA: The DTAA needs to be renegotiated to clarify the MFN terms and establish a body for a neutral arbitration mechanism to avoid arbitrary interpretation of trade clauses.
Enhanced investment protection mechanisms like Bilateral Investment Protection Treaties to foster the confidence among the investors and to promote bilateral trade.
Fasttrack India-EFTA trade agreement: Concluding EFTA will ensure new trade avenues to India ensuring mutual trade benefits with partner nations.
Strengthening Domestic Competitiveness: Reducing regulatory barriers and improving Ease of doing business will help attract foreign investments.
Digital and financial reforms: Adopting blockchain in trade agreements and developing fintech partnerships will boost trust and flexibility in the trade relations.

Conclusion: Switzerland withdrawal of India's MFN status highlights challenges in bilateral trade, including increased tax rates and investment uncertainties. However, it provides an opportunity to renegotiate clearer agreements, diversify trade, and foster collaborations. Strengthening dialogue and trust can ensure resilient, mutually beneficial economic ties for long-term growth and stability.

Carbon Market and its Working

Context: COP 29 in Baku, Azerbaijan has given a fillip to the idea of using carbon markets to curb the carbon emissions by approving standards that can help in the setting up of an international carbon market in near future.

Relevance of the topic:

Prelims: Key understanding of bonds and Carbon Market.

Mains: Analytical question on Carbon market, its benefits and its lacunae.

Major Highlights:

Carbon Market is a market that allows the trade of the right to emit carbon in the atmosphere.
- Illustration- A government focusing on controlling emission will issue limited carbon credits to firms. Each carbon credit is equivalent to 1,000 Kgs of carbon dioxide. Firms/individuals who do not need carbon credit can trade them with interested buyers.
- Price of carbon credit will be market based i.e., will work on the principle of demand and supply.
Carbon Offset: These are the alternatives to carbon credit, sold by environmental NGO to bridge the gap of credit and actual emission.
- In case a business pollutes more than carbon credit and fails to secure them from other firms they can opt for this option.
- For example, Firm A breaches the credit limit and can buy carbon offsets from NGO planting trees.

Benefits of Carbon Market:

Cost effective emission reduction by limiting the emission with the help of imposing cost on polluters.
Promotes polluter pay principle by enhancing compliance burden on individuals and firms.
Incentivise the compliance- The Cap and trade system enforces limits on emissions, motivating organisations to stay within their allowances or invest in credit.
Pushes green funding for environmental NGO and organisations by the mechanism of carbon offset mechanism.

Issues in Carbon Market System:

Discriminatory in nature- As carbon credit and carbon market mechanism paves way for the excess emission by wealthy developed nations.
Greenwashing risk is associated with it as the polluter pay principle will provide unrestrained right to pollute.
Overestimation of the impact, as the projects may exaggerate their carbon reduction impact.
Risk of market saturation- The oversupply of the carbon credits and offset clause combined, can reduce the value of carbon credits that can hamper the reduction targets.

Conclusion: Carbon credits and markets are valuable tools for reducing emissions and promoting sustainability, but they face challenges like regulation gaps and potential misuse. To maximise their impact, strong oversight, transparent standards, and a focus on real emission reductions are essential, ensuring they complement broader efforts toward a low-carbon, equitable future.

Amendments in the Insurance Acts and Composite License

Context: The Government has sought to introduce amendments in the Insurance laws to increase the Insurance penetration and reform the insurance sector to make it more competitive. However, these amendments may go against the interests of public sector Insurance companies.

Relevance of the Topic: Prelims: Key facts and developments about the Insurance Sector in India.

Insurance Sector in India:

Present Status:

The insurance sector is regulated under the Insurance Act, 1938. The sector can be divided into Life Insurance and General Insurance (Health, Motor etc.).
Both Public sector and Private sector companies are allowed to offer Insurance in India.

Public sector Insurance Companies.

The Life Insurance Corporation Act of 1956 nationalised the life insurance business by transferring it to Life Insurance Corporation.
General Insurance Business (Nationalisation) Act, 1972 (GIBNA) nationalised the general insurance business in India and regulates 4 general insurance companies- New India Assurance, United India Insurance, Oriental Insurance company and National Insurance Company.

Private sector Insurance Companies:

IRDA Act, 1999 allowed Private sector participation in the Insurance sector. India also allows FDI of up to 74% in Insurance.

Insurance Penetration and Density:

Insurance penetration is measured as the ratio of insurance premium to GDP. While insurance density is calculated as the ratio of Insurance premium to population (per capita premium).
India's overall Insurance penetration is around 4% while the Insurance density is around $70.

Proposed Amendments in Insurance Acts:

Composite License: As per the provisions of the Insurance Act, 1938, life insurance companies can only offer life insurance products, while general insurance companies can offer non-life insurance products, such as health, motor insurance etc. Hence, IRDAI does not allow composite licensing for insurance companies, which means that an insurance company cannot offer both life and non-life insurance products under one entity. Draft amendments allow composite licences for Insurance companies.
Foreign investment: Increase in FDI cap on Insurance from 74% to 100%.
Requirement of capital: The 1938 Act provides capital requirements for different classes of insurance business. The amendment provides that for entities engaged in more than one class of insurance business, the IRDAI may specify the capital requirements. This should not be less than the sum of capital required for carrying out each class of business separately. In addition, IRDAI can also reduce the minimum capital required to up to Rs 50 crore. This can be done for insurers serving underserved or special segments prescribed through regulations.

Concerns with recent proposals:

Presently, LIC can offer only Life Insurance under LIC Act, 1956 (and not General Insurance). Similarly, 4 General Insurance Companies can provide only General Insurance (and not Life Insurance) under the General Insurance Business (Nationalisation) Act, 1972 (GIBNA). Hence, the Government needs to amend the LIC Act and GIBNA to enable composite licensing for public sector Insurance Companies. However, no such amendments have been proposed.
A composite licensing regime would allow only the private sector companies to offer both Life Insurance and General Insurance. However, the public sector insurance companies would not be able to get a composite license. This would hinder public sector insurance companies from competing with the Private sector Insurance companies.

Jalvahak Scheme

Context: The Union Government has recently launched "Jalvahak" scheme to incentivise movement of cargo along the inland waterways, reduce logistics cost and de-congest roads and railways.

Relevance of the topic:

Prelims: Key facts about Jalvahak Scheme

Mains: Inland Waterways- Present status, benefits and constraints.

Present Status of Inland Waterways:

India has approximately 14,500 km of navigable waterways which consist of rivers, canals, backwaters, creeks, etc. However, the share of Inland waterway transport (IWT) in India is currently only around 2% in comparison to 35% in Bangladesh and 20% in Germany.

Benefits of Inland Waterways:

Reduce Logistics cost (12-14% of GDP) and bring it on par with the global standards (8-10% of GDP).
Lower Investment and maintenance cost in comparison to road and railways.
Environment Friendly:
- 50% lower carbon dioxide emissions in comparison to Roads.
- Negligible land requirement.
- Safe mode for hazardous cargo.
Streamline Infrastructure:
- Reduces pressure on Roads and Railways.
- Provide for carriage of vehicles in the form of Roll-on-roll-off mode.
- Easy integration of the IWT with sea transport.
- Safe and less risky in comparison to other modes.
Socio-economic development: IWT provides benefits in terms of trade and access to markets, enhance local community’s economic engagement, promote eco-tourism and boost employment opportunities. For example, Arth Ganga has potential to promote sustainable development with a focus on economic activities along river Ganga.

Constraints and Strategies:

Details about Jalvahak Scheme:

Rationale: Need to provide incentives on the lines of Europe's Marcopolo initiative to encourage modal shift towards Inland waterways from better funded and developed Road and Railways sector.
Duration of scheme: 3 years.
Implementation agency: Inland and Coastal Shipping Limited (ICSL)
Nodal Ministry: Ministry of Shipping, Ports, and Inland Waterways.

Design of the scheme:

Financial incentives will be provided directly to the cargo owners who shift cargo from road/rail to Inland waterways.
Incentive would be up to 35% of the total actual operating expenditure incurred on waterways.
Incentive would be provided only on long haul movement of cargo i.e. distances more than 300 km.

Is the incentive applicable for all the Inland waterways?

Presently, the incentives are applicable for movement of cargo along National Waterways 1 (river Ganga), National Waterways 2 (Brahmaputra river) and National Waterways 16 (River Barak). However, based on the success of the Scheme, it may also be extended to other waterways.

Way Forward: The inland waterways are cost-effective, fuel-efficient, safe and secure mode of transportation for goods and passengers. Going forward, the Jalvahak scheme should be implemented efficiently to increase the modal share of inland waterways from 2% to 5% as envisioned in Maritime India Vision 2030.

Sovereign Green Bonds

Context: Recently, the ₹5,000-crore auction of the new Sovereign Green Bond (SGrB) with 30-year tenure was concluded successfully. It is a notable improvement over the weak response to the Sovereign Green Bonds with 10-year tenure (the investors bid for these bonds at a lower price due to their relatively illiquid nature).

Relevance of the Topic: Prelims: Sovereign Green Bonds

What are Sovereign Green Bonds?

Sovereign Green Bonds are fixed interest-bearing financial instruments issued by any sovereign entity / inter-governmental organisation /corporation.
The proceeds of these bonds are used only for environmentally conscious, climate-resilient projects. This includes:
- Investments in solar/wind/biomass/hydropower energy projects (under 25 MW) that integrate energy generation and storage
- Public lighting improvements (E.g., replacement with LEDs)
- Supporting construction of new low-carbon buildings
- Energy-efficiency retrofits to existing buildings
- Projects to reduce electricity grid losses etc.
The bonds are issued at a premium to facilitate access to cheaper capital for environment-friendly projects.
There is no cap on foreign investment in these bonds because these instruments are considered as specified securities under the fully accessible route.
The proceeds will be deposited to the Consolidated Fund of India (CFI) in line with the regular treasury policy, and then funds from the CFI will be made available for eligible green projects.
There are no specific tax benefits provided for investment in sovereign green bonds.

Note:

In January 2023, the Reserve Bank of India (RBI) auctioned its maiden sovereign green bonds worth ₹8,000 crore under its Sovereign Green Bond Framework.
RBI has facilitated wider non-resident participation in the Sovereign Green Bonds by permitting eligible foreign investors in the International Financial Services Centre (IFSC) to invest in such bonds.

WTO Agreement on Fisheries Subsidies

Context: WTO’s Chair of the Negotiating Group reported that due to India’s continued objections to the draft text of the WTO Fisheries Subsidy Pact, the year-end deadline for concluding the pact cannot be met.

Relevance of the Topic: Prelims: Key aspects of WTO Agreement on Fisheries Subsidies.

About the WTO Agreement on Fisheries Subsidies:

The World Trade Organisation's (WTO) agreement was adopted at the 12th Ministerial Conference (MC12) on 17 June 2022.
It is being considered as a major step towards ocean sustainability by prohibiting harmful fisheries subsidies, a key contributor in the widespread depletion of the world’s fish stocks.
Key achievements of the Agreement:

First WTO agreement to focus on the environment.
First broad, binding, multilateral agreement on ocean sustainability.
Only the second agreement reached at the WTO since its inception.
Operationalisation: For the Agreement to become operational, two-thirds of members have to deposit their “instruments of acceptance” with the WTO.

Why is the Agreement needed?

United Nations Conference on Trade and Development (UNCTAD) Report, 2022:

Over one-third of global marine fish stocks have fallen to biologically unsustainable levels.
Overfishing and subsidies result in a loss of about $88.9 billion in forgone net benefits annually.

Key Provisions of the Draft Agreement:

1. Prohibitions:

IUU Fishing & overfished stocks: It will prohibit subsidies from being provided for Illegal, Unreported and Unregulated (IUU) fishing and overfished stocks.

**An overfished stock is a population of fish that is too low. A stock that is experiencing overfishing has an annual rate of catch that is too high. Therefore the population cannot support that level of fishing and is below that level is deemed “overfished.”

High Sea Fishing: Prohibits providing subsidies for fishing on high seas, which are outside the jurisdiction of coastal countries and Regional Fisheries Management Organisations/ Arrangements.

2. Special and Differential Treatment (S&DT):

Transition Period: Under S&DT, Developing countries and Least Developed countries (LDCs) will be allowed a transition period of two years from the date of entry into force of this Agreement.
Capacity Building: Targeted technical assistance and capacity building assistance to developing countries and LDC Members.

3. Exceptions:

No prohibition has been imposed on a WTO Member regarding granting or maintaining subsidy to its vessel or operator as long as it is not carrying out IUU.
No prohibition on providing subsidies for overfished stocks as long as such subsidies are implemented to rebuild the stock to a biologically sustainable level.

India’s Stand:

1. Key Arguments of India:

Low Subsidy levels: India is one of the lowest fisheries subsidisers ($35 per year per fisher compared to some developed countries offering $76,000 per fisher per year).
Sustainable practices: India’s fisheries sector primarily depends on several millions of small-scale and traditional fishers and does not exploit the resources indiscriminately like other advanced fishing nations.
Disproportionate conditions: The proposed agreement imposes stringent conditions on small-scale fishers (particularly in developing countries) but did not effectively discipline the large-scale, industrial fishing operations (primarily responsible for overfishing and depletion of marine resources).
Sustainability Exemption Concerns: Sustainability exemption clause is problematic as it allows advanced fishing countries with better monitoring and notification capabilities to avoid commitments to cut harmful subsidies. This discriminates against poorer countries that lack such capacities, even if they fish sustainably.

2. India’s Demands:

Polluter pay Principle: WTO Members who have provided huge subsidies in the past, and engaged in large-scale industrial fishing should take more obligations to prohibit subsidies based on the ‘polluter pay principle’ and ‘common but differentiated responsibilities’.
Equitable transition period: A 25-year transition period for developing countries that are neither covered by the de minimis (a global share of marine catch not greater than 0.8%), nor considered least developed countries (LDCs).

Conclusion:

India’s fishing communities are grappling with multiple issues like extreme climate events, the adverse economic impacts from the COVID-19 pandemic, large infrastructure projects, and recent policy developments at the domestic and international level such as the push for the blue economy framework.

The WTO Agreement is grossly unjust and inimical to the interests of the fishers in the developing and less developed countries, especially for small scale fishers. WTO must address concerns of developing nations by emphasising principles of equity, fairness, and common but differentiated responsibilities. It should encourage consensus-based solutions to balance conservation goals with development needs.

Railways (Amendment) Bill 2024

Context: The Lok Sabha passed the Railways (Amendment) Bill, 2024. The Bill was passed five months after it was introduced on the Floor of the House.

Relevance of the Topic:Prelims: Key aspects of the Railways (Amendment) Bill, 2024.

Background:

The Bill aims to repeal the Indian Railway Board Act, 1905 and incorporates its provisions into the Railways Act, 1989.
The Indian Railway Board Act, 1905 enabled the central government to invest in the Railway Board with powers and functions under Indian Railways Act, 1989.

Key provisions of the Bill:

Powers of Union Government: The Central Government will prescribe:
1. the number of members of the Board
2. the qualifications, experience, terms and conditions of service, and manner of appointment for the Chairman and members of the Board.

Statutory Status: The Bill proposes to amend the Railways Act, 1989, to provide statutory backing to the Railway Board.
Independent Regulator: The Bill proposes to establish an independent regulator to oversee tariffs, safety, and the participation of the private sector in the Railways.
Autonomy to Zones: The Bill proposes to improve operational efficiencies and decentralise powers, granting greater autonomy to railway zones.

Key Impact:

The current Bill proposes to simplify the legal framework by incorporating the proposals of the Indian Railway Board Act, 1905 in the Railways Act, 1989. This will reduce the need to refer to two laws. Instead reference will be required only to one law.
Establishment of an independent regulator would give encouragement to private participation by protecting the interests of stakeholders and promoting competition. This in turn would attract investment, increase efficiency in operations, and improve service standards.
Autonomy to zones would grant them flexibility and space to make decisions on project tenders for their zones without approaching the Board.
Statutory backing to the board would streamline its functioning with better efficiency and autonomy.
The amendment is expected to speed up the approval process for train services that will help meet pending demands from various regions.
The Bill will allow the government to fast-track infrastructure and superfast train operations.

Why was the amendment needed?

Indian Railways was envisioned as a commercial undertaking of the government, with an additional social responsibility to make transport services accessible and affordable to the public. Over the years, Railways has faced persistent challenges such as:

High operating costs due to significant salary and pension expenditure
Continued losses from its passenger business due to underpricing
Under-investment in capacity augmentation (infrastructure development) due to poor surplus generation and limited private participation
Network congestion and cross-subsidy for passenger services reducing its freight competitiveness.

The opposition alleges that through this bill the government is trying to take away the autonomy and has an aim to privatize the railways. Whereas the government argues that these steps are essential to make railways modernize and financially viable as the proposed amendments are in line with the recommendations made by various committees like The Committee on Restructuring of Railways (2015) and The Sreedharan Committee (2014).

Merchant Shipping Bill 2024

Context: India unveils new Merchant Shipping Bill 2024 which seeks to repeal Merchant Shipping Act, 1958 to streamline vessel ownership, registration, and environmental regulations.

Relevance of the topic:

Prelims: Key provisions of Merchant Shipping Bill 2024.

Mains: Provisions and significance of the Merchant Shipping Bill 2024.

Background:

The Merchant Shipping Act, 1958, restricts seafarers’ welfare provisions to Indian-flagged ships, despite 85% of the 2,80,000 active Indian seafarers working on foreign-flagged vessels. Additionally, the Act lacks enabling provisions for implementing certain international conventions that India has signed or plans to ratify.
The Merchant Shipping Bill introduces significant changes to modernise India’s maritime framework, drawing upon the best practices of leading maritime jurisdictions like the U.K., Norway, and Singapore.

Key Provisions of Merchant Shipping Bill 2024:

Simplified ownership criteria:
- The existing law restricts vessel registration to entities with 100% Indian ownership. The new Bill proposes significant reforms to attract foreign investment.
- It also reduces the ownership threshold for Indian citizens/entities from 100% to 51%, enabling more flexibility.
Expanded eligibility for vessel ownership.
- Ownership allowed for Indian citizens, Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and companies established under Central Act or State Act having its registered office of business in India.
Registration of vessels:
- The Bill allows the registration of vessels chartered by Indian entities under the bareboat charter-cum-demise, enabling entrepreneurs to acquire ownership of vessels at the end of the charter period.
Enlarging the scope of vessels:
- The existing Act regulates only mechanised ships (engine-fitted vessels) above a certain size, leaving smaller mechanised vessels and all non-mechanised vessels outside its ambit. This regulatory gap has allowed many vessels to operate without adequate oversight.
- The new Bill seeks to address this issue by expanding the definition of ‘vessels’ to uniformly include a wide range of crafts, including submersibles, semi-submersibles, hydrofoils, non-displacement crafts, amphibious crafts, wing-in-ground crafts, pleasure crafts, barges, lighters, Mobile Offshore Drilling Units (MODUs), and Mobile Offshore Units (MOUs), whether mechanised or not.
Regulation on wrecked or abandoned vessels:
- Vessels that have ceased registration due to wreckage or abandonment must be surveyed and certified seaworthy before re-registration.
Mortgage Rights:
- Establishes clear rules on mortgaged vessels, enabling debt recovery through vessel sales without court intervention for single mortgages. Multiple mortgages require High Court involvement for debt recovery.
Provisions for Recycling:
- Legislation encourages vessel recycling within India. Abandoned non-Indian vessels in Indian waters can be recycled under temporary registration.
Establishment of National Shipping Board:
- The central regulatory body will oversee vessel security and port facilities.
Stricter regulations on Marine Casualties:
- Imposes stricter norms on polluting or harmful vessels to ensure environmental protection.
Addressing Marine Pollution:
- Sulphur content in marine fuel reduced to less than 0.5%.
- Ban on single-use plastics aboard Indian ships.
- Launch of 'Swachh Sagar' portal for waste disposal at ports.
- Incorporates IMO conventions such as MARPOL, CLC (International Convention on Civil Liability for Oil Pollution Damage, 1969), and Bunker Convention.
- Aligns India’s framework with international standards for sustainable shipping.

Significance of the bill:

Boosts maritime trade by expanding ownership and registration options and promoting ease of doing business.
Encourages sustainability in the maritime sector through recycling initiatives.
Provides clarity on mortgage rights, expediting financial processes for shipowners and creditors.
Vessel definition is expected to enhance transparency and ensure comprehensive regulatory oversight in the offshore sector.
Registration of vessels will be beneficial for capital-deficient entrepreneurs, facilitating entry into the shipping industry without upfront investment.

By fostering investment, enhancing safety, combating marine pollution, and supporting seafarers’ welfare, the proposed reforms promise to unlock the true potential of India’s maritime sector.

India Skills Report 2025

Context: Kerala continues to shine as one of the most employable States in India, as indicated by the recently launched India Skills Report 2025.

Relevance of the Topic: Prelims- Key facts about India Skills Report and their findings.

Key Findings of India Skills Report 2025:

India’s National Employability stands at 54.8% indicating a significant pool of talent scoring above 60% on the Wheebox Global Employability Test (GET) with Maharashtra leading with 84% employability followed by Delhi (78%), Karnataka (75%), Andhra Pradesh (72%), Kerala (71%) and Uttar Pradesh (70%).
Male employability is slightly higher (53.47%) than female (46.53%) with Andhra Pradesh, Karnataka, Maharashtra, and Uttar Pradesh emerging as top states with male employable resources while Rajasthan leads in female employability followed by Gujarat and Kerala.
Kerala is one of the top States favoured for employment, alongside Tamil Nadu, Maharashtra, and Uttar Pradesh.
93.22% of users expressed strong interest in internships with Tamil Nadu showing the highest preference for internships, followed by Uttar Pradesh, Kerala, and Karnataka.
The report highlights that over half of Indian graduates are now employable, a significant rise from 33% a decade ago.
- This 17% increase over ten years underscores India's dedication to developing a future-ready workforce equipped to meet the demands of a rapidly changing global economy.
- This transformation is further driven by India's emphasis on emerging technologies such as artificial intelligence (AI), cloud computing, and automation, which are redefining traditional job roles and generating new opportunities.

Key Facts about India Skills Report:

Published by: Wheebox in association with the All India Council for Technical Education, Confederation of Indian Industry and Association of Indian Universities.
It is the culmination of an exhaustive evaluation of candidates who participated in the Global Employability Test (GET) conducted across India.
This comprehensive assessment is designed to benchmark employability skills against global standards, and provides deep insights into the readiness of India's talent pool for emerging job markets.
Significance:
- By evaluating candidates across diverse domains, the report captures critical trends in skills demand, sectoral employability, and regional talent distribution.
- This will serve as a vital resource for policymakers, academia, and industries.