Economy

All (4049)Current Affairs (4038)Mains Practice (126)Mains PYQs by Subjects (40)

Need to revisit Food and Fertiliser Subsidies

Context: With poverty levels now at historic lows, India needs to revisit food and fertiliser subsidies.

Relevance of the Topic: Prelims: Key facts of macroeconomic growth Mains: Food and Fertiliser subsidies - issues, solutions.

Over the past decade, India has achieved significant macroeconomic growth and a sharp decline in extreme poverty.

Nominal GDP increased from $2.04 trillion (2014) to $4.19 trillion (2025)
GDP (PPP) increased from $6.45 trillion to $17.65 trillion- 3rd largest globally.
Per Capita Income (PPP) increased from $4,935 to $12,131.
Inequality (Gini Index) - remained moderate (0.34 in 2014 to 0.33 in 2020)

With extreme poverty now at just 5.3%, there is a need to revisit inefficient subsidies- especially food and fertiliser subsidies. These subsidies claim the largest resources in the agri- food space and yet sub-optimal results.

Issues with Subsidies

High Fiscal Burden: The food subsidy budget for FY26 is set at Rs 2.03 lakh crore. India is giving free food (rice or wheat, 5kg/person/month) to more than 800 million people. The fertiliser subsidy budget for FY 2025-26 is set at ₹1.56 lakh crore.
Exclusionary: Fertiliser subsidies often benefit large farmers disproportionately, while small and marginal farmers struggle with access.
Distortionary: The PDS and MSP regime's wheat-rice focus distorts cropping patterns, leading to regional monoculture and neglect of pulses, oilseeds, and millets.
Promote Environmentally unsustainable practices: E.g., Unbalanced utilisation of fertilisers, over-consumption of water etc.
Leakages and Corruption: Food subsidies under PDS suffer from diversion, ghost beneficiaries, and low-quality delivery. Fertiliser subsidies go to manufacturers, not directly to farmers- creating scope for over-invoicing, black marketing, and cross-border smuggling (e.g., to Nepal and Bangladesh).
Does not address structural issues such as poor irrigation, low R & D, poor marketing infrastructure etc.

Way Forward

Food subsidy can be rationalised by giving beneficiaries food coupons (digital wallet) to buy nutritious food- pulses, milk, eggs from designated stores. This will help plug leakages, diversify diets, promote nutrition, and diversify the production basket.
Fertilizer subsidy can be rationalised by giving fertiliser coupons to farmers and deregulating the prices of fertiliser products.
Farmers can use these coupons to buy chemical fertilisers or bio-fertilisers or do natural farming. This will help fix the imbalance in the use of nitrogen (N), phosphorus (P), and potassium (K), reduce leakages, and encourage better products and farming methods.

There is a need to move from universal, input-based subsidies to targeted, output-oriented support that improves nutritional security, efficiency, and environmental sustainability.

Mains Practice Question

Q. With extreme poverty at historic lows, do you think it is time to rationalise food and fertiliser subsidies in India? Discuss the issues associated with the current subsidy regime and suggest reforms to make it more efficient, equitable, and sustainable.

From Farm to Shelf: Food Processing Sector

Context: Government-led reforms and schemes have transformed India’s food processing sector into a driver of inclusive growth, agricultural integration, and global engagement.

Relevance of the topic:

Prelims: Key government Initiatives for the Food Processing Sector.

Mains: Significance of the Food Processing Sector.

Food Processing Sector

Food processing is a technique of manufacturing and preserving food substances in an effective manner with a view to enhance their shelf life; improve quality as well as make them functionally more useful.
Once characterised by unorganised production and high post-harvest losses, the sector has now emerged as a key pillar of rural empowerment, entrepreneurship, and agri-industrial integration. Food Processing has emerged as a sunrise sector accounting for 11% of GVA in agriculture and 10% of GVA in manufacturing.

Significance of Food Processing Sector:

Promote agricultural diversification by increasing demand for raw material. E.g., Tribal women in Bastar transformed Mahua flowers into chocolates and herbal tea.
Reduce post harvest losses (about Rs 92000 Crore) through Cold chain infrastructure.
Boost agricultural exports E.g., Makhana of Bihar has turned into a global snack brand and now exports to the US and Canada.
Address nutritional insecurity through food fortification.
Promote inclusive growth through secondary agriculture and job creation.
Establish forward and backward linkages.

With following government initiatives, the food processing sector has emerged as one of the most potent instruments of inclusive growth, agricultural integration, and global engagement.

Pradhan Mantri Kisan SAMPADA Yojana:

Objective: Infrastructure creation, modernisation, and preservation of food products.
Key Outcomes:
- Created 250 lakh MT of annual processing and preservation capacity.
- Leveraged ₹22,000 crore private investment leveraged.
- 53 lakh farmers directly benefited and 7.6 lakh employment opportunities generated.

Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) Scheme:

Launched under: Atmanirbhar Bharat Abhiyan with an outlay of Rs 10,000 crore.
Objective: Empower unorganised micro food enterprises through formalisation, credit, and skilling.
Key Achievements:
- Over 1.41 lakh loans sanctioned, worth ₹11,205 crore
- 3.3 lakh SHG members supported it with seed capital.
- Over 1 lakh individuals trained in entrepreneurship & skills
- To foster innovation and support early stages enterprises, 75 incubation centres were approved.
- 17 regional brands launched, promoting local products.

Production Linked Incentive (PLI) Scheme for Food Processing Industries;

Objective: Catalyse large-scale investments, industrial capacity, and formal job creation
Achievement : With committed investment of ₹8,900 crore, the scheme has led to the creation of over 3.3 lakh new jobs and added more than 67 lakh MT processing capacity.

Budgetary Support for Infrastructure (Union Budget 2024-25)

Key Announcements:

50 multi-product irradiation units to improve shelf life and reduce losses.
100 NABL-accredited food testing laboratories for improved quality control.
Establishment of National Makhana Board to promote value addition, branding, and global recognition of Makhana.

Institutional Support and Innovation Ecosystem:

NIFTEM-Kundli and NIFTEM-Thanjavur, Institutes of National Importance, are training next-gen food technologists and entrepreneurs.
New NIFTEM is coming up in Bihar to utilise the eastern region’s potential.
India's food tech startup ecosystem is thriving with over 5,000 food-tech start-ups working on Plant-based foods, AI-enabled traceability, functional foods, sustainable packaging.

Global Branding and Investment Platform:

World Food India: An international platform by the Ministry of Food Processing Industries to promote investment, innovation, and global collaboration, showcasing India’s strength across the agri-food value chain.

The food processing sector in India is undergoing a major transformation- from farm to shelf. With strong government support, it is reducing post-harvest losses, creating jobs, boosting exports, and empowering rural communities.

SEZ rules relaxed to boost Semiconductor Manufacturing

Context: The Ministry of Commerce and Industry has recently notified changes to the Special Economic Zones Rules, 2006, to enhance the domestic manufacturing of semiconductors and electronics.

Relevance of the Topic: Mains: Significance of semiconductors, Challenges, government Efforts, etc.

Semiconductors

Semiconductors are used to manufacture components like transistors and diodes that are integral to modern electronic devices.
According to the Semiconductor Industry Association, China accounted for about 35% of all semiconductors manufactured in the world in 2021.
Post-COVID-19, countries like India recognised the risks of overdependence on a single source for critical supplies. This led to efforts to diversify supply chains and promote domestic manufacturing of key components for greater self-reliance and resilience.

Government efforts to boost Semiconductors Production:

Semicon India Programme has been launched with a total outlay of ₹76,000 crore for the development of semiconductor and display manufacturing ecosystem in the country. It aims to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystems.
Six chip manufacturing facilities are under construction for the manufacturing and assembly of semiconductor chips, under the India Semiconductor Mission.
Key rules related to Special Economic Zones (SEZs) have been relaxed to further encourage the domestic manufacturing of semiconductors and electronics.

Amendments to Special Economic Zones (SEZ) Rules, 2006

Recently, the Ministry of Commerce and Industry has notified several modifications to the Special Economic Zones (SEZ) Rules, 2006 to enhance the domestic manufacturing of semiconductors.

Minimum Land Size Reduced: Earlier, an SEZ set up exclusively for the manufacture of semiconductors or electronic components needed a minimum contiguous land area of 50 hectares. This has now been significantly reduced to 10 hectares. This reduced size will allow companies to make smaller investments but still avail of SEZ benefits such as tax exemptions, duty-free imports, and infrastructure support.
Relaxation of ‘Encumbrance-Free’ Land Rule: Previously, land had to be completely free of legal disputes to be used for SEZs. But with India’s complex land records and legal delays, this was a major bottleneck. Relaxing this rule will allow SEZs to come up faster.
Domestic Sales from SEZ allowed: Conventionally, SEZs are exclusively export-oriented. Recent amendment allows SEZ units in semiconductor and electronics component manufacturing to supply domestically, after paying the applicable duties. Allowing domestic sales not only shields the SEZs from the ongoing global trade uncertainty, but also ensures a steady supply to the domestic market itself.

Impacts:

Following the amendments, two new SEZs have already been approved with a total investment of ₹13,100 crore.

Micron Semiconductor Technology India will establish an SEZ facility in Sanand, Gujarat to manufacture semiconductors with an estimated investment of ₹13,000 crore.
Hubballi Durable Goods Cluster, a part of the Aequs Group, will establish an SEZ facility for the manufacture of electronic components in Dharwad, Karnataka, at a cost of ₹100 crore.

Also Read: India’s push for Semiconductor Chip Production amid Rising Imports

India ranks 71st on Energy Transition Index 2025: WEF

Context: India has ranked 71 out of 118 countries in the recently launched Energy Transition Index (ETI) by the World Economic Forum.

Relevance of the Topic: Prelims: Key facts about the Energy Transition Index.

Energy Transition Index

Launched by: World Economic Forum
ETI ranks countries based on their progress towards energy transition from fossil fuels to clean energy.
The report benchmarked the performance of energy systems of 118 countries across:
- Threesystem performance dimensions- energy security, sustainability and equity.
  - Energy security: presence of a stable and resilient energy supply through developing a diversity of energy sources as well as grid and power supply reliability)
  - Equity: access to energy for all, including consumers and industries.
  - Sustainability: promoting energy sources that have lower impacts on the environment such as lower carbon footprints.
- Five transition readiness factors- political commitment, finance and investment, innovation, infrastructure, and education and human capital.
The Index used 43 indicators under these broad categories using data from multiple sources and organisations, and scored countries on a scale of 0 to 100.

Energy Transition Index 2025

Global Highlights:

Sweden (score 77.5) topped the list of 118 countries, followed by Finland and Denmark. China was ranked 12th, and the US was 17th.
While the majority of countries improved their scores in 2025, the share of countries advancing across all three energy dimensions was only 28%, which reflects uneven progress.
Despite $2 trillion in clean energy investment in 2024, emissions hit a record 37.8 billion tonnes in the hottest year on record (2024), as energy demand rose 2.2% driven by artificial intelligence, data centres, cooling and electrification.

India-specific Highlights:

India’s rank has fallen from 63rd in 2024 to 71 out of 118 countries in 2025. India scored 53.3 on the Index.
India has made progress in lowering energy intensity and CH4 emissions, favourable energy regulations and increasing clean energy investments.
India needs improvement in grid reliability, energy access for rural areas and further reducing dependence on imported energy. This requires further investment in infrastructure, renewables, labour force development and financing to boost the country’s energy transition.

As per WEF, the top five largest economies- China, the US, EU, Japan and India- will determine the pace and direction of the global energy transition due to their sheer size.

Together, they account for around half of the global GDP, population and total energy supply (TES), and also nearly two-thirds of global emissions, giving them an outsized influence through their consumption patterns, investment flows and policy choices.

India to be world’s 4th largest electric car maker by 2030

Context: India’s planned electric four-wheeler manufacturing capacity is projected to rise over tenfold to 2.5 million units by 2030, up from just 0.2 million at present, making it the fourth-largest electric car producer globally after China, Europe, and the US.

Relevance of the topic:

Prelims: Key facts- EV Manufacturing status; FAME I, FAME II, PLI-Auto, PM E-DRIVE, SPMEPCI.

Mains: EV Policy in India: Progress & Gaps

Electric Vehicle Manufacturing in India

Rapid Expansion

By 2030, India’s electric car demand is estimated to reach between 0.4-1.4 million units, up from 0.1 million in 2024. The electric vehicle (EV) penetration rate would be around 7-23% in four-wheelers from 2% in 2024.
India’s electric car production capacity is expected to reach 2.5 million units, and the manufacturing capacity would outstrip domestic demand. India’s anticipated production capacity will be far behind China’s 29 million, EU’s 9 million, and 6 million in the US.

Need to catch up Pace:

To protect local manufacturers, India has maintained import tariffs of up to 70-100% on fully built EVs. However, this protective stance also limits consumer choice and raises costs. Presently, almost 100% of India’s EV manufacturing is only for its domestic market.
By 2030, India’s cell production capacity will lag behind China, Europe, the US, and Canada. China is expected to lead with a cell manufacturing capacity of 4,818 gigawatt hours (GWh), in contrast to India at 567 GWh.

Govt. Initiatives to drive India's EV Sector:

FAME Scheme (Phase I & II)
PLI Scheme for Automobile and Auto Components (PLI-Auto)
PLI Scheme for Advanced Chemistry Cells (PLI-ACC)
PM E-DRIVE Scheme (Electric Drive Revolution in Innovative Vehicle Enhancement)
SPMEPCI Scheme (Scheme to Promote Manufacturing of Electric Passenger Cars in India)

The increase in domestic EV manufacturing aligns with the government’s strategy to ‘Make in India for the world’. However, Indian companies will need to lower the cost of manufacturing to compete with exports from China.

Also Read: Addressing Policy Gaps in India’s EV Journey

India’s Journey to Growth and Economic Leadership

Context: At a GDP of $4.2 trillion, India has become the 4th largest economy in the world, in nominal GDP terms overtaking Japan. With the significant progress of the past decade, India’s imprint on the global economy is set to expand.

Relevance of the Topic: Mains: Key Trends supporting India’s growth story: Can be directly used as data points in Mains answers.

India’s growth and transformation across various sectors

India has witnessed significant transformation across various dimensions in the past decade, which can be reflected in:

Macroeconomic Growth and Stability:

Average growth since 2014 has been 6.4%.
Inflation has come down from 9.4% in FY14 to 4.6% in FY26 providing much-needed stability for households and businesses.
Capital expenditure has grown significantly, reaching Rs 11.2 lakh crore in 2025-26.

Infrastructure Development

India’s infrastructure development has been one of the most visible symbols of the country’s economic transformation and inclusion.

Roadways and Highways:
- National highways expanded from 91,287 km in 2014 to 1,46,204 km in 2024. The speed of construction has increased from 12 km/day to 34 km/day.
- The emphasis on last-mile connectivity has resulted in nearly four lakh km of rural roads being built, bringing 99% of rural India into the national network.
Railways:
- A total of 25,871 route kilometres (RKM) of new tracks were laid, significantly higher than the 14,985 RKM added in the previous decade.
- India leads the world in locomotive manufacturing, producing 1681 locomotives in 2024-25. This is more than the combined output of the US, Europe, and Japan.
- Freight movement has surged with Indian Railways becoming the world’s second largest cargo transporter, handling 1617 million tonnes annually.
Civil Aviation:
- The number of operational airports has grown from 74 to 160 between 2014 and 2025, with the UDAN scheme bringing air connectivity to remote towns.
- The government’s vision of expanding to 300 airports by 2047 underlines its continued focus on logistics and accessibility.
Urban Transformation:
- Urban Transformation has continued through Smart Cities Mission, with over 8000 projects and investments worth Rs 1.64 lakh crore.
Digital Public Infrastructure:
- Led by platforms like UPI and Aadhaar, this public-first approach has enabled real-time payments, direct transfers, and expanded rural banking through Jan Dhan and digital access points.
- DPI is projected to reach about 3-4% by 2030. India’s DPI has now been adopted in over 12 countries. Over 141 crore Aadhaar registrations and 60 crore UPI transactions every day signify their reach and acceptance.

Social Infrastructure and Poverty Reduction:

Healthcare: The number of medical colleges has grown from 387 to 780, and AIIMS institutions from seven to 23. MBBS and PG seats have also more than doubled. Health insurance under Ayushman Bharat covers 350 million people.
17.1 crore people have been lifted out of poverty. The poverty rate has fallen from 29.17% in 2013-14 to 11.28% in 2022-23.
Over 530 million Jan Dhan accounts have been opened. Forty million homes have been built, 120 million toilets constructed, and 100 million families cook with clean LPG.
Tap water connections have also reached 140 million households under “Har Ghar Jal” Yojana.
110 million farmers now receive direct income support through PM-KISAN.

Clean Energy:

Solar capacity has grown from 2.82 GW in 2014 to over 105 GW, with total clean energy capacity now at 228 GW.
India is the third-largest solar and fourth-largest wind energy producer globally.

Industrial Technological Advancement

Electronics Manufacturing has increased six times to cross Rs 12 lakh crore. Electronics exports have crossed Rs 3 lakh crore. India is now the second largest mobile phone producer. Production of electronic components is gaining pace under the new Electronic Components Manufacturing Scheme.
Semiconductor Mission: First commercial lab is under construction; five OSAT units are underway; over 20 chipsets with indigenous IP have been designed by students and engineers in India.
IndiaAI Mission: Over 34,000 high-speed computer chips, known as GPUs, are now available to all at just one-third the global cost to support AI development. AI-Kosha platform offers over 370 datasets and 200 ready-to-use AI models for learning and innovation.

Introduction of GST, New laws like Telecom Act and DPDP Act, over 1,500 old laws were repealed and 40,000-plus compliances removed. These policy reforms have encouraged investment, innovation, and formalisation, creating a virtuous growth cycle.

However, more needs to be done to improve ease of doing business, reduce compliance burdens, enhance competitiveness, and integrate more deeply into global supply chains.

Sustainable Nickel Extraction - Hydrogen Plasma Method

Context: A new study by researchers at the Max Planck Institute for Sustainable Materials, Germany, revealed a sustainable method to extract Nickel from low-grade ores using hydrogen plasma instead of carbon.

Relevance of the Topic: Prelims: Key facts about Hydrogen Plasma Based Nickel Extraction

About Nickel

Nickel is a critical metal used in several clean energy technologies, especially Electric Vehicles (EVs), as it is a major component of lithium-ion batteries used in EVs.
Traditional nickel extraction is Carbon intensive, producing 1 tonne of nickel and emitting over 20 tonnes of CO₂.
While EVs are seen as a cleaner alternative to traditional fossil fuel-powered vehicles, there are hidden environmental costs associated with their production, especially in the manufacturing of lithium-ion batteries.

The new study has introduced a sustainable, one-step method to extract nickel using hydrogen plasma instead of carbon.

Hydrogen Plasma Method

Traditional Nickel Extraction is multi-step, energy-intensive and relies on carbon. Nickel oxide is heated with carbon, which removes the oxygen and produces pure nickel, along with carbon dioxide emissions.
Hydrogen Plasma Method: The method replaces carbon with hydrogen plasma as the reducing agent and uses electricity as the energy source, specifically through an electric arc furnace. It is conducted in a single electric arc furnace, unlike the current multi-step process (calcination → smelting → reduction → refining).
- Hydrogen gas, when subjected to high-energy electrons in an electric arc, splits into high-energy ions, entering a plasma state. Plasma is the extremely hot and reactive fourth state of matter. It is distinct from solids, liquids, and gases.
- Hydrogen plasma acts as a reducing agent and rapidly reduces the metal oxides. From a thermodynamic perspective, the process is not only cleaner but significantly faster.
- The end product of hydrogen reacting with oxygen is water, not carbon dioxide. Therefore, the entire process is carbon-free, using only electricity, hydrogen, and yielding water as a byproduct.

The findings present a significant advancement in making nickel production cleaner and more energy-efficient.

Key Benefits of Hydrogen Plasma Method:

84% reduction in direct carbon dioxide emissions compared to conventional processes.
Up to 18% more energy-efficient and faster, reducing both energy consumption and time.
The only byproduct of the process is water (H₂O) instead of CO2.
The method produces high-purity ferronickel- an alloy with which stainless steel can be made, eliminating the need for extensive refining steps and making the overall process more sustainable.
The process is particularly effective on nickel laterite ores, which are abundant but underutilised due to traditional methods requiring high-grade ores. This has special significance for India, which has substantial laterite deposits in Odisha’s Sukinda region.

However, scaling the method for industrial use would require significant initial investments, access to renewable energy, and further research on kinetics and plasma stability.

Empowering Women in Agriculture

Context: The United Nations General Assembly has declared 2026 as the International Year of the Woman Farmer. The resolution celebrates the essential role of women in global agriculture while raising awareness of their challenges, which include property rights and market access.

Relevance of the Topic: Mains: Role of women in Agriculture and challenges faced by them.

Women in Agriculture

Women contribute 60-80% of food production in developing countries and form 39% of the agricultural labour force in South Asia.
In India, approximately 80% of all economically active women are employed in agriculture.
According to Periodic Labour Force Survey (PLFS) 2023‑24, 64.4 % of India's agricultural workforce are women.

These figures highlight the vital role of women in agriculture. Yet, their contribution remains undervalued due to systemic gender biases in land ownership, access to credit, and representation in policy making.

Key Challenges Faced by Women Farmers

Land Ownership Disparity: In India, the percentage of women who own agricultural land is significantly lower than that of men, despite women constituting a substantial part of the farm workforce. Only 14% of agricultural landholders in India are women; NFHS-5 puts this figure even lower at 8.3%.
Limited access to formal credit: Lack of land ownership makes it difficult to obtain credit and limits their access to financial institutions. While microfinance and self-help groups provide some access, such loans are often insufficient for significant investments. Less than 15% of female farmers access institutional credit (NABARD All India Rural Financial Inclusion Survey 2016-17). Consequently, they rely on informal sources, leading to exploitative debt cycles.
Invisibility in Agricultural Policy: Agricultural policies and schemes are often male-centric. As per MS Swaminathan, “The female face of farming is missing from policy frameworks.”
Double Burden and Time Poverty: Time Use Survey (2019) shows women spend 3-5 hours more daily on unpaid care work, reducing their capacity for skill-building or secondary livelihoods.
Limited access to technology: Regular access to information on agricultural planning and advisory is essential for farmers, but women have more limited access to technology, such as mobile phones.
Mechanisation Gap: Mechanised tools are predominantly designed for male farmers.
Climate Change disproportionately affects women farmers by increasing their domestic responsibilities and elevating their exposure to agricultural risks like crop failure.

These obstacles hinder investments, technology adoption and improvements in livelihoods.

Government Initiatives for Women in Agriculture:

The Government of India supports small women farmers to enhance skills and promote sustainable agriculture.

Mahila Kisan Sashaktikaran Pariyojana (MKSP): Upgrades skills and increases resource access for women.
Sub-Mission on Agricultural Mechanisation: Offers 50–80% subsidies on farm machinery for women.
National Food Security Mission (NFSM): 30% fund allocation for women in some states and UTs.
Self-Help Groups (SHGs) and DAY-NRLM: Promote group farming, micro-financing, and entrepreneurship.

Way Forward: Policy Recommendations

Gender-Sensitive Agricultural Policies: Policy design and implementation should take into account the unique needs of women farmers. E.g., Designing Women-Centric Farm Tools.
Granular data with a gender lens are needed to develop solutions tailored to women’s needs.
Focus on agri-value chains that support women farmers and are managed by women.
Enhance women’s access to financing mechanisms and information while supporting their collective action and networks, such as women’s self-help groups.
Secure Land Ownership through joint or individual land titles.

Women are the backbone of agriculture, yet they remain marginalised in land rights, credit access, and decision-making. As M.S. Swaminathan aptly said, "If agriculture is to be sustainable and equitable, the invisible face of the woman farmer must become visible.

Flipkart secures NBFC licence from RBI

Context: Walmart’s Flipkart has secured an Non-Banking Financial Company (NBFC) licence from the Reserve Bank of India allowing it to directly disburse loans for EMIs and BNPL (Buy Now, Pay Later) schemes. This is the first time the RBI has granted a large e-commerce player in India a NBFC licence.

Relevance of the Topic:Prelims: Key facts about Non-Banking Financial Company (NBFC); NBFCs vs Banks.

NBFC licence to Flipkart

The NBFC licence will allow Flipkart to lend directly to customers on its platform and through its fintech App- ‘super.money’.
Flipkart can offer loans independently rather than through partners, potentially boosting profitability.
It may also offer financing to sellers on the platform.

What is a Non-Banking Financial Company?

NBFC is the Non-banking financial institution registered under the Companies Act, 1956, that provides diverse financial facilities like lending, pension and insurance.
NBFCs do not have a full banking license and cannot accept deposits from the public. They cannot issue cheque books or open savings accounts.
NBFCs have played a pivotal role in making formal credit accessible to MSMEs, retail sectors and underserved populations.
- The sector contributes 12.5% to the country's GDP.
- The sector's credit share has grown from 15% in 2014 to 22.5% of total Scheduled Commercial Bank credit in 2024.
- The growth of NBFCs has been supported by diverse funding streams like bank loans, commercial papers and other debt instruments- where term loans and debentures consist of 75% of borrowings.
Regulation: The working and operations of NBFCs are regulated by RBI within the framework of the Reserve Bank of India Act, 1934.

Types of NBFCs:

Based on Asset-Liability Structures: Deposit-taking NBFCs (NBFCs-D) and non-deposit-taking NBFCs (NBFCs-ND).
Based on Systemic Importance: Among non-deposit taking NBFCs, those with asset size of Rs 500 crore or more are classified as non-deposit taking systemically important NBFCs (NBFCs-ND-SI).

NBFCs vs. Banks:

The NBFC sector plays an important role in supplementing credit creation along with the Banks.

Difference between Banks and NBFCs
Characteristics	Banks	NBFCs
Deposits	Accepts all types of deposits	Cannot accept demand deposits (some NBFCs can accept fixed deposits after RBI’s approval)
Deposit insurance of DICGC	Applicable (up to Rs.5 lakh per depositor)	Non-Applicable
Payment and Settlement system of the RBI	Supports RTGS, NEFT, IMPS etc.,	Not supported. Cannot issue their own cheque books.
Foreign investment	Up to 74%	Up to 100%
Cash Reserve Requirement	Applicable	Not Applicable
Capital Adequacy Norms	Applicable	Applicable only to Deposit-taking NBFCs and Systematically Important NBFCs (CRAR - 15%)
SLR	Applicable	Applicable only to Deposit-taking NBFCs (SLR - 15%)
Incorporated under	Banking Regulation Act, 1949	Incorporated under Companies Act 2013; and regulated under RBI and various bodies depending on category.

Role of NBFCs in Economy:

Credit access to the underserved sectors like small businesses, rural areas, and the informal sector & MSMEs.
Promoting financial inclusion by institutionalisation of the lending market in India, eliminating the unregulated lenders.
Driving infrastructural growth by funding the long-term and risky infrastructure projects, as banks lack the capacity to fund large projects due to their asset-liability mismatch.
Strengthening the financial market through the activities like leasing, hire-purchase and securitisation, improving the overall efficiency of the financial system.
Contributing capital formation as the NBFCs mobilises the resources, savings and investments to foster economic growth.

India’s Garment Sector need Reforms

Context: India’s stagnant garment export performance emphasises the urgent need for policy reforms to scale up the sector and enhance global competitiveness.

Relevance of the Topic: Mains: Garment Sector- significance, challenges, reforms.

State of India's Garment Sector

India’s textiles and apparel (T&A) sector employs a workforce of 45 million and contributes 2.3% to the overall GDP of India.
T&A sector has grown steadily from $11.5 billion in FY2001 to $37 billion in FY25. However, its share in global trade remains low (4.2%).
The apparel segment alone (under HS codes 61 and 62) has an even lower share of 3% ($15.7 billion). Additionally, this share has remained stagnant for the past two decades. In the last few years, apparel exports have declined at an AAGR of -2%.

India has set an ambitious target to increase its T&A exports from $37 billion in FY25 to $100 billion by 2030.

Key Challenges in India’s Garment Sector:

Lack of scale: Over 80% of India’s apparel units are Micro, Small and Medium Enterprises (MSMEs) which are too small and dispersed. Unlike China and Vietnam, India lacks large, integrated factories that benefit from economies of scale, reducing unit costs, speeding up delivery, and attracting bulk global orders.
High Interest Rate: Interest rates in India average around 9%, much higher than China (3%) or Vietnam (4.5%). For an industry operating on low margins (~4-5%), this makes investment and expansion economically difficult.
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.
Rigid and Complex Labour Laws: India’s 52 central labour laws have created rigidities, discouraging formal hiring and scale. Overtime wages are legally mandated at 2x hourly pay, compared to 1.25x internationally, raising production costs significantly.
Low Labour Productivity and Skilling Gaps: A large portion of the workforce is semi-skilled or unskilled, with poor access to modern training. Lack of effective, demand-linked skilling programs reduces efficiency and competitiveness.

Case Study: Shahi Exports

Founded in 1974 by Sarla Ahuja, Shahi Exports started with just 15 women and has grown into India’s largest apparel exporter.
It operates 50+ factories, 3 mills, across 8 states, with over 1 lakh workers, 70% women.
Built scale through vertical integration (80% fabric made in-house), professionalism, and sustainable practices.
Success of Shahi Exports demonstrates that Indian firms can scale with the right investment, vision, and long-term policy support.

Way Forward

Capital must be made accessible and affordable for scale-focused investments. A structured capital subsidy of 25-30% linked to the size of the unit can provide the initial push. Five to seven-year tax holiday for units would allow investments to mature and become globally competitive.
India’s garment sector needs to transition into a fashion-driven industry. To support this, it is crucial to incentivise and invest in MMF-based apparel while removing non-tariff barriers, such as the quality control orders on MMF.
Simplify labour laws and align overtime wages with global standards to reduce cost burdens. Link MGNREGA funds (say 25-30%) to subsidise labour costs in garment units
Schemes like SAMARTH should be significantly scaled up to provide short-cycle demand-linked skilling, especially for women.
Shift from production-based to export-linked incentives to reward global market success.
At least two of the PM MITRA parks should be developed as garment-focused hubs in labour-abundant states like Uttar Pradesh and Madhya Pradesh. This would help reduce worker migration to southern states, lower production costs, support local employment, and foster balanced, inclusive industrial growth across regions.
Encourage Vertical Integration: support units to produce in-house fabric and processing, improving efficiency and delivery timelines.

India’s garment sector holds immense potential to generate jobs and boost exports, but without bold policy reforms, this opportunity will slip away. Learning from success stories like Shahi Exports and focusing on scale, skilling, and export competitiveness can transform this sector into a global leader.

Also Read: Crisis in Cotton Production in India

Addressing Policy Gaps in India’s EV Journey

Context: India has recently launched the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) to boost EV adoption and manufacturing. India began its EV journey in 2015 about five years later than most large economies, and has made significant progress. However, few gaps exist in India’s EV Policy framework.

Relevance of the topic:

Prelims: Key facts about the schemes- FAME I, FAME II, PM E-DRIVE, SPMEPCI.

Mains: EV Policy in India: Progress & Gaps

EV Policy in India: Progress & Gaps

FAME Scheme:

India began its EV journey in 2015 with the launch of Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) scheme.
It aims to promote the adoption of EVs and their components, reduce vehicular emissions, and foster domestic manufacturing capabilities.
It has been implemented in two phases, FAME-I (2015-2019) and FAME-II (2019-2024).

FAME-I (2015-2019):

Focus: Provide demand-side incentives for EVs, such as upfront reduction in purchase price, supporting technology development, pilot projects, and charging infrastructure.
Success: Provided first impetus to EVs in India and supported about 278,000 EVs.
Criticism: Subsidised environmentally- taxing technologies, such as lead-acid batteries and mild-hybrid vehicles. Slow and limited progress of implementation.

FAME-II (2019-2024):

Launched in 2019 with an outlay of ₹10,000 crore for 5 years.
Success: Expanded the scope of incentives to electric buses, two-wheelers, and three-wheelers, enhanced minimum safety and technical standards, and introduced localisation norms for EV components.
Criticism: Localisation implementation issues, inadequate incentives for charging infrastructure, and insufficient focus on R&D.

PM E-DRIVE (Electric Drive Revolution in Innovative Vehicle Enhancement)

Launched in 2024 to accelerate EV adoption, establish charging infrastructure and foster development of the EV manufacturing ecosystem.
This scheme has a budget of ₹10,900 crore for a two-year period. Of the total allocated budget, ₹2000 crore has been kept for the installation of Electric Vehicle Public Charging Stations.

SPMEPCI (Scheme to Promote Manufacturing of Electric Passenger Cars in India):

Launched in 2025 to boost EV adoption and manufacturing.
Focus: offers concessional import duty of 15% on completely built-up units (CBUs). Available to EV manufacturers investing a minimum of ₹4,150 crore over three years to localise manufacturing in India, with a base domestic value addition (DVA) of 25% in three years, going up to 50% in another two years.

Key gaps in India’s EV Policy:

Late payment of subsidies to OEMs: In FAME-II, demand incentives were offered to customers as a price reduction upon the purchase of a new EV, based on the size of the battery. These incentives are reimbursed to original equipment manufacturers (OEMs) at a later date, when OEMs submit their reimbursement claims. This leads to late payment of subsidies and resultant shortage of working capital for OEMs.
Continuous reliance on demand incentives might create dependency among consumers. E.g., When subsidies on two-wheeler EVs were reduced, the consumer demand waned by 25% in the month following the subsidy reduction.
Lack of clear guidelines for DVA: FAME-II scheme did not prescribe the domestic value addition (DVA) metric to analyse whether a part is indigenous or imported (except for chargers). In the absence, it was unclear when components would qualify as indigenous, especially when sub-components or sub-parts of a component may be imported.
Limited funds for charging infrastructure: Only 10% of the total incentive outlay under FAME-II was reserved for charging infrastructure. In 2024, India had only one public charger per 135 EVs, far below the global average of one public charger per 6-20 EVs.
Limited R&D and technology transfer: India lags behind in technological, scientific, and industrial innovation, and continues to rely on imports for its EV component needs.

Way Forward

DBT to consumers: Government should consider devising a direct benefit transfer mechanism to consumers to alleviate concerns of late payment of subsidies to OEMs.
Incentivise local manufacturing: Emphasise on building robust supply chains and incentivising local manufacturing that can compete with traditional internal combustion engine-based vehicles. This can be done through inclusion of supply incentives including incentives on parts procurement costs.
Introduce clear minimum DVA (domestic value addition) thresholds as prerequisite to avail incentives, as well as harmonisation of PLI and FAME schemes with respect to DVA calculation.
Expand incentives to other commercial vehicles like trucks, tractors and industrial vehicles, thereby promoting a significant reduction in particulate matter emissions.
Expand charging infrastructure to meet India’s goal of 3.9 million charging stations by 2030. This is needed to accommodate increasing influx of EVs and alleviate concerns about range anxiety. Additionally, residential charging solutions are required.
Dedicated incentives for R&D to refine existing technologies and develop local component manufacturing.

India needs to learn from the challenges faced in FAME-I and FAME-II, and to adopt a cohesive and comprehensive strategy, along with technology transfer to accelerate EV adoption in India.

India's Energy Sector: Rise and Reforms

Context: Recently, India overtook Japan to become the world’s fourth largest economy with a GDP of over $4.18 trillion. A key pillar behind this growth story is the transformation of India’s energy sector over the past decade.

Relevance of the Topic: Prelims and Mains: State of India's Energy sectors and key reforms.

Key Stats in the Energy Sector in India

India is the third largest energy and oil consumer. India is the fourth-largest refiner, and fourth-largest LNG importer globally.
Coal has consistently accounted for over 70% of India's total energy generation. Despite increased domestic production, coal import dependence remains high (26%).
Crude oil’s share is ~6% in FY24. Natural gas was 7% of the total energy produced in FY24.
Renewable energy sources (hydro, solar, nuclear) stand at 7% in FY24. The highest potential for energy generation from renewable resources comes from wind (55%), followed by solar energy, and large hydro. India’s total renewable energy-based electricity generation capacity: 203 GW (2024). India’s target: 500 GW from non-fossil sources by 2030.

With energy demand expected to grow two and a half times by 2047 and 25% of incremental global demand is set to come from India, energy security is now viewed as development security.

Indian government’s energy strategy

Indian government’s energy strategy addresses the energy trilemma of- availability, affordability, and sustainability through a four-pronged approach:

Diversification of energy security sources and suppliers
Expansion of domestic production of oil and gas
Transition to renewables like Biofuels, green hydrogen etc
Affordability (affordable energy access for all sections of society)

Reforms in the Energy Sector:

1. Upstream Oil & Gas Reforms:

In the upstream oil and gas sector, India’s exploration acreage has doubled from 8% in 2021 to 16% in 2025.
With a goal of covering one million square kilometres by 2030, the government aims to unlock 42 billion tonnes of oil and oil-equivalent gas.

2. Policy Reforms:

This expansion has been enabled by landmark reforms such as the reduction of ‘No-Go’ areas by 99%, streamlined licensing through Open Acreage Licensing Policy (OALP) rounds, and attractive pricing incentives for new gas wells.
The revised gas pricing mechanism, linking prices to 10% of the Indian crude basket and offering a 20% premium for new wells, has enhanced gas availability for city gas networks and industrial usage.
To reduce costs and accelerate monetisation, new revenue-sharing contracts allow shared infrastructure among Exploration and Production (E&P) players.

3. Technological and geophysical efforts have complemented policy reforms:

National Seismic Programme, Mission Anveshan, airborne gravity gradiometry (AGG) surveys, and continental shelf mapping have expanded data and exploration confidence, especially in frontier basins such as the Andamans, the Mahanadi, and the Cauvery.
ONGC and Oil India have together made over 25 hydrocarbon discoveries across the Mumbai Offshore, Cambay, Mahanadi, and Assam basins in the last four years. Noteworthy among these are- Suryamani and Vajramani wells on the west coast offshore and the Utkal and Konark fields on the east coast deep waters.
These discoveries add over 75 MMtoe (million metric tonnes of oil equivalent) and 2,700 MMSCM (million metric standard cubic metres) of gas to India’s reserves.

4. Downstream infrastructure has seen parallel expansion:

India now operates 24,000 kilometres of product pipelines, nearly 96,000 retail outlets, and has significantly strengthened its strategic reserves and LPG storage.
Over 67 million people visit petrol pumps daily, which is testimony to the scale and efficiency of India’s fuel supply ecosystem.
India’s city gas network has grown from 55 geographic areas in 2014 to 307 in 2025, with piped natural gas (PNG) connections up from 25 lakh to 1.5 crore and over 7,500 compressed natural gas (CNG) stations in operation.
Unified pipeline tariffs and city gas expansions have ensured affordable access even in distant States.

Transition to Renewables

1. Biofuels and Ethanol:

Biofuels have emerged as a cornerstone of India’s green strategy.
Ethanol blending in petrol has surged from 1.5% in 2013 to 19.7% in 2025. Blending quantities have expanded from 38 crore litres to 484 crore litres.

This has saved 1.26 lakh crore in foreign exchange, reduced emissions by 643 lakh MT, and paid ₹1.79 lakh crore to distillers and over ₹1 lakh crore to farmers. Feedstock diversification ranging from molasses to maize has created a robust ethanol ecosystem.

2. Compressed Biogas:

Sustainable Alternative Towards Affordable Transportation (SATAT) initiative commissioned over 100 compressed biogas (CBG) plants and aims for a 5% CBG blending mandate by 2028.
Central support for biomass procurement and CBG-pipeline connectivity is accelerating circular energy adoption.

3. Green Hydrogen:

Green hydrogen has been given a massive thrust with 8.62 lakh tonnes of production and 3,000 MW of electrolyser tenders awarded.
Oil public sector undertakings are leading from the front- Indian Oil Corporation Ltd. recently awarded a landmark 10 kilo-tonnes per annum (KTPA) green hydrogen tender to L&T. Numaligarh Refinery Limited (NRL)’s green hydrogen unit in Assam is poised to become a first in the northeast.

4. Natural Gas:

India’s natural gas pipeline network now spans over 25,000 km; it targets 33,000 km by 2030.
Strategic pricing reforms and inclusion of gas in the ‘No Cut’ category for transport and domestic segments are ensuring supply stability.
Gas production has increased steadily from 28.7 billion cubic metre (BCM) in 2020-21 to 36.4 BCM in 2023-24, with further growth projected.
Oilfields (Regulation and Development) Amendment Act 2024 has enabled hybrid leases, allowing renewables alongside hydrocarbons.
Discovered small fields (DSF) fields now operate under simplified contracts with minimal compliance burdens, unlocking marginal fields across basins. These sweeping policy reforms show that we are ready to tweak and do more to make India’s upstream sector as competitive as any in the world.
Through the PM Gati Shakti, the Ministry of Petroleum and Natural Gas has digitally mapped over one lakh assets and pipelines. Integration with the National Master Plan ensures real-time project visibility and synergy across ministries. Key projects such as the Indo-Nepal pipeline and Samruddhi Utility Corridor have benefited from route optimisation and cost savings of over ₹169 crore.

Affordability Reforms:

Despite global LPG prices rising by 58%, Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries pay ₹553 per cylinder, supported by targeted subsidies and compensation to oil companies.
Fuel prices in India have been kept stable through excise cuts, insulating citizens from volatility seen in neighbouring countries.

Issues with Subsidies

Way Forward

Food Processing Sector

Significance of Food Processing Sector:

Budgetary Support for Infrastructure (Union Budget 2024-25)

Semiconductors

Government efforts to boost Semiconductors Production:

Amendments to Special Economic Zones (SEZ) Rules, 2006

Impacts:

Energy Transition Index

Energy Transition Index 2025

Global Highlights:

India-specific Highlights:

Electric Vehicle Manufacturing in India

Rapid Expansion

Need to catch up Pace:

Govt. Initiatives to drive India's EV Sector:

India’s growth and transformation across various sectors

Infrastructure Development

Social Infrastructure and Poverty Reduction:

Industrial Technological Advancement

About Nickel

Hydrogen Plasma Method

Key Benefits of Hydrogen Plasma Method:

Women in Agriculture

Key Challenges Faced by Women Farmers

Government Initiatives for Women in Agriculture:

Way Forward: Policy Recommendations

NBFC licence to Flipkart

What is a Non-Banking Financial Company?

Types of NBFCs:

NBFCs vs. Banks:

Role of NBFCs in Economy:

State of India's Garment Sector

Key Challenges in India’s Garment Sector:

Way Forward

EV Policy in India: Progress & Gaps

Key gaps in India’s EV Policy:

Way Forward

Key Stats in the Energy Sector in India

Indian government’s energy strategy

Reforms in the Energy Sector:

Transition to Renewables

Affordability Reforms:

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