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Liquefied Natural Gas and Energy Diplomacy

Context: The recent state visit of Qatar’s Amir Sheikh Tamim bin Hamad Al-Tjani to India saw a target to double the bilateral trade between the countries by 2030. Central to achieving the target is India’s import of Liquified Natural Gas (LNG) from Qatar. 

Relevance of the topic:

Prelims: LNG, extraction processes, Uses.

Mains: India’s transition to gas-based economy: Prospects and Challenges.

About Liquefied Natural Gas: 

  • Liquefied Natural Gas (LNG) is a natural gas that has been cooled to about -162 degree celsius to convert into liquid state. This process significantly reduces its volume by 600 times.
  • LNG is composed of methane (as predominant component), small amounts of ethane, propane and other hydrocarbons. 

LNG Production Process: 

  1. Gas extraction: Natural gas is extracted from underground reservoirs.
  2. Gas processing: Removing impurities like water, carbon dioxide and sulfur.
  3. Liquefaction: The gas is cooled to -162 degree celsius, turning gas into liquid.
  4. Storage and transportation: LNG is stored in isolated tanks and transported using specialised carriers. 
  5. Regasification: At the destination, LNG is heated and converted back to the gas for distribution. This is done using ‘heat transfer fluid’.
  • Uses of LNG: 
    • Power generation using gas-fired power plants to generate electricity. E.g., Hazira and Pipavav power plants.
    • Transportation: LNG is used as a fuel for ships, trucks and buses.
    • Industrial use in sectors like manufacturing and refining, as LNG is a cleaner-burning alternative to coal and oil.

Difference between LPG, CNG and LNG

Liquified Petroleum Gas (LPG)Compressed Natural Gas (CNG)Liquefied Natural Gas (LNG)
Components Propane and ButaneMainly methaneMainly Methane
SourceDerived from crude oil refining.Extracted from natural gas fields.Extracted from Natural Gas fields. 
Energy DensityHigher than CNG but lower than LNGLower than LPGHighest per unit volume
Environmental impactProduces carbon dioxide but less than diesel.Lower emission than LPG and petrolCleanest burning fossil fuel.

India and LNG

  • The share of Natural gas (including LNG) in India's energy basket of India is about 6%, which is lower than the global average. 
  • Expected LNG demand rise in India: 
    • To promote clean energy transition, the government has set an ambitious target to increase the share of natural gas in the country's primary energy mix to 15% by 2030, from the present level of about 6%.
      • Only 54% of CO2 is emitted in producing electricity from Natural Gas as compared to what is emitted in producing the same amount of electricity from coal. 
      • Natural gas is seen as a key transition fuel in India’s journey towards green energy and future fuels. However, there is high import dependence on Natural gas (50% of the total gas consumed is imported).
    • Aligns with India’s climate commitments under the Paris Agreement and net-zero emission goals.
      • Reducing emissions intensity of GDP by 45% by 2030, compared to 2005 levels. 
      • Achieving the target of net zero emissions by 2070. 
  • Government Initiatives for LNG expansion: 
    • To promote the usage and distribution of Liquefied Natural Gas (LNG), the Government has put LNG imports under Open General Licensing (OGL) category. 
      • India imports LNG from Qatar, USA, UAE and Angola, thus diversifying its imports and reducing dependency on one supplier. 
    • Urja Ganga pipeline aims to expand the natural gas grid and promote cleaner energy solutions, ensuring efficient natural gas (including LNG) distribution. 
    • Establishment of LNG infrastructure including LNG terminals under 100% FDI (automatic route).
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LNG and Energy Diplomacy

  • Tool for trade: India and Qatar’s trade is dominated by the LNG imports by India.
    • LNG imports consist of 60% India-Qatar trade by value.
    • Qatar accounts for 40% of India’s total LNG imports. 
  • Enhances bargaining power: 
    • India is emerging as one of the biggest markets for LNG. Both the USA and Qatar have interests in tapping the Indian market. 
    • The situation provides India with an opportunity to leverage it as a bargaining of interests. E.g., India can leverage this to bargain habitable and humane conditions for Indian labour in Qatar for the exchange of natural gas. 

Also Read: India Qatar elevate ties to Strategic Partnership 

Challenges to transition to a gas-based economy

India has set an ambitious target of increasing the share of natural gas in its energy basket from 6% to 15% by 2030. However, India faces following challenges in becoming a gas-based economy:

  • Insignificant domestic gas production, which has further shrunken over the past few years.
  • Inadequate gas-pipeline infrastructure and regional imbalance. E.g., Pipelines remain significantly low in central, southern and eastern India.
  • Limited market for natural gas due to a small number of producers (largely state players), shippers and limited consumers, and lacking liquidity and transparency.
  • Lack of Non-discriminatory/open access for private sectors to gas-pipeline networks.
  • Affordability issues as prices for India’s gas supplies (majorly) are government-controlled and set arbitrarily rather than market-determined.
  • Lack of an integrated Energy ministry and multiple departments governing the fuel sector causes lack of coordination, disconnect in policymaking, and incoherence in implementation.

Way Forward

  • Expanding pipeline infrastructure by targeting regional markets with the biggest capacity gap.
  • Unified and integrated ministry to fix accountability and reform energy governance structure.
  • Independent System Operator in gas markets to manage gas-grid collaboratively, promote efficiency, and for neutral allocation of pipeline usage.
  • Inclusion of natural gas under GST for better pricing, boosting trade through gas markets.
  • Rationalisation of gas pipeline tariffs or adopting single-zone tariff will promote affordability by reducing transportation costs and attract investments in gas-infrastructure.
  • Deregulation of pricing for domestically produced gas can provide freedom to price and market domestic gas and in turn boost domestic production.
  • Strategic Energy agreement with energy-rich countries for energy security. E.g., Investments in Russian-Far East.
  • Import diversification and Alliance with major importing countries like Japan for better-negotiating power against Asian premium.
  • Expedite gas-pipeline projects. E.g., TAPI.

Special Marriage Act 1954: Provisions and Concerns

Context: The recent incident of violence against an interfaith couple in Madhya Pradesh, marrying under the Special Marriage Act 1954, has raised concerns about its provisions and efficacy.

Relevance of the topic:

Prelims: Key facts about Special Marriage Act 1954. 

Mains: Special Marriage Act 1954: Provisions and Concerns.

About Special Marriage Act, 1954: 

  • The Special Marriage Act (SMA), 1954 was enacted to provide a secular legal framework for marriages between individuals belonging to different religions, castes, or communities. 
  • SMA enables marriage between inter-faith or inter-caste couples without them giving up their religious identity or resorting to conversion.

Objective of the Act: 

  • To decolonise the pre-independence marriage laws, which were largely based on religious personal laws.
  • To empower individuals to marry outside their religion without converting to another faith.
  • To offer a legal mechanism for interfaith marriages (particularly significant in the post-Partition period when religious divisions were sharp).

Eligibility criteria for Marriage: 

The Act prescribes specific conditions that both individuals must fulfill to legally solemnise their marriage:

  • Age requirement and eligibility:
    • The male partner must be at least 21 years old.
    • The female partner must be at least 18 years old.
    • People of any faith can marry across India.
  • Marital status:
    • Neither party should have a living spouse at the time of marriage, ensuring that monogamy is upheld.
  • Mental capacity:
    • Both individuals must be of sound mind and capable of giving valid consent to the marriage.
    • Individuals with severe mental illnesses or disabilities affecting their ability to consent are disqualified.
  • Prohibited relationships: The Act prohibits marriage between close relatives as per customary restrictions, unless allowed by the personal laws of the individuals involved.

Mandatory Public Notice Requirement: 

  • One of the most controversial provisions of the Act is the requirement for public notice before the marriage can be registered.
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  • This provision was intended to allow for transparency and objections, ensuring that no fraudulent or unlawful marriages take place. However, it has led to serious privacy concerns and the misuse of personal information, particularly in cases of interfaith marriages.

Provision for raising objections to Marriage: 

Under Section 7 of the Act, any person can raise an objection to the marriage within the 30-day notice period.

  • Valid grounds for objection include:
    • Either party is below the minimum legal age.
    • One of the partners is already married.
    • The marriage falls within prohibited relationships as per their customs.
    • One or both parties are incapable of giving valid consent due to mental incapacity.
  • If an objection is raised:
    • The Marriage Officer is required to investigate the claims and decide whether the marriage can proceed.
    • If the objection is found valid, the couple cannot get married under the Act.
  • While this provision was introduced as a safeguard against unlawful marriages, it has been frequently misused by families, religious groups, and vigilantes to disrupt interfaith marriages.

Registration and legal recognition of Marriage:

  • If no valid objections are raised within the notice period, the couple can proceed with the marriage.
  • The marriage is solemnised in the presence of the Marriage Officer and three witnesses.
  • After the ceremony, a marriage certificate is issued, which provides legal recognition to the marriage under Indian law.
  • Unlike religious marriages, no religious rituals or conversions are required under this Act.

Issues with the Special Marriage Act, 1954:

1. Violation of Privacy: 

  • The public notice requirement reveals the personal details of the couple to family members, society, and vigilante groups, compromising their right to privacy.
  • In Justice K.S. Puttaswamy vs Union of India (2017) case:
    • The Supreme Court has ruled that privacy is an inalienable fundamental right.
    • It recognised that individuals have the right to make autonomous decisions about their personal lives, including marriage.
    • The public display of marriage notices violates this right, making couples vulnerable to social backlash.

2. Risk of harassment and physical violence:

  • The recent incident at Bhopal (2024) highlights the dangers posed by this provision:
    • The couple’s personal information was allegedly leaked, making them targets of violence.
  • Many interfaith couples face threats, family pressure, and even forced separation due to public disclosure.
  • The state’s failure to provide security to interfaith couples exacerbates the issue.

3. Weaponisation of Section 7 (Objection Clause):

  • Objections to marriage are frequently misused by:
    • Family members who disapprove of interfaith marriages.
    • Religious extremists and vigilantes who claim to be protecting religious purity.
    • Individuals with personal grudges or vested interests.
  • There are no safeguards to prevent false, malicious, or communal objections, leading to unnecessary delays and harassment.

4. Gender bias and patriarchal control:

  • Women, especially from the Hindu community, are often portrayed as incapable of making independent decisions.
  • The assumption that Muslim men manipulate Hindu women reinforces patriarchal and communal biases.
  • Women often face pressure from families, society, and law enforcement to withdraw from interfaith marriages.

5. Legal and social consequences of Public Notice Requirement:

  • Threats from Family and Society: Many couples go into hiding or run away to escape backlash from their families and communities.
  • Forced marriages and honor killings: There have been cases where women are forcibly married off or subjected to honor crimes to prevent interfaith unions.
  • State inaction: Law enforcement agencies often fail to protect couples from threats and violence, allowing moral policing by the vigilante groups to thrive.

Suggested reforms in this Context:

  • Abolishing the Public Notice Requirement: In 2021, the Delhi High Court has ruled that public notice is not mandatory, but this needs to be uniformly implemented across India. Privacy should be protected, and only relevant legal authorities should have access to marriage records.
  • Strengthening protection for couples: Acting against vigilante groups and not allowing them to interfere in lawful marriages.
  • Regulating the Objection Mechanism: Only valid legal objections (age, mental capacity, existing marriage) should be allowed. Authorities must reject objections based on religion, personal beliefs, or social biases as it goes against the spirit of the Act.
  • Raising awareness and legal literacy: Public awareness campaigns should challenge misconceptions about interfaith marriages. Couples should be informed about their rights and legal protections under the Special Marriage Act.
  • Strict action against moral policing: Vigilante groups should be criminally prosecuted for interfering in private matters and authorities leaking personal data should also face legal consequences.

The Special Marriage Act, 1954, was meant to protect interfaith and inter-caste couples, but certain provisions have turned it into a tool of harassment. Unless these issues are addressed, the fundamental rights of individuals to choose their partners will remain under threat.

Quality of Government Expenditure Index: RBI

Context: Recently, the Reserve Bank of India (RBI) has released the ‘Quality of Public Expenditure’ Index to assess how well the government is spending public money. The latest report makes for a positive picture.

Relevance of the Topic: Prelims: Quality of Public Expenditure Index; Public Expenditure- Trends & Analysis. 

Quality of Public Expenditure (QPE) Index

  • Developed by the RBI to assess how well the government is spending public money. 

The Index uses five variables to assess quality of spending:

  1. Capital outlay to GDP ratio
  2. Capital outlay to GDP ratio
  3. Development expenditure to GDP ratio
  4. Development expenditure measured as a percentage of a government’s total expenditure
  5. Interest payments to total government expenditure ratio

Variables of Quality of Public Expenditure (QPE) Index

  •  Capital outlay to GDP ratio:
    • Money set aside by the government towards building physical infrastructure expressed as a percentage of Gross Domestic Product (GDP).
    • The higher the ratio, the better is the quality of public expenditure (stronger commitment to enhance a nation's productive capacity).
  • Revenue expenditure to Capital outlay ratio:
    • Relative weight of the revenue & capital expenditures. Compares day-to-day operational expenses of the government (like salaries, subsidies, pensions) to the long-term capital investment. 
    • The lower the value of this ratio, the better is the quality of public expenditure.
  • Development expenditure to GDP ratio:
    • Development expenditure refers to all public expenditure to enhance production factors (labour and capital) or by improving their productivity, in order to stimulate economic growth. 
    • It includes expenditure on:
      • Education and training
      • Public infrastructure investments
      • R&D (which drives technological advancement and innovation)
      • Healthcare (which boosts both the size and productivity of the labour force by extending the span of healthy life). 
      • Subsidies (particularly those aimed at improving nutrition, such as food subsidies) to bring long-term welfare gains.
  • Development expenditure as a percentage of a government’s total expenditure: The higher the value of this ratio, the better is the quality of public expenditure.  
  • Interest payments to total government expenditure ratio:
    • Proportion of government spending on servicing debt. 
    • A lower value of this ratio shows better quality of public spending.

Quality of India’s Public Expenditure: Analysis by RBI

  • The RBI has broken the whole period  (from 1991 to now)  in six phases to illustrate how structural forces have shaped the quality of public expenditure at both levels of government (Centre & states). 
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  • Phase 1: Early Post-Liberalisation Reforms & Fiscal Realignments (1991-95):
    • Centre’s index (Chart 1) showed a slight improvement in quality of public expenditure (QPE), while the States’ index (Chart 2) declined modestly. These movements were driven by the fiscal pressures faced by both levels of government. 
    • Public investment fell as fiscal consolidation took precedence.
  • Phase 2: Pre- FRBM Consolidation (1996-2003):
    • Both indices experienced a sharp decline reflecting the combined impact of the Fifth Pay Commission implementation, rising interest payments, and the persistent dominance of revenue expenditure over capital outlay.
  • Phase 3: FRBM Implementation & Growth Upswing (2003-2008):
    • Reflects positive effects of both fiscal discipline (as FRBM Act started guiding government borrowing) and fast economic growth making more money available for spending. 
    • States also benefited from higher fiscal devolution.
    • The index rebounded sharply until the world was hit by the Global Financial Crisis (GFC) of 2008.
  • Phase 4: Global Financial Crisis & Countercyclical Adjustments (2008-13):
    • GFC prompted the Centre to adopt countercyclical fiscal measures, including stimulus packages. 
    • Governments, especially the Centre had to spend more in order to counter the slowdown and hurt caused by the GFC. 
    • While this continued to push up the index during this phase, higher spending levels resulted in higher deficits, and it eventually started eroding the quality of public expenditure.
  • Phase 5: Structural Reforms & GST Rollout (2013-20):
    • The trajectory of the index goes in opposite directions for the Centre and the states. 
    • The QPE saw an improvement in states with improvements in development spending, as well as more money being available to them, thanks to the recommendations of the 14th Finance Commission. 
    • The Centre further faced challenges with GST revenue sharing initially favouring the states.
  • Phase 6: Pandemic shock & Infrastructure-focused recovery (2020-Present):
    • Economic recovery especially driven by the heightened focus on capital expenditure helped push up the quality of public expenditure.

Thus, according to RBI’s index, the quality of public expenditure in India (both at Centre and state levels) is close to the highest point it has ever been since the start of economic liberalisation in 1991.

Recent Trend shifts in India’s Public Expenditure

  • Push for Fiscal Discipline:
    • To limit the tendency in government to overspend, India instituted the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. 
    • FRBM limit on Fiscal & Revenue Deficit:
      • As per FRBM Act, the fiscal deficit should ideally not exceed 3% of GDP.  
      • The revenue deficit should be zero.
      • Purpose: Government should only borrow for capital expenditure (and not for paying higher salaries and other similar everyday spending).
    • Targeting overall debt: India has now shifted to targeting overall debt as a percentage of GDP, instead of an individual year’s fiscal deficit, as a way to maintain fiscal discipline.
  • Push for higher capital expenditure: Capex boosts productive capacity of the economy. 

Also Read: Re-evaluating FRBM Act 2003 

India needs to enhance the Quality of Public Expenditure by continued investment in infrastructure, renewable energy, and digital transformation, keeping borrowing under control, strengthening Centre-state financial coordination and using data-driven governance models to track expenditure efficiency.

RBI to conduct $10 Billion USD-INR Swap Auction

Context: The Reserve Bank of India (RBI) has announced a $10 billion USD-INR Buy/Sell swap auction with a tenure of three years, scheduled for February 28, 2025. This move is aimed to inject liquidity into the banking system and stabilise Indian currency.

Relevance of the Topic: Prelims: Forex Buy/Sell Swap, AD Category-1 Banks; Measures used by RBI to inject liquidity. 

About Forex Swap Auction

  • Forex Swap Auction is a financial instrument used by the Reserve Bank of India (RBI) to manage liquidity in the financial system. 
  • In the Buy/Sell swap mechanism, RBI buys U.S. Dollars from banks in exchange for Rupees (first leg) and agrees to sell them back at a pre-determined future date along with a premium (reverse leg). 
CriteriaForex Buy/Sell SwapForex Sell/Buy Swap
What does the RBI do?RBI buys dollars with an agreement to sell the dollars at a future date and at a fixed exchange rate.RBI sells dollars with an agreement to buy back the same amount of dollars at a future date and at a fixed exchange rate.
When is it adopted?Surplus of dollars → Rupee Appreciation pressureHence, RBI buys dollars and injects Rupee to control Rupee Appreciation.Shortage of dollars → Rupee DepreciationHence, RBI sells dollars and sucks out Rupee to control Rupee Depreciation.
What does it lead to?Potential Rupee Devaluation: Decrease in value of Rupee due to RBI’s Intervention Rupee Revaluation: Increase in value of Rupee due to RBI’s Intervention
Impact on Rupee LiquidityIncreases Rupee LiquidityDecreases
Impact on Rate of Interest on LoansIncrease in Rupee Liquidity → Decrease in Rate of Interest on LoansDecrease in Rupee Liquidity →  Increase in Rate of Interest on Loans
Impact on Forex ReservesRBI Purchases dollars →  Increase in Forex Reserves (temporarily) RBI sells dollars → Decline in Forex Reserves (temporarily) 

Significance of Swap Auctions

  • Liquidity management: Helps inject or absorb Rupee liquidity in the banking system.
  • Exchange rate stability: Reduces volatility in the USD/INR exchange rate by providing liquidity buffers.
  • Foreign exchange reserves management: Enhances the efficient utilization of forex reserves.
  • Inflation & Interest rate control: Manages liquidity, indirectly influencing inflation and interest rates.

RBI’s proposal for USD-INR Buy/Sell Swap Auction

  • Details of the auction:
    • Swap amount: $10 billion
    • Tenure: 3 years
  • Key features: 
    • Participants must place their bids in terms of the premium they are willing to pay to RBI for the tenure of the swap. Expressed in paisa terms up to two decimal places. 
    • The auction would be a multiple-price based auction, i.e., successful bids will get accepted at their respective quoted premium.
  • Authorised Dealers (ADs): Category-1 banks will be the eligible entities to participate in the auction.
  • Under the swap auction, minimum bid size would be USD 10 million and in multiples of USD 1 million thereafter. The eligible participants are allowed to submit multiple bids.
  • RBI reserves the right to:
    • Decide on the quantum of US Dollar amount to be accepted in the swap auction.
    • Accept offers for less than the aggregate notified US Dollar amount.
    • Accept marginally higher than the notified US Dollar amount due to rounding-off effects.
    • Accept or reject any or all the offers either wholly or partially without assigning any reason. 

Authorised Dealers (ADs) – Category-1 Banks

  • RBI gives an AD Category-1 Bank permission to deal in foreign exchange transactions. 
    • AD stands for Authorised Dealer.
    • Category-1 is the highest authorised dealer category in India's foreign exchange transactions.
  • These banks are allowed to carry out a wide range of activities related to foreign exchange, including:
    • Buying and selling foreign currency
    • Outward remittance of funds abroad
    • Issuance of letters of credit and bank guarantees.
  • They act as intermediaries between the buyers and sellers of foreign currencies and help to provide liquidity in the foreign exchange market.

Recent Liquidity Issues in the Indian Banking System: 

  • The Indian banking system encountered its worst liquidity crunch in more than a decade in January 2025. The liquidity deficit peaked at Rs 3.15 lakh crore on January 23, its lowest level in nearly 15 years. 
  • The deficit led to increased dependence by banks on market borrowing, thereby keeping interbank call money rates (rate at which banks lend to each other) consistently above the policy repo rate of 6.50%.
  • The RBI has been selling dollars to stabilise the rupee, thereby sucking out an equivalent amount in rupee from the system. RBI’s outstanding net forward sales of the dollar surged to $67.93 billion as of December 31, 2024, as the central bank intensified its efforts to stabilize the rupee.  

RBI’s measures to ensure liquidity

  • The RBI had infused over Rs 3.6 lakh crore of durable liquidity into the banking system in Jan-Feb 2025 through:
    • Debt purchases
    • Forex swaps (exchanging foreign currency with banks)  
    • Longer-duration repos. 
  • Other measures included:
    • Several variable rate repo (VRR) auctions 
    • $5 billion dollar-rupee swap
    • Rs 60,000 crore Open market operations (OMO) purchase auctions of government securities.  

Can an MP lose his seat under Article 101(4)?

Context: Amritpal Singh, a MP from Punjab, has approached the Punjab and Haryana High Court to seek permission to attend the ongoing Parliamentary session to avoid losing his membership due to prolonged absence.

Relevance of the Topic: Prelims: Questions based on provisions for disqualification of members.

Background:

  • MP Amritpal Singh faces charges under the National Security Act, and has been detained in Dibrugarh since April 2023. 
  • He contested and won the 2024 Lok Sabha election from prison, but thus far has an attendance of only 2%.
  • Under Article 101(4), he fears losing his membership due to his prolonged absence from Parliament. 

Provisions of Article 101

  • Article 101 mentions the provisions about the vacation of the seats of members of Parliament. 
  • No dual membership: 
    • Article 101(1): No person shall be a member of both Houses of Parliament simultaneously. 
    • Article 101(2): No person can become a member of both the Parliament and a state legislature at the same time. The seat of parliament becomes vacant if the member is not able to resign from the State Legislature within 14 days. 
    • Article 101(3): The members of either House of Parliament may resign from office by writing a letter in his own handwriting to the Chairman or Speaker (as applicable). If the letter is accepted by the Chairman or Speaker, the seat becomes empty.
  • Prolonged absence- Article 101(4): 
    • If a member of either House of Parliament is absent from all meetings, without permission of the House for a period of sixty days, the House may declare his seat vacant.
    • The 60 days, however, do not account for any period during which the House is prorogued or is adjourned for more than four consecutive days.
    • MPs can seek leave: For long absences, MPs can write to the ‘Committee on Absence of Members from the Sittings of the House’ (parliamentary panel that deals with this issue). The committee makes recommendations on each leave application, which are then ratified by the House concerned. 
    • Even if an MP is absent for more than 60 days, the House has to declare the seat vacant by putting the matter to vote. 
  • Note: No vacancy has been made till date by invoking Article 101(4).

Credit Guarantees in India: Trends and Concerns

Context: The Union government has launched various Credit Guarantees schemes to strengthen the credit delivery system and facilitate the flow of credit to bolster economic activity. However, the sustainability and long-term implications of government-backed guarantees need careful evaluation. 

Relevance of the topic:

Prelims: Credit guarantee schemes

Mains: Credit Guarantee- Trends, Issues, Way Forward 

Loan Guarantee schemes in India

  • Emergency Credit Line Guarantee Scheme (ECLGS):
    • Introduced in 2020 to provide additional working capital support to businesses (focus on MSMEs, hospitality, tourism, healthcare) affected by the COVID-19 pandemic. 
    • It provides Member Lending Institutions (MLIs), 100% guarantee against any losses suffered by them due to non-repayment of the ECLGS funding by borrowers.
  • Mutual Credit Guarantee Scheme for MSMEs (2025): 
    • In pursuance of the Union Budget 2024-25 announcement, the Mutual Credit Guarantee Scheme for MSMEs (MCGS - MSME) has been launched recently. 
    • MCGS- MSME scheme will provide 60% guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) for facilitating loans up to Rs. 100 crore to MSMEs for purchase of machinery or equipment without collateral.
    • Mutual Credit Guarantee Scheme for MSMEs 
  • Enhanced Credit Availability in Union Budget 2025-26: 
    • Credit guarantee cover for micro and small enterprises (MSEs) is increased from ₹5 crore to ₹10 crore.
    • Credit guarantee cover of startups will double from ₹10 crore to ₹20 crore, with a reduced fee of 1% for loans in 27 priority sectors.
    • Exporter MSMEs will benefit from term loans up to ₹20 crore with enhanced guarantee cover. 
  • Stand-Up India Scheme:
    • It facilitates bank loans between Rs 10 lakh and Rs 1 Crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise. This enterprise may be in manufacturing, services or the trading sector. 
  • Startup India Seed Fund Scheme (SISFS): Launched in 2021 to offer financial support to innovative startups.
  • Pradhan Mantri Mudra Yojana (PMMY): Facilitates micro-financing by offering loans to small businesses.
  • Atmanirbhar Bharat Abhiyan Credit Guarantee Scheme (2020): Aimed at revitalising MSMEs and facilitating the recovery of the economy post-pandemic. 
  • Kisan Credit Card (KCC): Provides timely credit support to farmers to support their cultivation needs. As of March 2024, India has 7.75 crore operational KCC accounts with a loan outstanding of ₹9.81 lakh crore. 

Positive impacts of government loan guarantees

  • Enhance liquidity and solvency:
    • Government guarantees have improved the liquidity of MSMEs, enabling them to sustain operations during periods of economic strain. 
    • E.g., Emergency Credit Line Guarantee Scheme (ECLGS) provided working capital support to businesses and prevented bankruptcies during COVID-19 pandemic.
  • Reduction in Non-Performing Assets (NPAs):
    • Government-backed guarantees (assurance of guarantees) encouraged banks to offer credit more freely. It has contributed increased formal credit and reduction in NPAs in public sector banks, showcasing an improved repayment rate from businesses benefiting from these schemes. 
    • E.g., The gross NPAs in MSME loans by Scheduled Commercial Banks had declined by over 18% to Rs 1.25 lakh crore in FY24 from Rs 1.54 lakh crore in FY22. 
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Concerns associated with loan guarantees

  • Over-reliance on government guarantees:
    • Small borrowers often back comprehensive financial records, which makes risk assessment for the lenders complicated. 
    • Perpetual dependence on government-backed guarantees may discourage banks to conduct thorough credit appraisals, which could lead to potential moral hazard. 
    • This could lead to financial instability, if these guarantees are misused or extended too freely.
  • Increased defaults and fiscal burden:
    • If the borrowers (especially MSMEs and startups) default on their loans, the government will bear the liability, which could strain public finances and lead to higher fiscal deficits.
  • Impact on fiscal deficit and debt:
    • The Fiscal Responsibility and Budget Management Act has restricted the Central Government to extend guarantees up to 0.5% of GDP in any financial year, there is no concise definition around the informal form of implicit support by the government. 
    • The government has used loan guarantees as a substitute for direct public investment, especially in infrastructure, to curtail fiscal deficit. However, this approach could increase the fiscal deficit if large-scale defaults occur. 
    • Moreover, guarantees are often difficult to account for in the national budget due to their contingent nature, leading to challenges in financial reporting.

Way Forward for Loan Guarantees

  • Transparency in financial reporting: 
    • The shift towards better accounting standards for MSMEs and startups is crucial to improving transparency and reducing risks associated with loan defaults. 
    • This includes disclosing the range of expected outcomes and their probabilities to help policymakers assess whether the risks associated with the guarantees are manageable.
  • Merit-based support for startups:
    • Government guarantees should be directed towards startups based on merit-based assessments rather than blanket support. 
    • Factors such as corporate ethics, governance capacity, and leadership style should be considered before granting guarantees. 
    • This can ensure that these firms can sustain themselves without long-term dependence on government support. 

REITs/InVITs: SEBI proposes fast track follow-on offers

Context: Securities and Exchange Board of India (SEBI) has proposed a framework for undertaking fast-track follow-on offers by real estate investment trusts (REITs) and infrastructure investment trusts (InVITs) to make fundraising more efficient.

Relevance of the Topic: Prelims: REITs, InVITs, Related key terms 

REITs & InvITs: 

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  • REITs: A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate (E.g., offices, malls, hotels) and sells shares to raise capital to do so. Allow investors to earn returns without owning physical property.
  • InvITs: Infrastructure Investment Trusts (‘InvITs’) are pooled investment vehicles similar to mutual funds. InvITs enable private and retail investors for long-term investment in infrastructure projects such as roads, gas pipelines, transmission lines, renewable assets, etc. They are regulated by SEBI. 

Read: InvITs (Infrastructure Investment Trust)

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SEBI Proposal: Key Features

  • Lock-In provisions for sponsors:
    • 15% of units allotted to sponsors & sponsor group: Locked in for 3 years from trading approval date.
    • Remaining units: Locked in for 1 year from trading approval date.
  • Follow-On Public Offer (FPO) requirements:
    • Application: To be made to all stock exchanges where units are listed.
    • Designated Stock Exchange: One exchange must be chosen for coordination.
    • Minimum public unit-holding: At least 25% of total outstanding units post-issue.
  • Issuance restrictions:
    • No further issuance of units (public issue, rights issue, preferential issue, etc.) between the draft filing and final listing, except through employee benefit schemes.
  • Documentation & Approvals:
    • Draft Follow-On offer document: Submitted via merchant banker to SEBI for observations.
    • Final document: Filed after incorporating SEBI’s comments.
  • Merchant Banker duties: Submit due diligence certificate along with draft document.

Significance of the Proposal

  • Enhanced fundraising efficiency: Fast-track FPO mechanism reduces fundraising delays.
  • Increased market confidence: Clear lock-in norms and compliance improve investor protection.
  • Transparency: Improved financial disclosure aligns with public issue norms.
  • Boost to Infrastructure & Real estate sectors: Facilitates smoother capital inflow into key sectors.

Related key terms

  • Lock-In period: refers to that period for which investments cannot be sold or redeemed.
  • Initial Public Offering (IPO): 
    • Refers to the process where private companies sell their shares to the public to raise equity capital from the public investors.
    • It is the first time a company goes public.
  • Follow-on public offer (FPO):
    • FPO is a follow up to the IPO as the name suggests. 
    • A follow-on public offer is the issuance of shares after the company is listed on a stock exchange.
  • Rights issue: When shares are issued to existing shareholders.
  • Private Placement & Preferential issue: When shares are issued to a select group of Persons including members or employees.

Economic Growth: Investment-driven vs Consumption-led

Context: Amidst the Budget 2025 emphasis on consumption-led growth in India, concerns arise over whether consumption-led growth can compete with investment-driven growth over its multiplier effects in the economy. 

Relevance of the topic:

Prelims: Sources of Aggregate demand

Mains: Investment-driven growth vs. Consumption-led growth

Understanding Economic Growth

  • A balanced economic growth ensures that Supply (Production) and Demand (Expenditure) must move in harmony.
  • GDP (Gross Domestic Product) measures the total monetary value of all goods and services produced within a country during a specific period. It reflects the economy's production capacity.
  • If Supply < Demand:
    • Consumers chase limited goods which cause inflation.
  • If Demand < Supply:
    • Companies face unsold inventories, leading to reduced production, job cuts, and decreased incomes, which triggers a negative demand-production cycle.

Sources of Aggregate Demand

  • Aggregate demand is the total expenditure on an economy’s output. It comprises four key components: Private Consumption, Private Investment, Government Expenditure and Net Exports.
  • Private Consumption:
    • Largest contributor to aggregate demand in India. E.g., In 2023, consumption was 60.3% of India's GDP, compared to 39.1% in China.
    • Involves household spending on everyday goods (e.g., food, clothing, electronics) and services (e.g., education, healthcare).
    • Driven by disposable income, consumer confidence, and credit availability.
  • Private Investment:
    • Expenditure by businesses on capital goods (machines, tools) and by households on real estate.
    • High private investment improves productivity, creates jobs, and drives innovation.
    • Highly sensitive to interest rates, political stability, and future demand expectations.
  • Government Expenditure:
    • Includes spending on infrastructure, defence, healthcare, and education.
    • Consumption Expenditure: Salaries for public sector employees and daily operational costs.
    • Investment Expenditure: Building roads, schools, and hospitals, enhancing long-term productive capacity.
  • Net Exports (Exports - Imports):
    • Positive net exports (trade surplus): Increases demand, boosts production. 
    • Negative net exports (trade deficit): Reduce demand, impacts currency value. 

Investment and its Multiplier effect

  • Investment is the gross fixed capital formation by the private sector and the government combined. It plays a pivotal role in driving economic growth due to the multiplier effects.
  • Example for Multiplier effect: A ₹100 public investment in highway construction can increase overall GDP by ₹125 (if multiplier = 1.25) through:
    • Direct incomes to construction workers and firms.
    • Indirect growth of roadside businesses (restaurants, fuel stations).
    • Induced demand from increased incomes and improved connectivity.

Consumption vs. Investment multipliers

  • Investment-driven growth has a higher multiplier effect than consumption-led growth. It stimulates long-term growth and capacity expansion.
  • Consumption-led growth: Lower multiplier. It supports immediate demand, it does not significantly enhance production capacity.

Consumption-driven Growth in India

  • Consumption share in 2023: India - 60.3% of GDP (whereas in China - 39.1%.)
  • High reliance on consumption reflects:
    • Weaknesses in investment and government expenditure.
    • Persistent trade deficit (imports > exports), draining domestic demand.
  • Concerns:
    • Consumption-led growth is slower and less sustainable.
    • Rising inequality: Benefits of growth accrue mainly to middle and upper classes.
    • Employment and income stagnation hinder inclusive growth.

India vs. China: Divergent Growth Trajectories

  • Economic conditions in the early 1990s:
    • Per capita incomes of India and China were almost the same. Both countries were equally poor, with the average income of an Indian or Chinese resident being approximately 1.5% of the average income of an American.
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  • Divergence by 2023:
    • China’s per capita income became 5 times that of India (2.4 times under purchasing power parity - PPP).
    • Investment as the key driver: China’s growth has been heavily investment-led, focusing on manufacturing, infrastructure, and technology.
    • India has leaned more on domestic consumption, limiting its capacity for sustained long-term growth.
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  • Investment rates over time:
    • 1992: China - 39.1% of GDP; India - 27.4%.
    • 2007 (Pre-Global Financial Crisis): India’s investment rate rose to 35.8%, reducing the gap with China.
    • Post-2008 Financial Crisis:
      • China: Used aggressive state-led investments, particularly through state-owned enterprises, to maintain growth momentum.
      • India: Witnessed declining investment rates; private sector hesitancy persisted.
    • 2023: China- 41.3%; India - 30.8%. 
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Investment Challenges in India

  • Private sector hesitation: 
    • Declining corporate investments due to policy uncertainties, infrastructure bottlenecks and credit constraints.
    • Business confidence (Animal spirits) remain subdued.
  • Household investment trends:
    • Growth in residential housing investments during the early 2010s.
    • Recent stagnation raises concerns about future demand and growth.

Government’s Role

  • Need for Proactive public investment:
    • Public investment can crowd in private sector spending, reviving growth momentum.
  • Priority areas:
    • Infrastructure (transport, energy, logistics)
    • Healthcare and education
    • Technology and renewable energy sectors
  • Recent Budget trends: Despite growth needs, the latest Union Budget shows:
    • Reluctance to increase capital expenditure significantly.
    • Preference for tax cuts over direct investments.
    • Focus on middle and upper-class consumption rather than inclusive development.

Way Forward

  • Government taking the lead: Enhance public investments to rebuild private sector confidence.
  • Develop policies that:
    • Promote employment generation.
    • Expand export competitiveness.
    • Address income inequality.
  • Encourage state-owned enterprises to invest in emerging sectors (E.g., AI, green technologies).

For India to achieve sustainable, inclusive, and high-growth trajectories, balancing consumption with investments is vital. Public investment, particularly in infrastructure and human capital, can act as a catalyst to revive private sector confidence, create jobs, and ensure long-term economic prosperity.

AI tools generate real time insights into Antibiotic Resistance

Context: A team of researchers from Indraprastha Institute of Information Technology-Delhi (IIIT-Delhi) have come up with AI-powered data integration and predictive analytics tools (AMRSense and AMROrbit Scorecard) to understand patterns of antibiotic resistance in real time.

Relevance of the Topic: Prelims: Key facts about Antimicrobial Resistance (AMR); Role of AI in combating AMR.

What is Antimicrobial Resistance (AMR)?

  • Antimicrobial resistance is the resistance acquired by any microorganism (bacteria, viruses, fungi, parasite, etc.) against antimicrobial drugs (such as antibiotics, antifungals, antivirals, antimalarials) that are used to treat infections. 
  • Microorganisms that develop antimicrobial resistance are sometimes referred to as superbugs. Due to AMR, standard treatments become ineffective, infections persist and may spread to others. 
  • The World Health Organisation (WHO) has identified antimicrobial resistance (AMR) as one of the top threats to public health. 
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Role of AI tools in combating Antibiotic Resistance

  • The AI-driven tool AMRSense has been deployed to use routine data that is generated in hospitals to generate accurate and early insights on antimicrobial resistance at the global, national, and hospital levels.
  • Utility: 
    • Bridge gap in community-level AMR data collection and evidence-based management. 
    • AI-assisted data recording: Empowers community health workers (CHWs) for accurate and simplified data collection. 
    • Data integration by creating a unified AMR data ecosystem through the integration of data on antibiotic sales, consumption, and WHO Net-compliant surveillance data, using open-source tools and APIs. 
    • Predictive analytics by using federated analytics across the One Health Ecosystem for integrative insights on AMR. 
    • AMROrbit Scorecard for monitoring and evaluating AMR trends to guide targeted interventions and demonstrate the benefits of data collection.
    • Promote AI-driven or AI-enhanced antimicrobial stewardship. 
  • Limitations: Lack of consistent surveillance data including antibiotic sales data, patient records etc. 

Also Read: Antimicrobial Resistance (AMR) 

Childhood Cancers: Impacts & Prevalence

Context: Childhood cancers account for 4% of all cancer cases in India. This leaves thousands of children vulnerable to the direct and indirect effects of cancer.

Relevance of the Topic: Prelims: Key facts about Cancer; Government Initiatives for Cancer Treatment.

What is Cancer?

  • Cancer is a condition of uncontrolled cell growth and division in any part of the body. 
  • Cancer occurs when some disruption in the DNA in a normal cell interferes with the cell’s ability to regulate cell division.
  • DNA disruption can be caused by mutation due to certain chemicals or sources of high energy (Sun, X-rays, Nuclear radiation), infection by some viruses and due to certain environmental and lifestyle factors. 
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Cancer on Children: Prevalence and Consequences

  • Prevalence: 
    • The National Cancer Registry Programme (NCRP) report found that childhood cancers (0-14 years) account for 4% of all cancer cases in India.
    • Common cancers: Leukemia, lymphoma, CNS tumours, neuroblastoma, bone cancer etc. 
  • Consequences: 
    • Loss of opportunity for education/ interruption of education.
    • Financial burden for the family/ cycle of generational poverty.
    • Risks of permanent (long-term) physical disability 
    • Psychosocial and mental health impacts.
image 164

Government Initiatives for Cancer Treatment

  • National Programme for Prevention and Control of Cancer, Diabetes, Cardiovascular Diseases, and Stroke is a flagship program under the National Health Mission. Launched in 2010, it aims to prevent and control major non-communicable diseases, including cancer.
  • National Cancer Registry Programme (1982) under the Indian Council of Medical Research collects and maintains data on cancer incidence across the country.
  • National Cancer Grid is a network of major cancer centres across India that collaborate to standardise cancer care to improve the quality of cancer treatment.
  • National Cancer Institute at Jhajjar, Haryana has been established as a centre of excellence for cancer treatment and research. 
  • Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) includes coverage for direct medical costs of cancer treatment to over 10 crore families. 
  • Production Linked Incentive (PLI) scheme launched in 2020 for domestic manufacturing of oncology equipment and other medical devices. 

Also Read: Immunotherapy for Cancer Treatment 

Education is a pathway to economic empowerment for such children. The need of the hour is to enact comprehensive policies and interventions to improve access to affordable quality treatment, counselling for mental well-being, and solutions for economic sustenance.  

Remission without Application: Supreme Court

Context: The Supreme Court has directed states with remission policies to consider the premature release of prisoners even if they do not apply for remission beforehand. This is a shift from earlier positions in Sangeet v. State of Haryana (2013) and Mohinder Singh v. State of Punjab (2013) where the SC held that remission must be initiated by the convict.

Relevance of the Topic: Prelims: Legal Framework on Remission. 

Legal Framework on Remission

  • Definition: Remission is the legal power to reduce or shorten the period of a sentence that a convicted person must serve. It allows a state government to partially cancel the punishment imposed by a court.
  • Relevant provisions:
    • Section 473 of BNSS (formerly Section 432 of CrPC): States can remit sentences at any time and impose conditions like reporting to police at regular intervals.
    • Section 475 of BNSS (formerly Section 433A of CrPC): Life convicts (guilty of offences punishable by death) must serve at least 14 years before remission.
    • Articles 72 & 161: President and Governors have been given separate remission powers.
  • Previously, remission required an application to be filed by the convict. Now, the Supreme Court has ruled that states must proactively consider eligible convicts.

Supreme Court’s Ruling and Reasoning

  • Earlier rulings in Sangeet v. State of Haryana (2013) and Mohinder Singh v. State of Punjab (2013) judgements had not considered pre-existing remission policies and held that these powers cannot be exercised Suo moto.
  • SC has now recognised that state prison manuals already mandate prison superintendents to initiate remission proceedings, hence administration can take steps for remission.
  • Uniform remission policies ensure uniformity and prevent arbitrary or en-masse releases (E.g., festival-related remissions).
  • If states fail to consider eligible cases, it would be discriminatory and violate Article 14 (Right to Equality).

SC’s directives to States

  • All states must create an exhaustive remission policy within two months.
  • Conditions for remission must be reasonable: SC has directed states to consider crime motive, criminal background, and public safety while giving remission, it has further directed that the conditions cannot be excessively stringent or vague.
  • Remission cannot be revoked arbitrarily:  A minor breach of conditions should not automatically lead to cancellation and the convicts must be notified and given a chance to respond before cancellation.

Implications of the Verdict

  • Impact on Prison Population: Indian prisons have 131.4% occupancy (NCRB, 2022), however, majority (75.8%) are undertrials, so immediate impact may be limited.
    • Premature releases: As per prison Statistics in India report, the following number of prisoners have benefitted from remission policies over the years.
      • 2020: 2,321 prisoners
      • 2021: 2,350 prisoners
      • 2022: 5,035 prisoners
  • Reduced discretionary powers of the State: Prevents arbitrary denials of remission and ensures consistent application of remission policies.
  • Balancing justice and reform: While preventing mass releases, the ruling reinforces rehabilitation-focused justice. It allows for a structured approach rather than political or emotional decisions on remission.
  • Shift from Judicial restraint to Proactive State Role: Previously, remission was considered a privilege requiring a convict’s application. Now, remission is seen as a right if eligibility criteria are met. This shift aligns with the policy of progressive penal reforms, emphasizing reintegration with society over prolonged punishment.
  • Constitutional and human rights perspective: The ruling ensures fair treatment and equality under Article 14. It also aligns with Article 21 (Right to Life and Liberty) by preventing arbitrary imprisonment.
  • Impact on prison overcrowding: Overcrowding is a serious issue in Indian prisons, with occupancy exceeding 131%. The SC’s decision may ease some of this burden but will have limited impact on undertrials. Future prison reforms should focus on speedy trials and bail reforms alongside remission policies.

Issues and Concerns

  • Implementation issues: Some states may delay framing policies.
  • Political interference: There is still scope for states to misuse remission for electoral gains.
  • Public safety risks: Ensuring that only truly rehabilitated convicts are released is crucial.
  • Proper implementation and safeguards are necessary to balance public safety and justice.

While remission reform is a positive step, India also needs faster trials to reduce undertrial population, parole and probation reforms and increased focus on rehabilitation and skill-building for prisoners.

SC stays Lokpal’s order on HC judges

Context: The Supreme Court has stayed a Lokpal order bringing High Court judges under its jurisdiction, terming that the Lokpal order impacted the independence of the judiciary. 

Relevance of the Topic: Prelims: Key facts about Lokpal & Lokayukt. 

Reasoning given by the Lokpal to bring High Court Judges under its purview

  • The Lokpal (in its now-suspended order) ruled that High Court judges fall within the definition of “public servant” under the 2013 Lokpal Act, asserting its jurisdiction over them.
    • Unlike the Supreme Court, the High Courts in India were constituted by British Parliamentary Acts — Indian High Courts Act, 1861 and Government of India Act 1935 — and thus the High Courts pre-date the Constitution.
    • Article 214 of the Constitution, which said “there shall be a High Court for each State”, had only “intrinsically recognised” the existence of the High Courts. The Constitution did not establish the High Courts. 
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Reasoning given by Supreme Court to stay the Lokpal order

  • The special bench of SC stated that high court judges would not come under the purview of the Lokpal and Lokayuktas Act, 2013, since their appointment is governed by the Constitution and that they are not like any other “public servant” functioning in an organisation established by a parliamentary law.
    • After the commencement of the Constitution, High Court judges are constitutional authorities and not mere statutory functionaries.

About the office of Lokpal

  • The Lokpal is an independent statutory body established under Section 3 of the Lokpal and Lokayuktas Act, 2013. 
  • Aim: To inquire and investigate allegations of corruption against public functionaries who fall within the scope and ambit of the Act. 
  • Since India is a signatory to the United Nations Convention against Corruption, it mandates the Government to provide clean and responsive governance which is reflected in passing of the legislation and creation of the body of Lokpal to contain and punish acts of corruption.

Objective behind establishing the office of Lokpal

  • To address concerns and aspirations of the citizens of India for clean governance. 
  • To serve the public interest and use the powers vested in it to eradicate corruption in public life.

Features of Lokpal and Lokayukta Act (2013) 

  • Uniform anti-corruption roadmap: It seeks to establish the institution of the Lokpal at the Centre and the Lokayukta at the level of the State and thus seeks to provide a uniform vigilance and anti-corruption road map for the nation both at the Centre and at the States. 
  • Jurisdiction of Lokpal includes the Prime Minister, Ministers, Members of Parliament and Groups A, B, C and D officers and officials of the Central Government. 
  • Composition: Lokpal consists of a Chairperson with a maximum of 8 members of which 50% shall be judicial members.
    • 50% of the members of the Lokpal shall come from amongst the SCs, the STs, the OBCs, minorities and women. 
    • The selection of the Chairperson and the members of Lokpal shall be through a Selection Committee, consisting of:
      • Prime Minister
      • Speaker of Lok Sabha
      • Leader of the Opposition in Lok Sabha
      • Chief Justice of India or a sitting Supreme Court Judge nominated by the Chief Justice of India
      • Eminent Jurist to be nominated by the President of India on the basis of recommendations of the first four members of the selection committee. 
Search Committee: 

-A Search Committee will assist the Selection Committee in the process of selection. 

- 50% of the members of the Search Committee shall also be from amongst the SCs, the STs, the OBCs, minorities and women.

Jurisdictional Aspect

  • Office of Prime Minister: The Prime Minister has been brought under the purview of the Lokpal with subject matter exclusions and specific process for handling complaints against the Prime Minister. 
  • Lokpal’s jurisdiction will cover all categories of public servants, including Group A, Group B, Group C, and Group D officers and employees of Government. 
    • On complaints referred to the Central Vigilance Commission (CVC) by the Lokpal, the CVC will send its report of preliminary enquiry in respect of Group A and Group B Officers back to the Lokpal for further decision. 
    • With respect to categories of employees from Group C and Group D, the CVC will proceed further in exercise of its own powers under the CVC Act subject to reporting and review by the Lokpal. 
  • Lokpal will have the power of superintendence and direction over any investigating agency, including the CBI, for cases referred to them by the Lokpal. 

Changes made by the Lokpal Act

  • Appointment of CBI Director: A High-Powered Committee chaired by the Prime Minister will recommend the selection of the Director of CBI. 
  • Attachment of property: It incorporates provisions for attachment and confiscation of property of public servants acquired by corrupt means, even while the prosecution is pending.
  • Provides timeline: It lays down clear timelines.
    • For preliminary enquiry, it is three months extendable by three months. 
    • For investigation, it is six months which may be extended by six months at a time. 
    • For trial, it is one year extendable by one year and to achieve this, special courts to be set up. 
  • Maximum punishment under Prevention of Corruption Act enhanced:
    • It enhances maximum punishment under the Prevention of Corruption Act from seven years to ten years. 
    • The minimum punishment under sections 7, 8, 9 and 12 of the Prevention of Corruption Act will now be three years, and the minimum punishment under section 15 (punishment for attempt) will now be two years.
  • Enhanced ambit: Institutions which are financed fully or partly by Government are under the jurisdiction of Lokpal, but institutions aided by Government are excluded. 
  • Power to grant sanction: Lokpal is conferred with power to grant sanction for prosecution of public servants in place of the Government or competent authority. 
  • Provisions to strengthen CBI: It contains a number of provisions aimed at strengthening the CBI such as:
    • setting up of a Directorate of Prosecution headed by a Director Prosecution under the overall control of the Director of CBI. 
    • appointment of the Director of Prosecution on recommendation of the CVC. 
    • maintenance of a panel of advocates by CBI other than Government advocates with the consent of the Lokpal handling Lokpal-referred cases. 
    • transfer of officers of CBI investigating cases referred by Lokpal with the approval of Lokpal. 
    • provision of adequate funds to CBI for investigating ca referred by Lokpal.
  • FCRA: All entities receiving donations from foreign sources in the context of the Foreign Contribution Regulation Act (FCRA) in excess of ₹10 lakhs per year are brought under the jurisdiction of Lokpal. 
  • Institution of Lokayukta for States:
    • It contains a mandate for setting up of the institution of Lokayukta through enactment of a law by the State Legislature within a period of 365 days from the date of commencement of this Act. 
    • Thus, the Act provides freedom to the states to decide upon the contours of the Lokayukta mechanism in their respective states. 
  • Protection to the honest and upright: It provides adequate protection for honest and upright public servants. 

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