PT 360 Economy September 2024: UPSC 2025

AVERAGE HOUSEHOLD SPENDING ON FOOD FALLS BELOW HALF SINCE 1947: EAC-PM PAPER 

The Economic Advisory Council to the Prime Minister (EAC-PM) emphasized in their report titled "Changes in India's Food Consumption and Policy Implications.

A Comprehensive Analysis of Household Consumption Expenditure Survey 2022-23 and 2011-12" the following key points:

• Regional Differences: There has been an overall increase in household spending across India, but the degree of increase varies by state and region. For instance, West Bengal experienced a 151% increase, while Tamil Nadu saw a 214% rise from 2011-12 to 2022-23.
• Rural vs. Urban Expenditure: The growth in consumption expenditure for rural households (164%) outpaced that of urban households (146%).
• Nutritional Trends: There is a noticeable shift from cereal-dominated diets to more diverse diets that include fruits, dairy products, eggs, fish, and meat.
• Rise of Processed Foods: Spending on ready-to-eat and packaged processed foods has increased across all income levels, with the most significant growth observed among the top 20% of households, especially in urban areas.

Policy Implications Arising from Changing Consumption Patterns:

• The government should prioritize policies that promote the production of a variety of food items, particularly fruits, vegetables, and animal-derived foods.
• Policies aimed at addressing micronutrient deficiencies should be specifically targeted, considering the regional differences in micronutrient intake.
• Agricultural policies need to shift focus beyond cereals, as their consumption is declining. Support measures like Minimum Support Price (MSP) that primarily target cereals will have limited benefits for farmers.

AGRICULTURE INFRASTRUCTURE FUND 

• The Union Cabinet has approved an innovative expansion of the Central Sector Scheme financing under the ‘Agriculture Infrastructure Fund (AIF)’ to enhance its appeal, effectiveness, and inclusivity.

Key Highlights of the Recent AIF Expansion:

• Creation of Viable Farming Assets: The scheme will now permit all eligible beneficiaries to develop infrastructure focused on 'viable projects for establishing community farming assets.'
• Integrated Processing Projects: Integrated primary and secondary processing projects will be added to the list of activities eligible for support under AIF.
• Convergence with PM KUSUM Component-A: There will be a convergence option for Component-A of the PM KUSUM scheme with AIF, benefiting farmers, farmer groups, Farmer Producer Organizations, cooperatives, and panchayats.
• Expanded Credit Guarantee Coverage: In addition to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), NABSanrakshan, a wholly owned subsidiary of NABARD, will now provide AIF credit guarantee coverage for Farmer Producer Organizations (FPOs).

About the Agriculture Infrastructure Fund (AIF):

• AIF is a medium- to long-term debt financing facility aimed at investing in viable projects for post-harvest management infrastructure and community farming assets, supported by interest subvention and credit guarantee provisions. A total of ₹1 Lakh Crore will be made available by banks and financial institutions as loans, offering a 3% annual interest subvention and credit guarantee for loans up to ₹2 Crores under CGTMSE.

Challenges in Agriculture Infrastructure in India:

• Upstream (Production and Initial Processing): There are significant challenges, including insufficient irrigation infrastructure (approximately 51% of net sown area relies on rainfed agriculture), low farm mechanization rates (47% as of 2022), a lack of soil testing facilities, and inadequate cold storage capabilities.
• Downstream (Post-Harvest, Processing, and Distribution): The sector faces limitations such as insufficient food processing facilities, ineffective supply chain management, and a lack of market intelligence, contributing to inefficiencies like the 'cobweb phenomenon.'

BHASKAR INITIATIVE FOR INDIA'S STARTUP ECOSYSTEM

• DPIIT to Introduce the Bharat Startup Knowledge Access Registry (BHASKAR) Initiative for India's Startup Ecosystem.
• Overview of the BHASKAR Initiative: The BHASKAR initiative, launched by the Ministry of Commerce and Industry, aims to create a centralized platform to enhance collaboration among key players in the entrepreneurial ecosystem, including startups and investors.
• Its primary objective is to establish the world’s largest digital registry for stakeholders within the startup ecosystem.
• BHASKAR is part of the Startup India program, which focuses on fostering a robust environment for innovation and encouraging investment.

Eligibility Criteria for Startup Recognition

• An entity will be classified as a startup for up to 10 years from its incorporation date.
• It must be registered as a private limited company, a partnership firm, or a limited liability partnership.
• The startup's turnover should not exceed INR 100 Crores in any previous financial year.

Key Features of BHASKAR

• Networking: BHASKAR will facilitate connections between startups and various stakeholders, promoting seamless interactions across different sectors.
• Centralized Resource Access: By granting startups immediate access to essential tools and knowledge, BHASKAR will support quicker decision-making and more effective scaling.
• Personalized Identification: Each stakeholder will receive a unique BHASKAR ID, allowing for customized interactions and tailored experiences on the platform.
• Improved Discoverability: Advanced search functions will enable users to find relevant resources, collaborators, and opportunities swiftly, leading to faster decision-making and action.
• Promoting India’s Global Brand: The initiative will enhance India’s international reputation as an innovation hub, making cross-border collaborations more accessible for startups and investors.

India's Startup Ecosystem

• India boasts the third-largest startup ecosystem globally, with over 146,000 DPIIT-recognized startups.
• The Department for Promotion of Industry and Internal Trade (DPIIT) is responsible for recognizing businesses as startups.

Other Initiatives for Startups

• Atal Incubation Centers by NITI Aayog.
• MAARG portal (Mentorship, Advisory, Assistance, Resilience, and Growth) under Startup India by DPIIT.
• Fund of Funds for Startups (FFS) Scheme.

DELHI DECLARATION ON CIVIL AVIATION 

The 2nd Asia Pacific Ministerial Conference on Civil Aviation (APMC) has successfully concluded with the unanimous adoption of the Delhi Declaration. This event, which also commemorates the 80th anniversary of the International Civil Aviation Organization (ICAO), was organized by the Ministry of Civil Aviation in collaboration with ICAO.

Key commitments outlined in the Delhi Declaration include:

• Reaffirmation of the Asia and Pacific Ministerial Declaration on Civil Aviation (Beijing): Focus on implementing the State Safety Programme and the Asia/Pacific Seamless Air Navigation Service Plan.
• Aviation Safety and Security: Aim to achieve the aspirational targets set by the Global Aviation Security Plan.
• Gender Equality: Implement necessary measures to enhance gender equality within the aviation sector.
• Environmental Protection in Aviation: Work towards reducing emissions and other environmental impacts associated with aviation.
• Ratification of International Air Law Treaties: Urge Asia and Pacific States to ratify amendments to the Convention on International Civil Aviation.

Civil Aviation Sector in India:

• India has the fastest-growing aviation market globally and is currently the third largest in the domestic segment, with over 800 aircraft and a rapidly expanding network of 157 airports.
• Gender Equality: Women represent 15% of pilots in India, significantly higher than the global average of 5%.
• Aviation Sector Initiatives: Notable schemes include the Regional Connectivity Scheme (RCS) – Ude Desh ka Aam Nagrik (UDAN), Digi Yatra, and the Greenfield Airports Policy of 2008, which emphasizes carbon neutrality.

FINANCIAL INCLUSION AND 10 YEARS OF PMJDY 

News Context

India recently marked the 10th anniversary of the Pradhan Mantri Jan Dhan Yojana (PMJDY), which was launched to enhance financial inclusion across the country.

What is Financial Inclusion?

• Financial inclusion refers to the accessibility of useful and affordable financial products and services for individuals and businesses, including transactions, payments, savings, credit, and insurance, provided responsibly and sustainably (World Bank).
• Goal: The aim is to offer financial services to the large segment of the population that has been previously underserved, unlocking the country's growth potential.

Other Initiatives for Financial Inclusion in India:

• Kisan Credit Card (KCC): This credit scheme, initiated in August 1998, addresses the credit requirements of resource-poor farmers.
• Self-Help Groups (SHGs) and Joint Liability Groups (JLGs): These groups facilitate access to financing without requiring collateral.
• MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act): The wage payments made through banks and post offices support financial inclusion.
• India Post Payment Banks: These banks offer microfinance services, leveraging their proximity to rural communities.

About PMJDY

• Origin: Initiated in August 2014.
• Overview: PMJDY represents the National Mission for Financial Inclusion (NMFI) and is recognized as the largest financial inclusion initiative globally.
• Objective: To provide every Indian access to essential financial services, including Basic Savings Bank Deposit Accounts (BSBDA), remittance, credit, insurance, and pensions in an affordable manner.
• Administering Body: Ministry of Finance (Department of Financial Services).
• Core Principles of the Scheme:
  
  • The framework of PMJDY consists of six key components (see Infographics).
  • Banking the Unbanked: Aims to include all unbanked adults.
    
    • Simplified account opening for BSBDA with minimal documentation, relaxed Know Your Customer (KYC) requirements, e-KYC options, camp mode account openings, and features like zero balance and no fees.
    • Individuals without an existing account can open a BSBDA at any bank branch or through a Business Correspondent (Bank Mitra) outlet.
    • Allows individuals to establish small bank accounts, known as Small Accounts or Chota Khata, without needing legal documents.
  • Securing the Unsecured: Provides indigenous debit cards for cash withdrawals and merchant payments.
    
    • The free accidental insurance coverage on RuPay cards was raised from ₹1 lakh to ₹2 lakhs for PMJDY account holders as of August 28, 2018.
  • Funding the Unfunded: Offers other financial products such as micro-insurance, consumption overdrafts, micropensions, and micro-credit.
    
    • Overdraft facilities of ₹10,000 are available, with an age limit of 65 years for eligibility.
  • Access to Additional Government Schemes: PMJDY accounts qualify for Direct Benefit Transfer (DBT), PM Jeevan Jyoti Bima Yojana (PMJJBY), PM Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), and the MUDRA scheme.

Key Achievements of PMJDY

• Increase in New Accounts: By August 2024, a total of 53.13 crore Jan Dhan accounts were opened, up from 14.72 crore in March 2015.
• Advancing the Digital Economy: 36.14 crore RuPay cards have been issued to PMJDY account holders, promoting cashless transactions and offering built-in accident insurance.
• Closing Financial Gaps in Rural Areas: Nearly all villages are served by banking outlets located within 5 km, as indicated by the Jan Dhan Darshak App.
• Rise in Average Deposits: The average deposit in PMJDY accounts has increased by 4.12 times from 2015 to 2024, with total deposits surpassing ₹2.3 lakh crore.
• Reduction in Zero Balance Accounts: The number of zero-balance accounts decreased to 4.26 crores from 8.52 crores in 2015.

Pradhan Mantri Jan Dhan Yojana (PMJDY)

• Ensures universal access to banking services.
• Establishes a pension scheme for the unorganized sector.
• Introduces a credit guarantee fund.
• Offers 100% money-back assurance.
• Six key components of PMJDY:
  
  • Basic savings bank account with an overdraft facility of ₹10,000 for eligible adults.
  • Financial literacy program.
  • Micro-insurance options.

50 YEARS OF INDIAN MICROFINANCE SECTOR 

• In 1974, India established its first Microfinance Institution (MFI), the Self Employed Women’s Association (SEWA) Bank, which was registered as a cooperative bank.
• The foundation of contemporary MFIs was set by Nobel Laureate Muhammad Yunus with the creation of Grameen Bank in Bangladesh in 1976.
• The Reserve Bank of India (RBI) serves as the regulatory authority for MFIs operating within the country.
• The Malegam Committee, formed by the RBI in 2010, proposed a comprehensive framework to regulate Non-Banking Financial Company – Microfinance Institutions (NBFC-MFIs).

Overview of Microfinance (Microcredit):

• Microfinance provides financial services, such as small loans, to marginalized and impoverished individuals who do not have access to traditional banking systems.
  
  • This includes a variety of services, such as savings accounts, fund transfers, and micro insurance.

Government Initiatives for Microfinance in India:

• SHG-Bank Linkage Program: This initiative aims to increase the loan amounts available to Self-Help Groups (SHGs) and shift their lending focus from non-productive to production-based activities.
• Pradhan Mantri Mudra Yojana (PMMY): This program offers loans up to ₹10 lakh to non-corporate, non-farm small and micro enterprises through commercial banks and Non-Banking Financial Companies (NBFCs).
  
  • Under the MUDRA scheme, loans are classified into three categories: Shishu, Kishore, and Tarun.
  • The Union Budget for 2024 raised the limit for previous beneficiaries who have successfully repaid their loans under the Tarun category from ₹10 lakh to ₹20 lakh.

FINANCIALISATION

Concerns Raised by the Chief Economic Advisor on Excessive Financialisation in India

• Financialisation refers to the growing influence of financial markets, institutions, and elites on economic policies and outcomes.
• As a result, financial intermediaries and technologies are exerting significant impact on daily life.
• This trend involves a shift in investments from traditional physical assets (such as real estate and gold) to financial assets (like mutual funds).

Factors Contributing to Financialisation:

• A rising middle class with increased disposable income.
• Inflation prompting households to seek higher returns than those offered by fixed deposits.
• Government incentives for investment in financial instruments.
• Greater digitisation and financial inclusion.

Concerns Associated with Excessive Financialisation:

• Increased Inequality: Financial income is disproportionately concentrated among the top 1% of the population through equity ownership.
• Economic Distortion: The economy becomes distorted as profits increasingly arise from financial investments rather than from the trade of goods and services. Consequently, stock market movements primarily influence economic performance instead of factors like employment generation or improvements in living standards.
• Rising Household Debt: Stagnating real wages may lead to increased reliance on loans, similar to trends observed in the U.S. economy.
• Negative Policy Impacts: Financialisation may encourage policies that favor predatory lending, promote higher risk-taking, and undermine worker protections.
• Developing nations often experience severe crises when financial market growth and innovations outpace economic growth, as seen during the Asian financial crisis of 1997-98. Therefore, India must pursue a gradual and orderly development of its financial markets.

INDIA'S DAIRY COOPERATIVE SECTOR 

News Context

The Ministry of Cooperation has introduced a Standard Operating Procedure for ‘White Revolution 2.0,’ marking a significant effort to revitalize India’s dairy cooperative sector.

About the White Revolution:

• The "White Revolution" refers to the successful Operation Flood, a dairy development initiative launched in 1970 aimed at achieving self-sufficiency in milk production in India.
• Led by the National Dairy Development Board (NDDB), this program is recognized as the largest dairy development effort in the world.
• The movement was championed by Dr. Verghese Kurien, who is considered the father of India’s White Revolution. November 26th is celebrated as National Milk Day in honor of his birthday.
• Operation Flood unfolded in three phases:
  
  • Phase I (1970-1980): Connected 18 milksheds to four major cities: Delhi, Mumbai, Kolkata, and Chennai.
  • Phase II (1981-1985): Established 43,000 village cooperatives, significantly increasing milk powder production from 22,000 to 140,000 tons.
  • Phase III (1985-1996): Added 30,000 new cooperatives and focused on research and development in areas like animal health.

Achievements of the White Revolution

• Transformed India into the world's leading milk producer, enhancing self-sufficiency.
• Developed a cooperative system that improved the socioeconomic conditions of farmers.
• Established a national milk distribution network for more efficient supply.
• Enhanced the quality of milch animals through crossbreeding programs.
• Reduced price fluctuations by cutting out middlemen.
• Modernized the dairy industry, resulting in the self-reliance of 10 million farmers.

Initiatives to Strengthen the Dairy Sector

• Rashtriya Gokul Mission: Focused on the development and conservation of native bovine breeds.
• National Programme for Dairy Development: Aims to improve the quality of milk and dairy products while increasing organized milk procurement through infrastructure enhancement.
• Livestock Health & Disease Control Programme (LHDCP): Aims to bolster animal health by implementing vaccination programs.
• Animal Husbandry Infrastructure Development Fund: Encourages investments from entrepreneurs and private firms to develop dairy processing and value-added infrastructure.
• Kisan Credit Cards (KCC): Provides livestock and dairy farmers with easier access to institutional credit facilities.

MINERALS SECURITY PARTNERSHIP FINANCE NETWORK

News Context

• India has recently joined the US-led Minerals Security Partnership (MSP) Finance Network to ensure sustainable supply chains for critical minerals.
• India’s involvement in the MSP Finance Network is part of its broader strategy to diversify and secure its supply of critical minerals.
• The initiative also aims to decrease reliance on China, which currently holds a dominant position in global critical mineral supply chains.

About of the Mineral Security Partnership

• Origin: Established in 2022.
• Goal: To promote investments from both the public and private sectors in strategic critical minerals initiatives, aiming to create more secure, varied, and sustainable supply chains for critical minerals.
• Membership: Comprises 14 nations and the European Union, representing more than 50% of the global GDP.
  
  • India became a member in 2023.
• Investment Scope: The Mineral Security Partnership's investments extend beyond projects located in partner countries.

What is the MSP Finance Network?

• This initiative, part of the Minerals Security Partnership, serves as a collaborative financing body to support critical mineral projects worldwide.
• Objectives: To bring together institutions from the Indo-Pacific region and Europe to enhance cooperation, facilitate information sharing, and encourage co-financing among members, aiming to develop diverse, secure, and sustainable supply chains for critical minerals.
  
  • It will also promote sustainable investments in global critical mineral supply chains by leveraging private sector capital for projects related to production, extraction, processing, recycling, and recovery.
• Members: The network consists of 14 countries, including India, along with the European Commission.
  
  • Key members also include the US International Development Finance Corporation (DFC), European Investment Bank (EIB), and Japan International Cooperation Agency (JICA), among others.

What Are Critical Minerals?

• Critical minerals are essential components of modern technologies and face supply chain risks due to limited global production and geopolitical factors.
  
  • Examples include lithium, cobalt, nickel, copper, and rare earth elements.
• The Government of India has identified a list of 30 critical minerals, which includes: Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, Platinum Group Elements (PGE), Phosphorus, Potash, Rare Earth Elements (REE), Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium, and Cadmium.

MIDDLE INCOME TRAP 

News Context

The World Bank has published a report titled "World Development Report 2024: The Middle Income," which indicates that several countries, including India, face the risk of becoming trapped in a middle-income status.

Understanding the Middle-Income Trap

• Middle Income Countries (MIC): The World Bank categorizes economies with a per capita Gross National Income (GNI) ranging from US$ 1,135 to US$ 13,846 as MIC.
  
  • Lower MIC: This includes economies with a per capita GNI of US$ 1,136 to US$ 4,465 (India's per capita GDP is approximately $2,500).
  • Upper MIC: These are economies with a per capita GNI between US$ 4,466 and US$ 13,845.
• Definition of the Middle Income Trap: The term "middle-income trap" was introduced by the World Bank in its 2007 report titled "An East Asian Renaissance: Ideas for Economic Growth." It describes a scenario in which rapidly growing economies become stagnant at middle-income levels and do not advance to high-income status.
• Current Trends: Over the past decade, the likelihood of MICs transitioning to high-income status has diminished. This decline is attributed to factors such as an aging population, rising debt levels, increasing geopolitical tensions and trade conflicts, and the challenges of accelerating economic growth while protecting the environment.

What Makes India Susceptible to the Middle-Income Trap?

• Underutilized Human Capital
  
  • Skills Gap: Approximately 51% of graduates are employable (Economic Survey 2023-24), and only about 2.3% of the workforce has received formal skill training in India.
  • Innovation Deficiency: India’s research and development spending is only 0.64% of GDP, compared to 2.4% in China and 3.47% in the United States.
• Increasing Income Inequality: The top 1% in India possess 22.6% of total income (World Inequality Lab, 2022-23).
  
  • This disparity can lead to reduced tax revenue for the government, fostering social unrest and political instability, which can negatively affect economic growth.
• Stalled Industrialization: India has transitioned directly from an agricultural economy to a services-dominated one, with manufacturing consistently accounting for less than 20% of output and employment.
  
  • Insufficient growth in manufacturing has led to unemployment and hidden unemployment, particularly in the agricultural sector.
• Current Global Challenges:
  
  • Middle-income nations are "trapped between the swiftly evolving advanced technologies of wealthy countries and competition from low-wage economies producing mature products" (IMF).
  • Geopolitical tensions are constraining foreign trade and investment, while populist movements limit government actions.
  • External debt has risen by 6.4% in March 2024 compared to the previous year.
  • Urgent climate action introduces new obstacles to achieving growth without environmental harm.

About Creative Destruction

• The concept of Creative Destruction was introduced by economist Joseph Schumpeter.
• It describes the process of innovation and technological advancement that results in the dismantling of established economic frameworks, including industries, companies, and jobs.
• This destruction facilitates the emergence of new structures, ultimately fostering long-term economic growth and development.

Additional Initiatives to Consider

• Human Capital Development
  
  • Skilled Workforce: Enhance investment in secondary education and vocational training, particularly for women and marginalized groups, to improve social mobility.
    
    • Initiatives like the Atal Innovation Mission (AIM) and the National Intellectual Property Rights (IPR) Policy 2016 will be crucial.
  • Brain Gain: Utilize the expertise of the diaspora and forge partnerships with leading universities, directing research funding toward strategic fields like STEM, health, and energy.
• Market Reforms
  
  • Limit Support for Small Firms: Avoid excessive support for unproductive small businesses, as this can impede growth and misallocate resources.
  • Engage with Global Markets: Welcome foreign investment and integrate into global value chains to allow domestic firms to reach larger markets and access advanced technologies.
    
    • Notable initiatives include the 'Buy (Indian)' and 'Buy and Make (Indian)' defense procurement categories, Production-Linked Incentive (PLI) schemes, and full foreign direct investment (FDI) allowance in the space sector.
  • Enhance Competition: Implement robust antitrust laws and an effective anti-competitive agency to prevent monopolistic practices by established firms and encourage technological advancements.
  • Deepen Capital Markets: Strengthen equity markets to support innovative ventures, particularly in private firms that often experience greater funding challenges than publicly traded companies.
• Utilize Digital Technologies: Embrace digital tools—including the internet, mobile technology, social media, and online information systems—to enhance social mobility and talent development.
  
  • For instance, digital records like those from Aadhar can facilitate credit access and establish financial reliability.
• Address Global Challenges: Middle-income nations should engage in global low-carbon supply chains, contingent on advanced economies moderating their protectionist trade measures.

NATIONAL INDUSTRIAL CORRIDOR DEVELOPMENT PROGRAMME 

News Context

The Union Cabinet has recently given the green light to establish 12 new industrial nodes or cities as part of the National Industrial Corridor Development Programme.

Additional details:

• These projects are strategically situated along six major corridors, spanning across 10 states.
• The new industrial areas will be developed in Khurpia (Uttarakhand), Rajpura-Patiala (Punjab), Dighi (Maharashtra), Palakkad (Kerala), Agra and Prayagraj (Uttar Pradesh), Gaya (Bihar), Zaheerabad (Telangana), Orvakal and Kopparthy (Andhra Pradesh), and Jodhpur-Pali (Rajasthan).
• The new industrial cities will be constructed as Greenfield smart cities that meet global standards, designed to be developed "ahead of demand" with a focus on the 'plug-n-play' and 'walk-to-work' concepts.

 
National Industrial Corridor Development Programme (NICDP)
•    The NICDP was initiated with the establishment of the Delhi-Mumbai Industrial Corridor (DMIC) in 2007.
•    It aims to develop new industrial cities as "Smart Cities," where advanced technologies will be integrated seamlessly across multiple infrastructure sectors.
•    The design of these industrial corridors focuses on boosting growth in the manufacturing sector and encouraging organized urbanization.
•    These corridors will benefit from strong multi-modal connectivity and will be developed in partnership with State Governments.
•    Currently, the National Industrial Corridor Development Corporation (NICDC) manages 11 industrial corridors at various stages of development.
Other Infrastructure Development Initiatives
•    Special Economic Zones (SEZ): Launched in 2000, the SEZ policy establishes duty-free enclaves that do not require import licenses and offer tax and other advantages.
•    National Investment Manufacturing Zones (NIMZ): NIMZs are planned large land areas equipped with the necessary ecosystem to foster world-class manufacturing activities.
•    Industrial Parks: An industrial park is a specifically designated, planned, and zoned area within a city intended for industrial development.
NATIONAL BANK FOR FINANCING INFRASTRUCTURE AND DEVELOPMENT (NABFID) 
•    The Central Government designated NaBFID as a Public Financial Institution (PFI) under the Companies Act, 2013.
•    Only entities created by a Central or State Act, or those with at least 51% of their paid-up share capital owned by the central or state government, can be recognized as a PFI.
National Bank for Financing Infrastructure and Development (NaBFID)
•    NaBFID was established as a Development Financial Institution (DFI) focused on infrastructure, following the National Bank for Financing Infrastructure and Development Act, 2021.
•    Its purpose is to facilitate the growth of long-term, non-recourse infrastructure financing in India, which includes the development of bond and derivatives markets.
PM E-DRIVE SCHEME 
News Context
•    The Ministry of Heavy Industries has announced the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme.
•    The PM E-DRIVE Scheme expands on earlier programs like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME-I) from 2015 and FAME-II from 2019.
•    It also includes the Electric Mobility Promotion Scheme 2024 (EMPS-2024), which was introduced in July 2024 to accelerate the adoption of electric two-wheelers (e-2Ws) and three-wheelers (e-3Ws).
Overview of the PM E-DRIVE Scheme
•    Objective: The scheme aims to speed up the adoption of Electric Vehicles (EVs) by offering upfront purchase incentives and supporting the development of necessary charging infrastructure. Additionally, it seeks to promote EVs to lessen the environmental effects of transportation and enhance air quality.
•    Funding: ₹10,900 crore
•    Duration: 2024-2026
•    Targets:
o    Support for e-2Ws, e-3Ws, and electric buses
o    Installation of 22,100 fast chargers for electric four-wheelers, 1,800 fast chargers for electric buses, and 48,400 fast chargers for e-2Ws and e-3Ws.
•    Nodal Ministry: Ministry of Heavy Industries
o    A Project Implementation and Sanctioning Committee (PISC), led by the Secretary of Heavy Industries, has been established for comprehensive monitoring, sanctioning, and implementation.
Vehicle Categories Eligible for Demand Incentives
•    Electric Two-Wheelers (e-2Ws)
•    Electric Three-Wheelers, including registered e-rickshaws and e-ambulances (electric, plug-in hybrid, and strong hybrid)
•    Electric trucks and other emerging EV types
•    E-carts and L5 (e-3Ws)
•    To be eligible for incentives, vehicles must be registered as "Motor Vehicles" according to the Central Motor Vehicle Rules (CMVR), 1989, and equipped with advanced battery technology, meeting other specified criteria under the scheme.
Guidelines for the Installation and Operation of Electric Vehicle Charging Infrastructure - 2024
•    Objective: The aim is to promote the adoption of electric vehicles (EVs) by ensuring that charging stations are safe, reliable, and easily accessible.
•    Key Features of the 2024 Guidelines:
o    Implementation Mechanism: The Bureau of Energy Efficiency (BEE) will serve as the Central Nodal Authority responsible for overseeing the implementation of these guidelines.
o    Coverage: The guidelines will apply to:
    Public Spaces: Such as commercial complexes, railway stations, petrol stations, airports, and metro stations.
    Private Spaces: Including office buildings, educational institutions, and hospitals.
o    Provision of Public Land for Public Charging Stations (PCS):
    Government and public entities will provide land for the installation of PCS at subsidized rates to both government and private entities.
    This will operate under a revenue-sharing model, allowing the land-owning agency to receive ₹1 per kWh of electricity consumed for charging at the station.
o    Location of PCS:
    By 2030, there should be at least one charging station within each 1 km x 1 km area in urban settings.
    Along highways, charging stations will be established every 20 km for standard EVs and every 100 km for long-range and heavy-duty vehicles such as buses and trucks.
o    Centralized Platform: The BEE, in partnership with State Nodal Agencies (SNAs), will maintain a comprehensive national database of PCS across the country.
o    Additional Provisions:
    All EV supply equipment must adhere to Bureau of Indian Standards (BIS) requirements.
    Charging tariffs will be reduced during solar hours to encourage the use of renewable energy for EV charging.
    The electricity cost at charging stations will be capped at the ‘Average Cost of Supply’ until March 2028.
Key Benefits of PM E-DRIVE:
•    Provides accessible and eco-friendly public transportation options.
•    Stimulates demand for electric vehicles (EVs) by lowering acquisition costs.
•    Enhances facilities for EV testing.
•    Establishes sufficient public charging infrastructure to boost EV user confidence.
Related News: PM-eBus Sewa-Payment Security Mechanism (PSM) Scheme:
•    The Cabinet has sanctioned the PM-eBus Sewa-Payment Security Mechanism (PSM) scheme to facilitate the procurement and operation of electric buses (e-buses) by Public Transport Authorities (PTAs).
•    Key Features of the Scheme:
o    Aims to deploy over 38,000 e-buses from 2024-25 to 2028-29.
o    Supports the operation of these buses for up to 12 years following deployment.
o    Employs a Public-Private Partnership model based on Gross Cost Contract (GCC).
    PTAs do not have to pay the initial bus cost.
    Original Equipment Manufacturers (OEMs) or operators are responsible for procuring and operating e-buses for PTAs, receiving monthly payments.
    A dedicated fund will ensure timely payments to OEMs/operators.
o    The implementation will be overseen by Convergence Energy Services Limited (CESL).
PRIORITY SECTOR LENDING 
The Reserve Bank of India (RBI) published a study titled "Priority Sector Lending (PSL): The Indian Experience." PSL was established in 1972 to ensure that credit flows to sectors that, despite being creditworthy, struggle to obtain financing from formal financial institutions.
Key findings from the study include:
•    Improved Asset Quality: PSL demonstrates a positive correlation with asset quality, as increased PSL growth contributes to the overall enhancement of bank asset quality.
•    Niche Development in Specific PSL Segments: The introduction of Priority Sector Lending Certificates (PSLCs) has led to a rise in the share of PSL within total bank credit, allowing certain banks to focus on specialized PSL segments.
•    Meeting PSL Targets: Lending to the priority sector has consistently surpassed 40% across different periods and categories of banks, influenced by the strategies adopted by individual banks. Public Sector Banks (PSBs) have regularly achieved their agricultural lending target of 18%.
About PSL:
•    Objective: The primary aim is to ensure that marginalized communities and underdeveloped regions gain access to credit.
•    PSL Targets: Banks are required to allocate a specified percentage of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE), whichever is greater, towards PSL. The mandated target varies by bank type: Scheduled Commercial Banks and foreign banks (with 20 or more branches) have a target of 40%, while Regional Rural Banks and Small Finance Banks have a target of 75%. Urban Cooperative Banks must allocate 65% to PSL in FY 2024-25, with an increase to 75% in FY 2025-26.
Categories under Priority Sector:
•    Agriculture
•    Micro, Small and Medium Enterprises
•    Export Credit
•    Education
•    Housing
•    Social Infrastructure
•    Renewable Energy
•    Others
PERPETUAL BONDS 
•    India recently issued its first additional Tier I (AT-1) perpetual bond following regulatory changes aimed at enhancing their attractiveness.
Perpetual bonds are defined as follows:
•    They are financial instruments for raising funds that do not have a maturity date, unlike traditional bonds.
•    Instead, they provide investors with fixed interest payments indefinitely.
•    Investors can retrieve their principal by selling the bond in the secondary market or when the issuer opts to redeem it.
•    These bonds only obligate the issuer to pay interest and do not require repayment of the principal amount.
REGIONAL DISPARITY IN DEVELOPMENT 
News Context
A recent working paper titled "Relative Economic Performance of Indian States: 1960-61 to 2023-24," published by the Economic Advisory Council to the Prime Minister (EAC-PM), sheds light on the disparities in growth among Indian states.
Key Insights from the Working Paper:
•    Disparities in Per Capita Income:
o    The Western and Southern states are leading in economic performance, with Delhi, Telangana, Karnataka, and Haryana showing the highest per capita incomes.
    Notably, Delhi's per capita income is 250.8% of the national average, indicating it is 2.5 times higher than the national figure.
o    West Bengal has experienced a decline, dropping from being 27% above the national average (third highest in 1960-61) to only 83.7% of the national average today.
o    Odisha has seen an improvement in its relative per capita income, increasing from 55.8% in 2000-01 to 88.5% in 2023-24.
•    Southern States' Contribution to GDP:
o    Karnataka, Andhra Pradesh, Telangana, Kerala, and Tamil Nadu collectively contributed over 30% of India's GDP in 2023-24.
o    West Bengal's GDP share has decreased significantly, falling from 10.5% (the third largest) in 1960-61 to just 5.6% in 2023-24.
•    Performance of Maritime States: Overall, maritime states have outperformed their counterparts, with West Bengal being the only exception.
•    Diverging Trends in Punjab and Haryana:
o    Punjab's per capita income has declined from 119.6% of the national average in 1960-61 to 106.7% in 2023-24, while Haryana's has increased from 106.9% to 176.8% during the same period.
    This divergence raises questions about whether Punjab's agricultural focus has led to a form of 'Dutch disease,' impeding its industrial transition.
•    Concerns in Eastern States: Over the decades, West Bengal's economic performance has deteriorated, while Bihar's relative position has stabilized in the last twenty years but still remains significantly behind other states.
Consequences of Regional Development Disparities
•    Security Risks: Areas with significant developmental shortcomings often experience security challenges, such as Naxalism.
•    Political Fragmentation: The demand for new states, like Telangana and the proposed Vidharbha in Maharashtra and Bodoland in Assam, illustrates political division stemming from regional disparities.
•    Migration for Improved Livelihoods: According to the 2011 Census, Uttar Pradesh and Bihar are the primary sources of inter-state migrants, while Maharashtra and Delhi are the top destinations.
•    Reinforcing Inequality: Wealthier regions tend to attract more investments, resulting in faster growth for cities like Chennai and Bangalore compared to others.
•    Environmental Consequences: High levels of industrialization can lead to pollution in various forms, as seen in the air, water, and noise pollution in Delhi.
Efforts to Address Regional Growth Disparities
•    Aspirational Districts Programme (ADP): This initiative seeks to rapidly develop 112 of the most disadvantaged districts across the nation.
•    Aspirational Block Programme (ABP): Aims to enhance governance and improve citizens' quality of life in some of India’s most challenging and underdeveloped blocks (targeting 500 blocks in 27 states and 4 union territories).
•    ‘Vocal For Local’ Initiative Supporting Grassroots Entrepreneurship and Self-Reliance: Introduced under ABP to promote self-sufficiency among residents of Aspirational Blocks, driving them towards sustainable growth and prosperity.
•    Human Resource Development: For instance, the Janani Suraksha Yojana offers greater incentives to beneficiaries and ASHA workers in low-performing states to encourage institutional deliveries.
•    Border Area Development Programme (BADP): Focuses on addressing the unique developmental needs and welfare of individuals residing in remote, hard-to-reach areas near international borders.
STEEL SECTOR IN INDIA 
News Context
Recently, the government has set an ambitious target of achieving 500 million tonnes of steel production by 2034.
About of the Steel Sector in India
•    Steel has long been a leading metal and a key driver of industrialization.
•    It is an alloy composed of iron and carbon, typically containing less than 2% carbon and 1% manganese, along with trace amounts of silicon, phosphorus, sulfur, and oxygen. (When the carbon content is higher, it is referred to as cast iron.)
•    The growth of the steel sector is supported by the domestic availability of raw materials, such as iron ore (where India holds the fifth-largest reserves), affordable labor (notably in Durgapur, West Bengal), and a surge in infrastructure development, along with the expanding automobile and railway industries.
•    Additional Location Factors for the Steel Industry in India include access to water sources (as seen with Tata Steel in Jamshedpur, located near the Subarnarekha River), proximity to markets (like the Bhilai plant in Chhattisgarh), and transportation advantages (such as the Vizag Steel Plant in Andhra Pradesh, close to Visakhapatnam Port).
Government Initiatives to Support the Steel Sector:
•    The National Steel Policy of 2017 aims for a steel production capacity of 300 million tonnes (MT) and a per capita steel consumption of 160 kg by 2030-31.
•    The 'Make in India' initiative, bolstered by the PM Gati-Shakti National Master Plan, focuses on enhancing collaboration with vital sectors like Railways, Defence, and Housing to increase steel consumption.
•    The Production-Linked Incentive (PLI) scheme for specialty steel is designed to boost domestic production of specialty steel and reduce imports by attracting substantial capital investment.
•    Mission Purvodaya seeks to accelerate the development of eastern India—specifically in Odisha, Jharkhand, Chhattisgarh, West Bengal, and Andhra Pradesh—by creating an integrated steel hub in Kolkata.
•    The Steel Import Monitoring System (SIMS) 2.0 has been revamped to better track steel imports and address issues impacting the domestic steel industry.
Related Article: Decarbonizing the Steel Sector
•    The Minister of Steel and Heavy Industries has released a report titled “Greening the Steel Sector in India: Roadmap and Action Plan,” which was developed based on input from 14 task forces established by the Ministry.
•    Green Steel: While the Indian government has yet to provide a formal definition, green steel refers to steel produced without fossil fuels.
•    The CO2 emission intensity of the Indian steel sector has decreased from approximately 3.1 tonnes of CO2 per tonne of crude steel in 2005 to around 2.5 tonnes in 2022.
Decarbonization Initiatives in the Steel Sector:
•    The Perform, Achieve and Trade (PAT) scheme is part of the National Mission for Enhanced Energy Efficiency, incentivizing the steel industry to lower energy consumption.
•    The Steel Scrap Recycling Policy of 2019 establishes a framework to encourage and facilitate the development of metal scrapping centers for the scientific processing and recycling of ferrous scrap.
•    The National Green Hydrogen Mission (NGHM) allocates 30% of the pilot project budget to promote the use of green hydrogen in steel production.
•    The Carbon Credit Trading Scheme (CCTS) aims to mitigate greenhouse gas emissions across various sectors of the Indian economy, including the steel sector, by implementing a carbon credit trading mechanism.
 
SPICED SCHEME 
•    The Union Ministry of Commerce and Industry has recently given its approval to the SPICED Scheme.
About the SPICED Scheme
•    The SPICED Scheme, which stands for ‘Sustainability in Spice Sector through Progressive, Innovative, and Collaborative Interventions for Export Development,’ is an initiative by the Spices Board.
•    Objective: The scheme aims to enhance the cultivation area of cardamom, boost productivity for both small and large cardamom, promote exports, and build capacity and skills among stakeholders.
•    Key Components of the Scheme: The main elements include improving productivity, upgrading post-harvest quality, expanding markets, promoting trade, implementing technology interventions, conducting research, and fostering capacity and skill development.
•    Implementation Period: The scheme will be executed during the remaining tenure of the 15th Finance Commission, from 2023-24 to 2025-26.
About Cardamom
•    Cardamom is grown commercially for its dried fruit (capsules).
•    Small Cardamom:
o    Origin: Native to the evergreen forests of the Western Ghats in South India.
o    Major Producers: Kerala, Karnataka, and Tamil Nadu.
o    Ideal Conditions: Small cardamom thrives in thick, shady areas with acidic loamy soil, at elevations between 600 and 1500 meters, with adequate drainage.
•    Large Cardamom:
o    Geographical Distribution: Found in the Sub-Himalayan regions of North Eastern India, Nepal, and Bhutan.
o    Favorable Conditions: Requires average precipitation of 3000-3500 mm over approximately 200 days, with temperatures ranging from 6 to 30 degrees Celsius.
UNIFIED LENDING INTERFACE (ULI) 
About ULI
•    ULI is a technology platform designed to provide frictionless access to credit.
•    It will allow for a smooth and consent-driven transfer of digital information, including land records from various states, sourced from multiple data service providers to lenders.
•    The platform will feature a unified and standardized Application Programming Interface (API) that supports a 'plug and play' model.
Benefits of ULI
•    It allows borrowers to benefit from a streamlined credit delivery process, ensuring faster turnaround times with minimal documentation.
•    ULI effectively addresses the credit demand gaps in the agriculture and MSME sectors.
VADHVAN PORT 
News Context
Prime Minister Narendra Modi has inaugurated the foundation for Vadhvan Port in Palghar, Maharashtra.
About Vadhvan Port
•    The port is situated close to Dahanu in the Palghar district of Maharashtra.
•    It will become the 13th major port in India.
•    Once completed, it will be the largest container port in the country and one of India’s biggest deep-water ports.
•    The construction of the project will be undertaken by Vadhavan Port Project Limited (VPPL), a special purpose vehicle.
o    VPPL is a collaboration between the Jawaharlal Nehru Port Authority (JNPA) and the Maharashtra Maritime Board (MMB), with respective shares of 74% and 26%.
•    This initiative aims to create a global maritime hub that enhances trade and economic development by facilitating large container vessels and ultra-large cargo ships.
 
India’s Port Sector
•    India ranks as the 16th largest maritime nation globally.
•    The Indian maritime sector is responsible for 95% of the country’s trade by volume and 70% by value.
•    As per the World Bank's Logistics Performance Index, India holds the 22nd position in international shipment efficiency, boasting a quicker turnaround time of 0.9 days compared to the USA, Australia, and Singapore.
•    The Indian port sector consists of two categories: major ports and non-major ports.
o    India currently has 12 major ports (with Vadhvan as the 13th and Galathea as the 14th) and over 200 non-major ports.
•    The Ministry of Ports, Shipping & Waterways oversees the major ports in India, which include:
o    Chennai, Cochin, Deendayal (Kandla), Jawaharlal Nehru (Nhava Sheva), Kolkata, Mormugao, Mumbai, New Mangalore, Paradip, Visakhapatnam, VO Chidambaranar (Tuticorin), and Kamarajar Port Ltd.

Ongoing Challenges in India’s Port Sector
•    Financial Hurdles: Limited access to financing from banks and financial institutions hampers private sector involvement.
•    Regulatory Delays: Slow government approval processes and environmental clearances create significant bottlenecks.
•    Infrastructure and Connectivity Issues: Poor road networks within port areas and insufficient hinterland connectivity, along with a lack of essential infrastructure in remote areas for new projects.
•    Labor and Efficiency Concerns: Major ports suffer from overstaffing, employing unskilled and untrained workers, leading to frequent labor strikes.
•    Operational Shortcomings: Existing port designs are outdated, failing to accommodate rapid cargo turnover and increasing volumes.
•    Challenges in Port Upgradation: The high costs of modernizing older, government-run ports are compounded by resistance to change in state-controlled operations.
•    Dredging Difficulties: The dredging industry in India faces issues like lack of standardization, obsolete equipment, ineffective soil investigation, and a shortage of skilled labor. Dredging is essential globally as sedimentation gradually obstructs waterways.
Initiatives for the Port Sector in India
•    Sagarmala Programme: Initiated in March 2015, this program aims to lower logistics costs for both foreign and domestic trade, streamline container transport, and boost export competitiveness.
•    Maritime Amrit Kaal Vision 2047: This vision, created by the Ministry of Ports, Shipping & Waterways, seeks to develop world-class ports and promote inland water transport, coastal shipping, and a sustainable maritime industry. It includes over 300 actionable initiatives designed to improve ports, shipping, and waterways by 2047, based on extensive consultations and international standards.
•    National Logistics Portal (Marine): An IT platform that enhances efficiency and transparency while reducing costs and delays by linking stakeholders within the logistics sector.
•    Sagar Manthan: A digital platform offering a real-time performance monitoring dashboard for the Ministry and its agencies, allowing for the tracking of projects, key performance indicators (KPIs), and financial metrics.
•    SAGAR-SETU: A mobile application that facilitates easier business operations by providing real-time data on port activities, vessel movements, cargo, containers, finance, and regulatory authority information.
Related News: Galathea Port
The Central Government has officially announced the Galathea Port, utilizing the authority granted by section 5 of the Indian Ports Act, 1908.
•    This port is being developed as an International Container Transshipment Port (ICTP) and will become India’s 14th Major Port.
o    A transshipment port serves as a central hub where cargo is transferred from one ship to another for onward shipping to its ultimate destination.
Importance of ICTP at Galathea Bay in Andaman & Nicobar
•    Economic:
o    The ICTP at Galathea Bay will enhance export-import trade due to its location on a key international shipping route.
o    Currently, around 75% of India's transshipped cargo is processed at foreign ports, such as Colombo, Singapore, and Klang.
o    This project is expected to lead to savings in foreign exchange, attract foreign direct investment, and boost economic activities at other Indian ports.
•    Strategic: The transshipment port's proximity to crucial chokepoints like the Malacca Strait and the East-West shipping route that links Europe, Africa, and Asia is a significant advantage.
 
VOLUNTARY VEHICLE MODERNIZATION PROGRAM 
News Context
The Union Ministry of Road Transport and Highways (MoRTH) has recently introduced the Voluntary Vehicle Modernization Program, also known as the Vehicle Scrapping Policy.
Additional Details
•    The initiative aims to establish a framework for phasing out unfit, polluting vehicles nationwide through a network of Registered Vehicle Scrapping Facilities (RVSFs) and Automated Testing Stations (ATSs).
•    Various commercial and passenger vehicle manufacturers will provide discounts for two and one year, respectively, in exchange for a Scrappage Certificate.
•    The Union Government initially announced the Vehicle Scrapping Policy in 2021 to gradually retire vehicles older than 15 to 20 years, aiming to reduce air pollution, enhance road safety, and stimulate vehicle sales.
Key Features of the Voluntary Vehicle Modernization Program
•    Circular Economy: The program seeks to foster a circular economy in the automotive industry by encouraging recycling and minimizing the use of raw materials.
•    Vehicles that do not pass the fitness test will be scrapped, and their owners will receive a Certificate of Deposit (Scrappage Certificate) as proof, which can be used for discounts on new vehicle purchases.
•    Scrapping Incentives:
o    Manufacturers have introduced various incentives to promote vehicle scrapping:
    Commercial Vehicle Manufacturers: Discounts of up to 3% off the ex-showroom price.
    Passenger Vehicle Manufacturers: Discounts of 1.5% off the ex-showroom price.
o    These discounts are in addition to the scrap value provided by RVSFs and government incentives, such as concessions on Motor Vehicle Tax and waivers on registration fees.
Voluntary Vehicle Modernization Program
Commercial Vehicles (CVs)
•    Vehicle registration is contingent upon the validity of the fitness certificate.
•    CVs must undergo a fitness test every two years for the first eight years, followed by annual tests thereafter.
Private Vehicles (PVs)
•    The initial registration is valid for 15 years.
•    A valid fitness certificate is required for renewing registration after 15 years, with renewals being valid for five years.
Fitness Testing Requirements
•    Fitness testing will be implemented through Automated Testing Stations.
o    Starting April 1, 2023, fitness testing for Heavy Commercial Vehicles will be exclusively conducted at Automated Testing Stations.
o    For all other categories of CVs and PVs, the transition to fitness testing via Automated Testing Stations is scheduled to occur in phases, beginning June 1, 2024.
WINDFALL TAX 
•    The government has lowered the windfall tax on crude oil produced domestically.
Understanding Windfall Tax:
•    A windfall tax is a levy imposed by governments on specific sectors that generate unusually high profits because of favorable economic circumstances.
•    Its goal is to redistribute these excess profits to fund initiatives that benefit society as a whole.
•    Governments defend this tax by arguing that such profits are not only the result of the entity's own actions but also influenced by external conditions.

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