Economic Development (Part 1): August 2025 Current Affairs | Current Affairs & General Knowledge - CLAT PDF Download

GS3/Economy

India’s Herbicide Revolution

Why in News?

The use of crop protection chemicals, commonly known as pesticides, plays a crucial role in agriculture by protecting crops from pests that can cause direct damage or spread diseases. For example, the white-backed plant hopper significantly affects rice crops by both feeding on them and transmitting the Fiji virus, leading to stunted growth, an issue currently impacting farmers in Punjab and Haryana.

Key Takeaways

• Herbicides are experiencing the fastest growth in India’s crop protection market.
• Labour shortages are leading to increased reliance on herbicides.
• There is a shift towards preventive herbicide use among farmers.
• Multinational corporations dominate the herbicide market, but Indian firms are beginning to innovate.

Additional Details

• Market Growth: India’s organised crop protection chemicals market is valued at approximately ₹24,500 crore, with herbicides growing at an annual rate of over 10%, totaling around ₹8,200 crore.
• Labour Shortages: The agricultural sector is facing severe labour shortages, with wages rising from ₹326.2 in 2019 to ₹447.6 in 2024, prompting farmers to increasingly adopt herbicides as labour-saving tools.
• Shifts in Strategy: Farmers are moving towards preventive herbicide strategies, utilizing pre-emergent and early post-emergent herbicides to manage weed growth proactively.
• Innovation: Indian companies like Crystal Crop Protection Ltd (CCPL) are developing new products, such as the Sikosa herbicide, which combines two active ingredients for effective weed control at competitive prices.

In summary, India is undergoing a significant transformation in its agricultural practices, particularly in the herbicide segment, which is responding to labour scarcity and evolving farming methods. The growing emphasis on preventive measures and the push for innovation among Indian firms indicate a promising future for the country's herbicide market, though challenges remain in competing with multinational giants.

GS3/Economy

RBI’s Monetary Policy Review - Balancing Growth Optimism with Inflationary Caution

Why in News?

This article discusses the outcomes of the Reserve Bank of India's (RBI) recent Monetary Policy Committee (MPC) meeting, focusing on its evaluation of inflation trends, GDP growth forecasts, external trade risks, and the anticipated policy direction.

Key Takeaways

• The RBI maintained the repo rate at its current level, adopting a neutral stance.
• Inflation is projected to see an upward trend, with CPI inflation expected to exceed 4% in 2026.
• The RBI has already implemented a total policy rate reduction of 100 basis points since February 2025.

Additional Details

• Inflation Outlook: CPI inflation dropped to around 2% in June 2025 and is projected to rise to 2.5% for the following quarters. The FY26 CPI inflation forecast has been revised down to 3.1% due to statistical effects and vegetable price deflation.
• Vegetable Price Volatility: Following a high inflation rate of 27% in 2024, vegetable price deflation has occurred, averaging -15% recently. The sub-index for vegetables (6% weight in CPI) remains very volatile, with CPI inflation (excluding vegetables) stable between 3-4% during FY25 and Q1 FY26.
• Future Projections: An anticipated reversal of the base effect may cause CPI inflation to surpass 4% in Q4 FY26, with FY27 CPI inflation potentially averaging above 4.5%.
• GDP Outlook: The RBI has retained its GDP growth projection for FY26 at 6.5%, citing factors like interest rate cuts and strong agricultural output.
• Consumption and Employment Concerns: Urban consumption is sluggish due to low income growth and a slowdown in hiring, particularly within the IT sector, where top firms are experiencing stagnant employment.
• Investment Trends: Public capital expenditure saw a significant increase of 52% in Q1 FY26, although private sector investment remains cautious due to economic uncertainties.
• External Risks: Challenges such as US reciprocal tariffs pose risks to India's external sector, with merchandise exports expected to contract while services exports remain strong.
• Current Account and Forex Reserves: India’s current account deficit is manageable at 0.9% of GDP in FY26, with forex reserves comfortably at $689 billion, covering 11 months of imports.
• Policy Outlook: With low real interest rates (around 1%) and ample liquidity, the RBI is likely to pause further rate cuts unless there is a significant downturn due to external shocks.

The RBI’s cautious yet optimistic approach showcases its understanding of the dynamic macroeconomic environment. Ensuring sustained domestic demand, strategic policy adjustments, and vigilance against inflation and external risks are essential for maintaining economic stability in FY26 and beyond.

GS3/Economy

India’s S&P Upgrade: Drivers and the Road Ahead

Why in News?

Recently, S&P Global Ratings upgraded India’s sovereign rating from BBB- to BBB, marking the country’s first upgrade in nearly two decades. This development is significant due to the long hiatus and its extensive implications for India’s economic position, investor confidence, and global credibility.

Key Takeaways

• India’s sovereign rating has improved, reflecting enhanced economic fundamentals.
• The upgrade is expected to lower borrowing costs and improve access to global capital markets.
• India's government has actively pursued higher ratings from global agencies for better economic recognition.

Additional Details

• S&P Global: A leading international credit rating agency that evaluates the creditworthiness of governments and corporations, providing independent assessments of financial risk.
• Importance of Credit Ratings: Credit ratings gauge a country's ability to repay borrowed funds, influencing borrowing costs and investor confidence.
• India’s Economic Reforms: The rating upgrade is supported by improvements in fiscal discipline and economic growth, with efforts to reduce the fiscal deficit from 9.2% of GDP in 2020-21 to a projected 4.4% by 2025-26.
• Inflation Management: S&P praised India’s management of inflation, with the headline rate falling to 1.55% in July 2025, enhancing investor confidence.
• Global Standing: India’s new rating places it alongside countries like Greece and Mexico, indicating that while it has made progress, there are still challenges ahead to reach higher ratings.

The upgrade signals improved financial credibility for India, with immediate benefits like lower borrowing costs and a stronger rupee. However, achieving a further upgrade will require addressing the structural fiscal deficit, which poses a significant challenge in the coming years.

GS3/Economy

Minimum Public Shareholding (MPS)

Why in News?

SEBI has released a consultation paper proposing changes in the norms governing Minimum Public Shareholding (MPS) and Minimum Public Offer (MPO) for listed companies, aiming to enhance market participation and stability.

Key Takeaways

• SEBI's proposal aims to ease share release rules for large companies.
• Companies will have extended timelines to meet the MPS requirements.
• The initial Minimum Public Offer (MPO) for very large companies will be reduced.

Additional Details

• Minimum Public Offer (MPO): Refers to the requirement for a company to sell a minimum number of shares to the public during its Initial Public Offer (IPO). This ensures sufficient share distribution, akin to a shop displaying enough goods for customers.
• Minimum Public Shareholding (MPS): This mandates that at least 25% of a company's shares must be owned by the public, fostering broader ownership and accountability while helping stabilize share prices.
• Proposed Changes: Large companies valued between ₹50,000 and ₹1,00,000 crore will now have up to 10 years to achieve the MPS of 25%, with a milestone of 15% in the first 5 years.

The proposed changes by SEBI are significant as they aim to enhance market stability. A gradual share release prevents price drops, encouraging more companies to list in India and allowing investors to enter the market without sudden shocks.

Consider the following statements:

I. India accounts for a very large portion of all equity option contracts traded globally, thus exhibiting a great boom.

II. India’s stock market has grown rapidly in the recent past, even overtaking Hong Kong’s at some point in time.

III. There is no regulatory body either to warn small investors about the risks of options trading or to act on unregistered financial advisors in this regard.

Which of the statements given above are correct?

• (a) I and II only
• (b) II and III only
• (c) I and III only
• (d) I, II and III

Answer: Option A

GS3/Economy

“Anna-Chakra” Supply Chain Optimisation Tool for PDS

Why in News?

The Union Minister of State for the Ministry of Consumer Affairs, Food and Public Distribution has recently provided significant updates regarding the Anna-Chakra Tool in Parliament.

Key Takeaways

• The Anna-Chakra is a digital tool designed to optimize the supply chain of the Public Distribution System (PDS).
• It has been developed by the World Food Programme (WFP) in collaboration with the Foundation for Innovation and Technology Transfer (IIT-Delhi).
• Currently, the tool is implemented in 30 States and Union Territories, excluding Manipur.
• It supports approximately 4.37 lakh Fair Price Shops and 6,700 warehouses.
• The tool aims to reduce logistics and fuel costs, with annual savings estimated at around ₹250 crore.
• By optimizing routes, the Anna-Chakra can decrease travel distances by 15% to 50%, which in turn cuts CO₂ emissions.

Additional Details

• Public Distribution System (PDS): A government initiative that provides subsidized food grains to low-income households, ensuring food security.
• Historical Context: The PDS originated during the inter-war years and expanded significantly after the food shortages of the 1960s.
• Reforms: The PDS was revamped in 1992, extending its coverage to rural and poverty-stricken areas.
• Structure: The system is managed by the Centre (Food Corporation of India), which is responsible for procurement, storage, transportation, and bulk allocation of food grains to families through Fair Price Shops.
• The PDS serves about 800 million people through over 5 lakh Fair Price Shops.
• Items Distributed: Includes wheat, rice, sugar, and kerosene; some states also distribute pulses and oils.
• Significance: The PDS plays a crucial role in shielding poor households from fluctuations in food prices and economic distress.

In summary, the Anna-Chakra tool represents a significant advancement in optimizing the efficiency of the Public Distribution System, promoting sustainability and economic savings while ensuring food security for the population.

UPSC 2008 Question:

Consider the following statements:

• 1. Regarding the procurement of food grains, the Government of India follows a procurement target rather than an open-ended procurement policy.
• 2. The Government of India announces minimum support prices only for cereals.
• 3. For distribution under the Targeted Public Distribution System (TPDS), wheat and rice are issued by the Government of India at uniform Central issue prices to the States/Union Territories.

Which of the statements given above is/are correct?

• Options: (a) 1 and 2 (b) 2 only (c) 1 and 3* (d) 3 only

Answer: Option C

GS3/Economy

GST Reforms to Unlock Long-Term Revenue Gains for India

Why in News?

S&P Global Ratings has pointed out that the proposed two-tier Goods and Services Tax (GST) structure could reduce the effective taxation rate while enhancing long-term fiscal revenues for India. The central government is preparing to discuss this proposal with states in an upcoming meeting, aiming to simplify GST by reducing the existing slabs to just 5% and 18%, along with a special 40% rate for select luxury or sin goods. This reform is anticipated to streamline compliance, reduce complexity, and potentially boost government revenues over time, although the short-term impact on collections and affordability is still uncertain.

Key Takeaways

• The proposed GST reform aims to transition from the current four-rate system to two main slabs, plus a special rate for sin goods.
• The reform is expected to be implemented by the end of 2025, simplifying compliance and reducing indirect tax distortions.
• S&P Global Ratings supports the reform, suggesting it will not harm fiscal revenues despite a potential reduction in tax rates.

Additional Details

• Proposed Two-Slab System: The central government intends to move from the current GST structure of four rates (5%, 12%, 18%, and 28%) to a simplified two-slab system. This change is expected to decrease classification disputes and litigation, as well as eliminate duty inversion.
• Declining Effective GST Rates: Since its introduction in 2017, the weighted average GST rate has decreased from 14.4% to 11.6%, according to an RBI study from 2019. This trend is likely to continue under the new structure.
• S&P emphasizes that while tax rates may be lower, the simplicity of implementation and better accounting practices could lead to improved revenue collection in the long run.
• Despite potential revenue losses for state governments estimated at ₹7,000-9,000 crore annually, these losses may be counterbalanced by stronger GDP growth, which would increase both direct and indirect tax revenues.

In summary, the proposed GST reforms are positioned as a strategic move to simplify the tax structure, enhance compliance, and ultimately support the fiscal health of the government. While challenges may arise in the short term, the long-term outlook suggests potential for increased revenue generation and economic stability.

GS3/Economy

With Tariffs, India’s Growth Rate Needs a Careful Watch

Source: The Hindu

Why in News?

Recent trade measures implemented by the United States have posed significant challenges to India’s economic growth and external account stability. Effective August 7, the U.S. has imposed a 25% reciprocal tariff on Indian exports, followed by an additional 25% penal levy set to take effect from August 29, 2025, due to India's ongoing crude oil imports from Russia. These developments have serious implications for India’s trade balance, current account deficit (CAD), GDP growth, and strategic trade positioning.

Key Takeaways

• India enjoys a merchandise trade surplus with the U.S. amounting to $41.18 billion in 2024–25.
• U.S. tariffs are targeting both Indian exports and crude oil imports, affecting export competitiveness.
• Impact estimates show a potential decline in GDP growth and an increase in current account deficit due to tariffs.

Additional Details

• Reciprocal Tariff Impact: Assuming an import elasticity of -1, India’s exports to the U.S. could significantly decline, which would widen the trade deficit by 0.56% of GDP, potentially increasing it to 7.84%.
• GDP Growth Impact: The growth rate is estimated to drop by 0.6 percentage points, from 6.5% to 5.9% due to the new tariffs.
• Current Account Deficit: CAD may rise from 0.6% to 1.15%, indicating mounting economic pressure on India.
• Mitigating Factors: New trade agreements with the U.K. and ongoing negotiations with the EU may help offset some export losses. Additionally, the depreciation of the rupee could enhance export competitiveness.

The imposition of these tariffs reflects a strategic use of trade policy as a coercive geopolitical tool. Although India can potentially manage immediate impacts through negotiations and currency adjustments, the ongoing nature of such measures poses a threat to global trade stability. It is crucial for India to defend its trade interests while seeking to strengthen its export base and reduce dependency on single markets or energy sources.

GS3/Economy

Assets Under Management (AUM)

Why in News?

India's Mutual Fund (MF) industry has experienced remarkable growth, with Assets Under Management (AUM) reaching ₹74.40 lakh crore as of June 2025. This marks a sevenfold increase over the past decade, reflecting significant progress in the financial sector.

Key Takeaways

• Exponential growth in AUM indicates a healthy investment environment.
• Professional fund management plays a crucial role in investment strategies.

Additional Details

• Definition of AUM: AUM refers to the total market value of financial assets (stocks, bonds, etc.) managed by an investment firm on behalf of its clients.
• Growth Drivers:Key factors contributing to the increase in AUM include:
  • Net investor inflows and redemptions
  • Market performance
  • Dividend reinvestments
• Importance of AUM:AUM is significant as it:
  • Indicates the size of the fund and investor confidence.
  • Reflects the performance and popularity of fund managers.
  • Enhances liquidity and facilitates better portfolio diversification.
  • Affects management fees and establishes minimum investment limits.
• What is a Mutual Fund? A mutual fund is an investment vehicle that pools money from multiple investors to create a diversified portfolio, managed by professional fund managers to optimize risk and return.
• Unit-Based Investment: Investors buy units of the fund; the value of each unit is known as the Net Asset Value (NAV), which fluctuates based on market conditions.

Classification of Mutual Funds

• Based on Asset Class:
  • Equity Funds: Invest primarily in stocks and can include large-cap, mid-cap, and small-cap funds.
  • Debt Funds: Focus on bonds and fixed-income instruments.
  • Hybrid Funds: Combine equity and debt investments for balanced risk-return.
• Based on Investment Objective:
  • Growth Funds: Target long-term capital appreciation.
  • Income Funds: Seek regular income through dividends and bond investments.
  • Liquid Funds: Invest in short-term debt instruments, offering low risk and high liquidity.
  • Tax-saving Funds (Equity Linked Savings Scheme): Provide tax benefits under Section 80C with a focus on equity.
  • Pension Funds: Designed for retirement savings with a long-term return focus.
• Based on Structure:
  • Open-ended Funds: Allow investors to enter or exit at any time, thus providing high liquidity.
  • Closed-ended Funds: Have a fixed maturity period; investments can only be made during the initial offer.
  • Interval Funds: Permit purchases and redemptions at specified intervals only.

In conclusion, the surge in India's Mutual Fund AUM signifies a robust investment climate and highlights the growing participation of investors in the financial market, facilitated by professional fund management and diverse investment options.

Consider the following statements:

• I. India accounts for a very large portion of all equity option contracts traded globally, thus exhibiting a great boom.
• II. India’s stock market has grown rapidly in the recent past, even overtaking Hong Kong’s at some point in time.
• III. There is no regulatory body either to warn small investors about the risks of options trading or to act on unregistered financial advisors in this regard.

Which of the statements given above are correct?

• (a) I and II only
• (b) II and III only
• (c) I and III only
• (d) I, II and III

GS3/Economy

PM Modi’s 12th Independence Day Speech - A Roadmap to Viksit Bharat

Why in News?

On August 15, Prime Minister (PM) Narendra Modi delivered his 12th Independence Day speech from the Red Fort. This address was notable for its visionary scope, bold reforms, and a long-term roadmap aimed at transforming India into a Viksit Bharat by 2047. The focus areas included next-generation reforms in the digital economy, energy security, national security, healthcare, taxation, and employment generation.

Key Takeaways

• Digital Sovereignty: Emphasis on India's digital leadership through initiatives like the Unified Payment Interface (UPI).
• Energy Security: Reduction of "No-Go" zones for hydrocarbon exploration and the launch of the National Deepwater Exploration Mission.
• Healthcare Innovation: India aims to lead the world in biopharma innovations and vaccine production.
• Tax Reforms: Introduction of a new Income Tax Bill and GST 2.0 to simplify compliance.
• Employment Generation: Launch of the PM Viksit Bharat Rozgar Yojana to empower youth.

Additional Details

• Digital India Stack: The UPI system accounts for 50% of global real-time digital transactions, showcasing India's digital prowess.
• Energy Exploration Initiatives: The National Deepwater Exploration Mission aims to unlock significant oil and gas reserves through innovative drilling techniques.
• National Critical Minerals Mission: India is exploring over 1,200 sites for essential minerals like lithium and cobalt, ensuring independence in technology production.
• Healthcare Achievements: India is recognized as the "pharmacy of the world," producing 60% of global vaccines.
• New Income Tax Bill: This bill simplifies the tax structure, reducing complexity by abolishing redundant sections.
• Employment Initiatives: The PM Viksit Bharat Rozgar Yojana aims to create jobs for approximately 3.5 crore young Indians.

The roadmap outlined in the Independence Day speech signifies India's commitment to transition from an ancient civilization to a modern power by integrating its rich heritage with progressive reforms. The goal is to achieve Viksit Bharat by 2047, positioning India as a technological, economic, and strategic powerhouse on the global stage.

GS3/Economy

Udyam Sakhi Portal

Why in News?

The Udyam Sakhi Portal has been launched by the Ministry of Micro, Small and Medium Enterprises (MSME) to support women entrepreneurs in starting, building, and expanding their businesses across India. This initiative aims to empower women and promote self-reliance.

Key Takeaways

• The Udyam Sakhi Portal was introduced in March 2018 by the Ministry of MSME.
• It provides essential information on financial schemes, policies, and programs tailored for women entrepreneurs.
• The portal serves as a network to foster entrepreneurship and develop business models for affordable products and services.
• Over 4,500 women entrepreneurs have registered on the portal so far.

Additional Details

• Entrepreneurship Support: The portal offers various services including entrepreneurship learning tools, incubation facilities, and training programs for fundraising.
• Mentorship Opportunities: Women entrepreneurs can access mentors and participate in one-on-one investor meetings to enhance their business prospects.
• The portal also provides facilities for market surveys and resources for learning and development through education and technical assistance.

In summary, the Udyam Sakhi Portal is a significant initiative aimed at empowering women entrepreneurs in India by providing them with resources, support, and opportunities to thrive in the business landscape.

GS3/Economy

Is the New Income Tax Law More Accessible?

Why in News?

In August 2025, the Parliament enacted the Income Tax Bill, 2025, which has significantly simplified the previous legislation by reducing its chapters and sections, aiming to enhance taxpayer experience while addressing concerns over privacy and surveillance.

Key Takeaways

• The new Income Tax Bill has 23 chapters and 536 sections, down from 47 chapters and 819 sections.
• It introduces extended timelines for updating tax returns and aims to reduce taxpayer harassment.
• However, it expands the powers of tax officials regarding access to digital information.

Additional Details

• Need for Overhauling the 1961 Income Tax Framework: The previous Income Tax Act had become outdated, leading to excessive complexity and potential for harassment by officials.
• Legislative Journey: The initial draft was introduced in February 2025 and underwent extensive review by a Select Committee. The final version was passed on August 11, 2025, to avoid confusion.
• Key Reforms: Tax rates and slabs remain unchanged, but provisions for Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) have been clarified.
• Taxpayer-Friendly Features: The law allows updates to returns within four years without penalties and reduces the assessment reopening period to five years.
• Concerns Over Surveillance: Enhanced powers for tax officials include the ability to demand access to personal digital data, raising privacy issues.

The Income Tax Bill, 2025 represents a significant reform in simplifying India's tax laws. While it introduces more taxpayer-friendly provisions, the increased surveillance capabilities for tax authorities create a potential conflict between efficiency and individual privacy rights. The challenge lies in ensuring that these reforms do not undermine public trust and constitutional protections.

GS3/Economy

Inoperative PM Jan Dhan Accounts: A Concern

Why in News?

The Government has informed Parliament that 23% of the total 56.04 crore PM Jan Dhan Yojana accounts are currently inoperative. This raises concerns regarding financial inclusion and the effectiveness of the scheme.

Key Takeaways

• 23% of PM Jan Dhan Yojana accounts are inoperative.
• Scheme aims to enhance financial inclusion for the unbanked population.

About Pradhan Mantri Jan Dhan Yojana (PMJDY)

• Launch: Introduced in 2014 as the world's largest financial inclusion mission.
• Objective: To provide banking services to the unbanked, insurance to the unsecured, and credit to the unfunded.
• Accounts: Offers Basic Savings Bank Deposit (BSBD) accounts with zero balance, minimal paperwork, and e-KYC facility.
• Benefits: Includes a RuPay debit card with accident insurance, overdraft facility, micro-insurance, and pension coverage.

Key Features

• Access: Universal banking through bank branches and Business Correspondents.
• Overdraft: Up to ₹10,000 for eligible account holders.
• Insurance: Accident cover of ₹1 lakh (₹2 lakh for new accounts opened post-2018); life cover of ₹30,000 for accounts opened between August 2014–January 2015.
• Interoperability: Enabled via RuPay cards and Aadhaar-linked platforms.
• Post-2018 Expansion: Coverage now includes all unbanked adults, with enhanced overdraft limits and increased eligibility age from 60 to 65 years.
• Direct Benefit Transfers: Strengthened subsidy delivery through the JAM Trinity (Jan Dhan–Aadhaar–Mobile).

Did You Know?

• According to the Reserve Bank of India (RBI) guidelines (2009), an account is considered dormant if no transaction occurs for over two years.

UPSC Insight

Pradhan Mantri Jan-Dhan Yojana was launched to:

• (a) provide housing loans to poor people at cheaper interest rates
• (b) promote women’s Self-Help Groups in backward areas
• (c) promote financial inclusion in the country*
• (d) provide financial help to marginalized communities

This information highlights the importance of the PMJDY scheme in enhancing financial literacy and access to banking services in India.

GS3/Economy

Pradhan Mantri Viksit Bharat Rozgar Yojana

Why in News?

The Prime Minister has recently introduced the Pradhan Mantri Viksit Bharat Rozgar Yojana, aimed at enhancing formal job creation through direct financial incentives for both employees and employers.

Key Takeaways

• The scheme aims to create over 3.5 crore jobs in two years.
• It offers direct cash incentives to first-time employees and employers.

Additional Details

• Part A – Support to First-Time Employees:
  • This component targets first-time employees registered with the EPFO.
  • Eligible employees will receive a one-month EPF wage up to Rs 15,000 in two installments.
  • Employees with a salary of up to Rs 1 lakh can qualify for these incentives.
  • The first installment is paid after 6 months of service, while the second installment is given after 12 months of service and completion of a financial literacy program.
  • A portion of the incentive will be deposited in a savings account, promoting the habit of saving.
• Part B – Incentives for Employers:
  • This segment encourages the creation of additional jobs across all sectors, particularly in manufacturing.
  • Employers can receive incentives of up to Rs 3000 per month for each new employee with a salary of up to Rs 1 lakh, sustained for at least six months.
  • Incentives in the manufacturing sector may extend into the 3rd and 4th years as well.
• Incentive Payment Mechanism:
  • Payments to first-time employees under Part A will be made via Direct Benefit Transfer (DBT) using the Aadhar Bridge Payment System (ABPS).
  • Employers will receive payments directly into their PAN-linked accounts.

This scheme is expected to formalize the workforce in the country, enhancing social security coverage for millions of young individuals.

GS3/Economy

What is PM SVANidhi Yojana?

Why in News?

The Prime Minister has recently praised the achievements of the PM SVANidhi Yojana, emphasizing its role in empowering street vendors across the nation.

Key Takeaways

• Launched on June 1, 2020, by the Ministry of Housing and Urban Affairs (MoHUA).
• Aimed at providing affordable working capital loans to street vendors affected by the Covid-19 pandemic.
• Implementation managed by the Small Industries Development Bank of India (SIDBI).

Additional Details

• Loan Amount: Vendors can access a working capital loan of up to Rs. 10,000, to be repaid in monthly installments over a tenure of one year.
• Interest Subsidy: On timely or early repayment, an interest subsidy of 7% per annum is credited to beneficiaries' accounts through Direct Benefit Transfer on a quarterly basis.
• No penalties are imposed for early repayment of the loan, encouraging financial discipline.
• The scheme promotes digital transactions by offering cashback incentives of up to Rs. 100 per month.
• Vendors can also benefit from the escalation of their credit limit upon timely repayments.
• Usage of Loan: The loan can be used for various purposes related to street vending, such as purchasing raw materials, paying rent, or acquiring equipment.

Eligibility Criteria

• Street vendors must possess a Certificate of Vending or Identity Card issued by Urban Local Bodies (ULBs).
• Vendors identified in the survey but without a Certificate of Vending/Identity Card are also eligible.
• Vendors who were not included in the ULB-led identification survey or have started vending afterward can apply if they have a Letter of Recommendation (LoR) from the ULB/Town Vending Committee (TVC).
• Street vendors from peri-urban or rural areas vending within ULB limits can also qualify with the appropriate LoR.

The PM SVANidhi Yojana is a significant initiative aimed at supporting street vendors, aiding them in resuming their businesses and achieving self-reliance in the aftermath of the pandemic.

GS3/Economy

Globally Important Agricultural Heritage Systems (GIAHS) Programme

Why in News?

The Minister of State for Agriculture and Farmers Welfare recently informed the Lok Sabha that India is home to three Globally Important Agricultural Heritage Systems (GIAHS).

Key Takeaways

• The GIAHS Programme is initiated by the Food and Agriculture Organization (FAO).
• Launched in 2002 at the World Summit for Sustainable Development, the programme addresses threats to traditional agricultural systems.
• India's GIAHS includes the Koraput region, Kuttanad system, and Saffron Park of Kashmir.

Additional Details

• GIAHS Programme: This initiative was created to respond to global challenges like climate change, community displacements, and biodiversity loss. It aims to balance conservation with socioeconomic development, helping farmers adapt sustainably.
• Multistakeholder Approach: The programme promotes the value of traditional agricultural knowledge and supports markets for agricultural products, agrotourism, and other opportunities.
• Koraput Region (Odisha): Known for its subsistence paddy cultivation on highland slopes, this area boasts a vast diversity of paddy landraces and rich genetic resources of medicinal plants.
• Kuttanad System (Kerala): A distinctive below-sea-level farming landscape featuring wetlands for paddy cultivation, garden lands for coconut and food crops, and inland water bodies for fishing and shell collection.
• Saffron Park of Kashmir: This region represents a rich agro-pastoral system with traditional saffron cultivation, intercropping, and organic farming practices, enhancing local biodiversity and soil health.

The GIAHS Programme not only aims to protect these unique agricultural heritage systems but also strives to enhance the livelihoods of the communities that depend on them. By fostering sustainable practices and promoting local knowledge, it plays a crucial role in preserving biodiversity and supporting farmers.

GS3/Economy

Debunking the Myth of Job Creation

Why in News?

On July 1, 2025, the government introduced the Employment Linked Incentive (ELI) Scheme with a substantial allocation of ₹99,446 crore. This initiative aims to tackle persistent employment challenges in India, but its design raises important concerns regarding its effectiveness in addressing existing inequalities in the labour market.

Key Takeaways

• The ELI Scheme adopts an employer-centric approach, incentivizing job creation primarily in the manufacturing sector.
• There is a significant mismatch between the skills of graduates and available job opportunities, with only 8.25% securing jobs that match their qualifications.
• The scheme largely excludes the informal sector, which employs 90% of the workforce.

Additional Details

• Employer-Centric Design: The ELI provides fiscal incentives to employers, but this approach fails to address the structural skill mismatches in the labour market. With only 4.9% of Indian youth receiving formal vocational training, the potential for real productivity gains is limited.
• Exclusion of the Informal Sector: By relying on Employee's Provident Fund Organisation registration, the scheme effectively sidelines informal workers who lack social security and formal contracts, thus entrenching a dual labour market.
• Risks of Disguised Unemployment: Without proper safeguards, the scheme may normalize situations where individuals are technically employed but contribute little to productivity, especially in agriculture and informal services.
• Marginalization of Women and Youth: The focus on manufacturing underestimates the importance of the agriculture and services sectors, which together employ nearly 70% of the workforce. This bias could further marginalize vulnerable groups.

In conclusion, while the ELI Scheme signifies a political commitment to reducing unemployment, its current framework risks exacerbating structural inequalities. A more effective strategy should prioritize skill development and education reforms, ensuring that workers are equipped to meet industry demands and access quality jobs. True job creation requires addressing the root causes of underemployment and recognizing the diverse realities of India’s labour market.

GS3/Economy

India Semiconductor Mission (ISM)

Why in News?

The Union Cabinet has recently approved four new projects under the India Semiconductor Mission (ISM), reinforcing India's commitment to establishing a robust semiconductor and display manufacturing ecosystem.

Key Takeaways

• The ISM was launched in 2021 and is managed by the Ministry of Electronics and Information Technology (MeitY).
• The mission aims to develop a sustainable semiconductor and display manufacturing ecosystem in India.

Additional Details

• Scope: The mission supports the entire semiconductor value chain, which includes chip design, fabrication, assembly, testing, packaging, and display manufacturing.
• Administrative Role: The ISM is responsible for receiving and evaluating applications for schemes under the Semicon India Programme and engaging with industry stakeholders to attract investments.
• Key Components:
  • Semiconductor Fabs Scheme: Provides fiscal support for establishing semiconductor wafer fabrication plants in India.
  • Display Fabs Scheme: Offers incentives for the manufacturing of TFT LCD and AMOLED display panels.
  • Compound Semiconductors/Silicon Photonics/Sensors Fab & ATMP/OSAT Scheme: Supports advanced semiconductor technologies and packaging facilities.
  • Design Linked Incentive (DLI) Scheme: Offers incentives and infrastructure support for IC, SoC, chipset, and semiconductor-linked design projects, administered by CDAC, including support for startups.
  • Modernisation of Semiconductor Laboratory (SCL), Mohali: Upgrading the laboratory as a brownfield fab.
  • Comprehensive Coverage: The mission encompasses manufacturing, research and development (R&D), packaging, and design support.

In summary, the India Semiconductor Mission is a strategic initiative aimed at enhancing India’s capabilities in semiconductor and display manufacturing, which is crucial for meeting the growing demand for electronic components.

GS3/Economy

Trumponomics: Defying the Doom Predictions—for Now

Why in News?

Six months after US President Donald Trump’s significant tariff increases, the anticipated economic downturn has not occurred. The S&P 500 index has risen by approximately 10% since "Liberation Day," and although the dollar initially weakened, it has recently regained strength. Despite imposing tariffs on nearly all major trading partners, consumer prices in the US have not shown a substantial increase. This raises an important question: will these tariffs result in a one-time price hike or lead to ongoing inflationary pressures?

Key Takeaways

• The US has implemented significant tariffs on nearly all trading partners, including 15% on the EU, Japan, and South Korea, and 35-50% on Canada, Switzerland, Brazil, and India.
• Current average tariffs could range between 15-20%, which is inherently inflationary, even if some costs are absorbed by retailers.
• The US economy has shown resilience due to a strong foundation of over 2% GDP growth, near full employment, and low inflation prior to the tariffs.
• Stock markets have been buoyed by growth in the artificial intelligence sector, positively impacting tech company earnings.

Additional Details

• Tariff Impact: Importers increased shipments before tariffs took effect, meaning many goods currently available are not subject to the higher duties yet.
• Trump's frequent waivers and deadline extensions have postponed the full effects of the tariffs.
• Warning signs in the labor market indicate potential weaknesses, with non-farm payrolls rising only by 73,000 in July and previous months being revised downward.
• Despite stable inflation rates so far, higher import costs are expected to influence prices, potentially reducing consumer demand and hindering job growth.

In conclusion, while the US economy appears stable for the moment, the future remains uncertain as inflationary pressures from tariffs may begin to manifest, particularly with the upcoming holiday season. This could significantly affect voter sentiment before the midterm elections, leading to broader economic implications as the Federal Reserve navigates these challenges.

GS3/Economy

New Income Tax Bill, 2025

Why in News?

Parliament has recently passed the Income-tax Bill, 2025, which replaces the outdated Income Tax Act of 1961. This new legislation aims to simplify tax laws by eliminating redundant provisions and archaic language, and it will become effective on April 1, 2026.

Key Takeaways

• The total number of sections has been reduced from 819 to 536.
• The number of chapters has decreased from 47 to 23.
• The word count has been cut from 5.12 lakh to 2.6 lakh, with the inclusion of 39 tables and 40 formulas for enhanced clarity.
• A new concept of a “tax year” has been introduced, defined as from April 1 to March 31.

Additional Details

• Refunds: The bill restores the ability to claim refunds on belated returns by removing previous restrictions.
• Tax Collected at Source (TCS) Clarification: There will be nil TCS for Liberalised Remittance Scheme (LRS) remittances intended for educational purposes funded by financial institutions.
• Corporate Tax: The bill corrects errors related to inter-corporate dividend deduction for companies choosing concessional tax rates.
• Alternate Minimum Tax (AMT) Alignment: Aligns AMT provisions for Limited Liability Partnerships (LLPs) with current rates.
• Nil-Tax Deducted at Source (TDS) Certificate: Allows taxpayers without tax liability to obtain a nil-TDS certificate.
• Transfer Pricing: Clarifies transfer pricing provisions, including the set-off of losses and alignment with Section 79 concerning “beneficial ownership.”
• Non-Profit Organisation (NPO) Benefit: Expands exemptions to include 5% of total donations, extending beyond just anonymous donations.
• House Property Income: Clarifies a 30% standard deduction applicable after municipal taxes.
• Search Definition: Retains the definition of “virtual digital space” to encompass cloud storage, email, and social media accounts.
• Data Handling: A Standard Operating Procedure (SOP) will be issued for managing personal digital data seized during searches.

This significant overhaul of the income tax framework is expected to enhance compliance, reduce litigation, and improve overall taxpayer experience.

UPSC 2025

Consider the following statements:

Statement I: In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax.

Statement II: In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961.

Which one of the following is correct in respect of the above statements?

• (a) Both Statement I and Statement II are correct and Statement II explains Statement I
• (b) Both Statement I and Statement II are correct but Statement II does not explain Statement I
• (c) Statement I is correct but Statement II is not correct
• (d) Statement I is not correct but Statement II is correct