Conquer Mains 2025

Indian Economy – Important Topics

India now 4th largest economy
Ø NITI Aayog CEO has stated that India now has become 4th
largest economy overtaking Japan
Ø India is behind US, China and Germany
Ø As per IMF data, India’s per capita income has doubled from
$1438 in 2013-14 to $2880 in 2025
Ø Important data
o As per the IMF projections, India’s GDP in 2025 was likely
to be $4,187.03 billion, which will be marginally higher
than the GDP of Japan at $4,186.43 billion.
o The per capita GDP in India was $2,711 in 2024 in current
dollar terms,
o %age of workers with formal employment contracts —
23.9% in India in 2023, compared to 91% in Japan
o The gross enrolment rate in college-level education, after
completion of secondary school, was 32.7% in India in
2022, compared to close to 65% and 75% in Japan and
Poland, respectively.
o The life expectancy of a person was 72 years for an
average Indian in 2023, compared to 84 years in Japan
o India’s IMR remains at 24.5, while Japan records less than
five such deaths per 1,000 births.
o The Human Development Index (HDI) for India’s is 0.685
and that of Japan is 0.9

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
Gender Budgeting - Catalyst for inclusion
Ø Facts
o As a percentage of total allocation, it has increased from
5.4% in 2014-15 to 8.86% in FY26
o The outlays in absolute terms have seen an increase of
4.9x from ₹ 0.98 lakh Cr (2014-15) to ₹ 4.49 lakh Cr in
FY26
o It includes three part structure
§ Part A (100% allocation for women)
§ Part B (at least 30% allocation for women)
§ Part C (Up to 30% allocation for women)
o The top 3 ministries allocating high allocations are -
Ministry of Women and Child Development; Dept of Rural
Development, Dept of Food and Public Distribution
o The Gender Budgeting Knowledge Hub has also been set
up in 2025 to centralise the coordination
Ø Positive trends of gender budgeting
o The gender budgeting has been institutionalised with the
Gender Budgeting Cells being set up at centre and state
levels
o The Gender Budgeting is mandatory included in the union
budget strengthening the whole exercise
o Many states have adopted the gender budgeting exercise
o The allocations under this have steadily increased
o This has led to designing and implementation of new
women centric schemes
Ø The Gender Budgeting has led to transformative reforms which
has helped address deep rooted structural inequalities and
promote inclusive development

CAG Report - Municipal corporations - Resource spending gap 42%

in ULBs
Ø The 74th Constitutional amendment was implemented from
1993 and it’s been over 30 years. 18 states are yet to

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 implement the law in spirit. The CAG has published a
compendium of 393 ULBs across these 18 states
o As per the 74th CAA, the states were to devolve 18
functions - urban planning, regulation of land use and
construction, water supply, planning for economic and
social development, public health etc - to the ULBs
§ On an average 17 out of 18 functions were
devolved
§ Urban planning and fire services were the least
devolved functions by law. The report also mentions
that the states have devolved the functions and
provided complete autonomy in 4 of the functions.
Ø By 2050, 50% of India will be residing in cities. Hence the ULBs
need to be provided autonomy so that they will be able to the
needed infrastructure and also be involved in critical policy
making
Ø As per CAG report
o The Urban Local Bodies (ULBs) in 18 states catering to 241
mn face 42% gap between their resources and
expenditure
o Only about 29% of their resources go towards
programmatic and development work
o 32% of their total revenue was their own and the rest
came from union and state governments
o They were able to realize just 56% of their property tax
demand
o They also faced issue of 37% vacancy against the
sanctioned staff strength
o ULBs in 16 states had no or limited power over
recruitment

Ø RBI Report on Municipal Corporation Revenues

o As per the recent report of RBI on municipal
corporations

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § Municipal corporations generate 50% of their
revenue from their own taxes, fees and user
charges
§ 25% comes from revenue grants provided by the
central and state governments
§ Remaining portion comes from rental incomes,
compensations and investment income
o The borrowings of municipal corporations (MCs) from the
financial institutions has increased by 363% in the last 5
years
§ From ₹ 2886 Cr in FY20 to ₹ 13364 Cr in FY24 (has
increased 1.9% of their receipts to 5.2% of their
receipts respectively)
o The municipal bond market is yet to mature and as of
FY24, the value of such bonds outstanding was ₹ 4204 Cr
which is just 0.09% of total corporate bonds outstanding
§ Most of these bonds are privately placed which will
limit the investor base
§ There is a need to improve the finances and also get
the credit ratings done to promote investor
confidence and broaden the market participation
o The revenue capacity of municipal corporations (MCs) is
not adequate for meeting the revenue expenditures and
this is affecting their functional and financial autonomy
o They need to boost their own resources by through tax
reforms, rationalize user charges, strengthen collection
mechanism
o They need to improve the property tax collections, water
taxes and for this RBI has suggested using the Geographic
Information Systems (GIS) mapping and digital payment
systems to enhance the collections
o Municipal Bonds
§ A municipal bond or muni bond is a debt instrument
issued by municipal corporations or associated
bodies.

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 • These are non-convertible debt instruments
• These are issued as a private placement or
through a public offer
§ There are primarily two types of municipal bonds
in India
• General Obligation Bonds
o These bonds are used to raise finances
for general projects such as improving
the infrastructure of a region.
o Repayment of the bonds (including
interest) is done by generating revenue
from other sources such as imposing
taxes
• Revenue Bonds
o These bonds are used to raise
finance/funding for specific projects,
such as the construction of a particular
infrastructure project.
o Repayment of such bonds (principal and
accrued interest) shall be paid through
revenues generated from the above
projects.
§ The Securities and Exchange Board of India (SEBI)
revised the guidelines related to the issuance of
municipal bonds in 2015
§ SEBI - As of 30th April 2024, 11 municipal
corporations have raised just ₹ 2683.9 Cr or
approximately $320 mn (the local administration in
USA has raised over $4 tn through such bonds)
§ Issues with these bonds
• These securities do not enjoy any kind of
sovereign guarantees
• The credit rating agencies to provide a credit
rating must get access to their balance sheet
and income statement
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o This data is either not available and if
available is provided with a lag of one or
two years
• These are also issued at very high price - a face
value of ₹ 10 lakh - which makes them in
accessible to many of the investors
• Though many of them are listed on the stock
market, these have very low volume of trade

Income Tax Act 1961 – New Act to replace old one

Ø The cabinet has approved the New Income Tax Bill
o It will bring in sweeping changes to the income tax (I-T)
regulation and make it simple and concise
Ø This new law will replace the old Income Tax act 1961
o The existing law has 51 chapters and about 5,20,000
words
§ The finance minister in July budget had made this
announcement
o The UPA govt had proposed Direct Taxes Code (DTC)
bill 2010 which lapsed with the dissolution of the 15th
Lok Sabha. This was followed by Mr Arun Jaitley as
finance minister junked the idea of DTC in the budget
speech 2015-16
Ø Need for simplification
o There are 6 slabs and these are too many
o In case of corporate taxes, the govt has already
changed the rates in 2019 and made them available for
the companies opting for lower exemptions
o The importance is that fewer exemptions will reduce
the scope of differing interpretations and hence
disputes
o The govt in the last 10 years has taken multiple steps
to reduce and resolve the tax disputes such as
§ Vivad se Vishwas scheme in 2020

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 • Around 1.46 tax disputes amounting to ₹
99756 Cr have been settled under this
§ The govt has also increased the monetary value
to file appeals before ITAT, HC and SC
o The tax law is long and complex.
§ The govt has to keep making changes or
amendments to ensure the law meets
international standards and to address the tax
avoidance measures used by taxpayers
§ For the taxpayers this increases the challenge as
they are supposed understand such provisions in
addition to the circulars, notifications, rules
issued by the I-T department
Ø The reforms needed were on 4 areas
o Litigation reduction
o Language simplification
o Compliance reduction
o Obsolete provisions
Ø Proposed Features (These can change based on the
committee recommendations)
o The new law will come into force from 1st April 2026
o Compared to 823 pages now, it has been proposed to
be reduced to 622 pages
o It has all provisions of the 1961 act ensuring continuity
and has eliminated the redundant sections and clauses
o Concept of tax year has been introduced
§ Will end the confusion between ‘assessment
year’ and ‘previous year’
o Simplification
§ The Tax Deducted at Source (TDS) compliance
• All the TDS related sections have been
brought under a single clause with simple
tables for ease of understanding
§ Deductions from salaries, such as standard
deduction, gratuity and leave encashment have
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 been tabulated in the new bill in one place
instead of being scattered over different sections
o The bill is free from explanations or provisos making it
easier for taxpayers to read and understand

Switzerland Withdraws MFN Status for India

Ø Switzerland has decided to suspend the MFN (Most Favoured
Nation) treatment for India under the 30 year old double
taxation avoidance agreement (DTAA)
Ø It has cited the SC judgement in this regard.
o The Supreme Court (SC) in its earlier order has stated that
it does not get automatically triggered as long as notified
under the income tax act
Ø They have stated that para 5 of the protocol to India -
Switzerland Double Taxation Avoidance Agreement (IN-CH
DTA) is not shared by the Indian side and in the absence of
reciprocity the unilateral application has been waived off from
1st January 2025
Ø Basics
o DTAA (Double Taxation Avoidance Agreement)
§ India has signed DTAA agreements with over 100
countries
o The DTAA with Switzerland was signed in 1994 and
revised in 2000 and 2010
o Subsequently India signed tax treaties with Colombia and
Lithuania that levied lower taxes on certain incomes than
extended to OECD member nations

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § With these countries becoming members of OECD,
Switzerland interpreted that the same 5% rate
would be applicable to their investments as well
§ However Supreme Court (SC) in the order stated
that the Most Favoured Nation (MFN) clause under
DTAA does not get automatically triggered and that
the centre needed to notify it under IT Act 1961
o India – Switzerland
§ $9.95 bn worth of investments have been made in
India from Switzerland
§ The Swiss investments in stocks in India amounted
to $35 bn in 2021
§ Over 330 Swiss companies have invested in India
§ Over 180 Indian companies have invested in Swiss
companies
Ø Background
o In 2014 Steria India Pvt Ltd argued that its payments to its
French parent company should be taxed under the India -
UK DTAA invoking MFN clause
o In 2021 Nestle filed a writ petition in Delhi HC (High
Court) challenging the income tax notice issued on 4th
January 2021
§ There was a withholding tax of 10% imposed
§ It should have been 5% under India - Switzerland
DTAA
§ The HC held the rule in favour of Nestle
§ The revenue department challenged this in Supreme
Court (SC) and this was combined with 13 other
petitions
§ The SC ruled in favour of the department in October
2023
• Switzerland argued that India signed bilateral
treaties with Lithuania and Columbia (the
treaty prescribed lower taxes) and these two
became members of OECD group and this
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 meant that the same rates were applicable to
Switzerland
o SC ruled that the MFN clause doesn’t
automatically kick in and requires
notification by the government
o As per the MFN clause, If India signs a
deal with a third OECD country with a
lower rate than same would apply for
Switzerland too
• It also ruled that benefits apply only if the third
country was OECD member at the time of the
treaty’s signing

Ø Impact
o The issue is expected to have larger ramifications for the
Indian companies which have invested in Switzerland
o Other countries such as France and Netherlands may
consider taking such measures
o DTAA agreement cannot be enforced unless notified
under section 90 of the Income Tax Act
§ This meant that the companies such as Nestle and
other Swiss, Dutch, French MNCs operating in India
would be facing higher taxes on dividends
o The Indian companies will face higher withholding tax in
Switzerland
§ Indian companies have enjoyed a reduced tax rate
of 5% and with the discontinuation the tax rate on
the dividends will increase to 10%
o More countries may follow this trend which will hurt
Indian MNCs
o Increase the complexities of navigating international tax
treaties in an evolving landscape

Time for higher taxes? - Income and Wealth Taxes

Ø What’s in news
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o Thomas Piketty has called for release of detailed income
tax data
§ He has recommended imposing higher income tax
on the rich in India which could be used to fund
higher expenditure on health and education
§ The poverty can be reduced much faster by reducing
inequality
§ Recommendation is 2% on the wealth of 167
billionaires
• The tax collections will be around 0.5% of GDP
§ India should aim for a tax revenue of 25% of GDP in
the next decade. For this there’s a need to focus on
the progressive taxes, wealth taxes on the super-
rich
§ Thomas Piketty and co-authors have argued in
favour of imposing a 2% annual tax on net wealth
exceeding ₹ 10 Cr and a 33% inheritance tax on
estates in excess of ₹ 10 Cr
§ A large part of India suffers for lack of access to
quality education, health, nutrition and sanitation
facilities. All of this will manifest into inequality of
opportunity. This also reduced the productivity and
incomes are a function of productivity
Ø Basics
o Billionaires taxes were earlier introduced by the European
countries in the 20th century to finance their welfare state
and public services
§ Countries such as Sweden, France, Germany,
Norway, Netherlands introduced the wealth tax
• The Canton of Basel City in Switzerland
introduced it in 1840
• Netherlands – 1892
• Sweden – 1911
• The number of countries imposing such tax has
gone down from 12 (1990) to 4 (2017)
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § The countries have withdrawn it because of capital
flight, difficulty in assessing wealth accurately and
shift in the economic policy towards less
redistributive models
o India has tax revenue to GDP of 17% (centre and states)
whereas it is over 30% in case of rich countries
§ The tax to GDP ratio for FY25 is 11.78% (direct taxes
– 7% ). With the taxes collected by the states it will
be reaching around 17%
§ Around 90 mn (6.5% of the population) are
taxpayers. Only about 15 mn are effective taxpayers
• Around half of 90 mn pay nil returns and rest
pay negligible tax
o Wealth Tax
§ India imposed wealth tax in 1957
§ Based on the recommendations of Chelliah
Committee (1993) and Kelkar Committee (2002), the
wealth tax was abolished in the union budget 2016-
17
• This was replaced with an additional surcharge
of 2% on those with taxable annual income of
over ₹ 1 Cr
• It argued that it was burdensome without
substantial collections.
§ Globally the experts have stated that wealth tax is
not feasible. Rather than this it is better to impose
taxes on flows of money and not stock of wealth
• The value of the assets cannot be correctly
evaluated
o Direct taxes – Concepts by economists
§ Milton Friedman has stated that “inequality is
inevitable and may be even beneficial” “social
levelling leads to economic stagnation by removing
incentives for the hard work”

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § Arthur Laffer also recommended that the tax cuts
can increase tax collections if the initial tax rate is
above its optimal level
• Reagan in 1981 brought down the highest
marginal tax rate in USA from 70% to 50%
• Donald Trump reduced corporate tax rate from
35% to 21%
§ Kuznets inverted U Curve hypothesis
• The inequality increases and then decreases
after reaching certain level of economic
development
• Piketty showed that the inequality in USA has
increased since 1980s
Ø Arguments in favour of higher taxes on rich
o The govt cannot impose higher taxes on the middle class
until it can show that the rich are paying more taxes
o China imposed a 25% tax when it was in a similar phase
o If inequality is not reduced the country is struck in the low
productivity trap
o The taxes account for 17% of GDP which means that the
country is not collecting sufficient taxes
o The income share of top 10% should be around 30 to 40%
and not 55 to 60%
Ø Arguments against
o Such taxes entail high administrative costs, lead to
excessive litigation and tend to raise very little revenue
§ In 1985 V P Singh abolished the estate duty or
inheritance tax. He stated that the administrative
cost of this was higher and govt was able to collect
just ₹ 20 Cr from this
§ In 2015, wealth tax was abolished by FM Arun
Jaitley. The total collection under this in 2013-14
was ₹ 1008 Cr. The argument was that collection
cost or administrative costs was higher
o May lead to capital flight
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § After Norway increased wealth tax, many HNIs (High
Net worth Individuals) left the country
§ In 2023, around 5100 Indian millionaires have
relocated abroad
o 248 mn people have escaped multidimensional poverty
between 2103 and 2023
§ The Household Consumption Expenditure Survey
(HCES), shows that the Gini coefficient has reduced
between 2011-12 to 2022-23 for rural and urban
areas. In simple terms consumption inequality has
reduced
o The reduction in poverty and not inequality is the litmus
test of inclusive growth
o Should the higher taxes be imposed on wealth or income.
As the wealth is generally held in the form of shares

Base Erosion and Profit Shifting (BEPS) and Global Minimum Tax
Ø Base erosion refers to strategies that help an entity do business
in India without having any business establishment in India.
Ø The multinational enterprises (MNEs) use the loopholes and
transfer the profits from one tax jurisdiction (high tax rates) to
another tax jurisdiction (with very low or negligible or no taxes)
Ø A firm comes across two jurisdictions-source country and
resident country. It transfers the profits from one country to
another country and uses all the loopholes that are present and
end up paying very negligible tax or no tax at all (double non-
taxation or double tax avoidance). As per the conservative
estimates of OECD (Organization for Economic Co-operation
and Development) there is an annual loss of around $ 100 bn –
$240 bn per annum of corporate taxes.
Ø This will have a large impact on especially the developing
countries who are heavily dependent on corporate taxes
Ø So, OECD in collaboration of G20 is pushing for various reforms
that have to be implemented so as to reduce such losses and
one of the prominent areas is tax challenges. In October 2015,

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 OECD has come out with a vision report which outlines 15
actions
o Action 1 - Addressing the tax challenges of the digital
economy
o Action 2 - Neutralizing the Effects of Hybrid Mismatch
Arrangements
o Action 3 – Designing Effective Controlled Foreign
Company Rules
o Action 4 - Limiting Base Erosion Involving Interest
Deductions and Other Financial Payments
o Action 5 – Countering Harmful Tax Practices More
Effectively, Taking into Account Transparency and
Substance
o Action 6 – Preventing the Granting of Treaty Benefits in
Inappropriate Circumstances
o Action 7 – Preventing the Artificial Avoidance
of Permanent Establishment Status
o Action 8 to 10 – Aligning Transfer Pricing Outcomes with
Value Creation
o Action 11 – Measuring and Monitoring BEPS
o Action 12 – Mandatory Disclosure Rules
o Action 13 – Guidance on Transfer Pricing
Documentation and Country-by-Country Reporting
o Action 14 – Making Dispute Resolution Mechanisms More
Effective
o Action 15 – Developing a Multilateral Instrument to
Modify Bilateral Tax Treaties

Ø Global Minimum Tax

o It has two pillars
§ Pillar 1
• Applicable to multinational enterprises (MNEs)
with a global turnover of 20 bn euros
• Certain part of the profits will be allocated to
countries where the sales are taking place
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § Pillar 2
• Countries have agreed for minimum effective
tax rate of 15%
• Companies with global turnover above 750 mn
euros will be covered under this

Digital Public Infrastructure (DPI)

Ø DPI refers to set of digital networks which are used to provide
digital services to the citizens
Ø India’s DPI (also referred to as India Stack) has enabled
o Access to online, paperless, and cashless digital access to
various public and private services
o Has helped in rapid completion of transactions which
originate in remote areas which generally take a longer
time period
o It has helped in providing citizen centric and transparent
governance services
o It has improved financial inclusion and benefitted larger
economy by increasing formalization and widening of tax
base
Ø Other examples of DPIs include
o Singapore - PhilSys
o UAE - Pass
o Brazil’s Pix
o Türkiye - FAST etc
Ø The India Stack consists of three interconnected layers
o The Identity Layer (Aadhaar)
§ It has played an important role in providing digital
identity to every Indian
§ Before the implementation of Aadhaar, just one out
of 25 citizens had any form of formal identification,
and just one in four had bank accounts.
o The Payments Layer (it includes Unified Payments
Interface, Aadhaar Payments Bridge, Aadhaar Enabled
Payment Service)
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § This has helped in increasing the cashless payments
(both in value and volume terms)
§ The pandemic has catalysed adoption of UPI and
this has continued even after the pandemic as it is
easy to conduct such transactions
o The Data Layer
§ This provides for a standardized, consent-driven,
and interoperable platform. Using this the
individuals, businesses, and government agencies
can securely share and access data for various
purposes, such as financial services, e-governance,
education, healthcare, and more.
§ This has transformed the authentication ecosystem
in India and facilitated the KYC process, reducing
the cost of conducting e-KYC from ₹1000 to ₹5.
§ The data governance layer focuses on ensuring
ownership and control over the user data to its
rightful owners.
§ Account Aggregator
• According to the IMF’s Working Paper -
‘Stacking Up the Benefits: Lessons from India’s
Digital Journey’
o As of March 2023, roughly 4.5 mn
individuals and companies have
benefited from easier access to financial
services through the Account Aggregator
since it was first launched in August
2021.
§ Other platforms under this are
• The Digital Document Execution (DDE)
platform
o Set up by National E- Governance
Services Limited (NeSL)
o It is a mode for paperless execution and
storage of financial contracts
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o This will result in superior enforcement,
thereby enhancing the ‘Ease of Doing
Business’
• Information Utility set up under the IBC
o It completes the loan documentation of a
beneficiary
o Some of the factors have helped in growth of India stack
§ The demonetisation led to surge in use of non-cash
forms of payment followed by the covid
§ 100% FDI in the telecom sector under automatic
route. This has led to large investments in this sector
and with higher investments of various other
companies in the domestic market has increased
access to the services, increased the data usage
Ø Since 2023, India has signed agreements with Armenia, Antigua
and Barbados, Sierra Leone etc to offer the DPI infrastructure
to them
Ø The value addition by the DPIs (Digital Public Infrastructure)
could potentially increase to 2.9% to 4.2% of GDP by 2030
(from current levels of 0.9% in 2022)
Ø The DPI will pave the way for India becoming $8 tn by 2030 and
also help in achieving $1 tn digital economy
Ø Challenges in adopting DPI
o Lack of interconnectedness among various stakeholders
o Lack of real time data availability
o Limited language expansion for users to access in
preferred
o Future partnerships beyond govt services

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
New National Cooperative Policy
Ø Importance of cooperatives
o These operate across various sectors such as Agriculture,
Credit and Banking, Housing and Women’s Welfare
o These are instrumental in promoting financial inclusion by
providing credit to farmers and small entrepreneurs who
find it difficult to get access to other institutional credit
o These play a crucial role in rural development,
empowering local communities and reducing socio-
economic disparities.
Ø Other reforms to promote cooperatives
o Over 67000 PACS are being computerised
o New Multipurpose cooperative societies have been
registered
o The decentralized grain storage program has set up
godowns in 11 PACS and many more are lined up
o National Cooperative database created
o Reforms in Urban Cooperative Banks
o Tribhuvan Das Sahkari University
o White Revolution 2.0
Ø The cooperatives history dates back to pre-independence
o Cooperative Credit Societies Act which was enacted in
1904
o The NDA government in 2002, modified the Multi-State
Cooperative Societies Act and released the National
Cooperative Policy
o In 2011, 97th CA was passed providing constitutional
status to cooperative societies
Ø The cooperatives account for
o 14% of total agricultural credit
o 25% of fertiliser production
o 31% of sugar production
o 85% of liquid milk distribution
o 15% of total storage capacity

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
Ø The policy has been framed by panel which was headed by
Suresh Prabhu. This will be replacing the 23 year old policy
Ø The new policy aims to
o Triple sector’s contribution to Indian economy over the
next 10 years
o To increase the number of cooperatives by 30% from
current level of 830000
o Encourage branding of organic, agricultural and dairy
products under Bharat Brand
o Recommended an apex cooperative bank to enhance
collaboration among various tiers of cooperative financial
institutions to provide affordable credit
§ The cooperative societies are under the oversight of
the registrar of cooperatives
§ The national bank will harness their true potential
and provide support, capacity building,
professionalism and business opportunities
o Recommeded forming a task force to examine challenges
faced by cooperatives credit institutions and suggest
measures to address them
o As of now 300 mn people are covered under
cooperatives, the target is to increase it to 500 mn
Ø Other measures undertaken earlier
o The government set up the new Ministry of Cooperation 4
years ago (2021). Earlier this was present as department
under ministry of agriculture (since 1979)
§ Since its establishment, there have been multiple
reforms undertaken by the ministry
§ Multi State Cooperative Societies Act 2023 - this
introduced three new cooperative bodies including
the National Cooperative Exports Limited (NCEL)
§ Two lakh New Multi-Purpose Primary Agricultural
Credit Societies have been targeted
§ New National Cooperative University has been
announced

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
White Revolution 2.0
Ø White revolution was launched in 1970
Ø The union minister has rolled out White Revolution 2.0
o It is aimed at empowering women and creating job
opportunities in rural areas as well as reducing the
malnourishment with increased offtake of milk
o The govt aims to increase the milk procurement by dairy
cooperative societies by 50% over the next 5 years
Ø The White Revolution 2.0 revolves around the cooperative
societies
o The cooperatives have procured 660 lakh kg of milk per
day in 23-24
o The govt wants to increase this to 1007 lakh kg per day by
28-29
o Increase the milk production by 50% in the next 5 years
o This can be done by increasing the access to dairy farmers
in uncovered areas and increasing the share of dairy
cooperatives in the organized sector
Ø The White Revolution 2.0 will focus on 4 key areas
o Empowering women farmers
o Enhancing local milk production
o Strengthening dairy infrastructure
o Boosting dairy exports
Ø To achieve the objective the procurement of milk is to increase
by 9% per annum against the current level of 6% growth. This is
expected to be done through expanding coverage of dairy
cooperatives and deepening the reach of dairy cooperatives
o The govt has set up a target of establishing 1 lakh dairy
cooperatives (56000 will be newly established and 44000
will be strengthened in terms of better procurement)
Ø White Revolution 2.0 is being launched with financial assistance
to 1,000 Multipurpose Primary Agricultural Credit Cooperative
Societies (MPACSs)
o Each of these MPACS is provided an assistance of ₹
40,000/- per MPACS

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o This will be used for initiating dairy activities from the
resources of National Dairy Development Board (NDDB).

e-Commerce Exports
Ø Factors driving e-commerce export
o Expanding data connectivity, increased penetration of
smartphones, a rise in availability and use of digital
wallets and safer online payments, increased customers'
income levels and growing familiarity with digital
shopping platforms have provided an impetus to India’s e-
commerce exports
o Government initiatives, such as Make in India and
Aatmanirbhar Bharat, have enhanced support and focus
on MSMEs and e-commerce exports, which has paved the
way for more domestic sellers going global.
o These initiatives have helped the businesses to thrive and
expand their reach. Recognising the relevance of e-
commerce exports, the Foreign Trade Policy (FTP) 2023
has laid down provisions for fostering cross-border digital
trade and promoting e-commerce and other emerging
export channels. These include
§ The Niryat Bandhu scheme
§ Financial assistance to e-commerce exporters under
the Market Access Initiative (MAI) scheme
§ Export and packing credit
§ e-commerce export hubs
§ Dak Niryat Kendra
§ Electronic Bank Realisation Certificate (e-BRC)
§ The GST regime offers the benefit of zero-rated
supplies
§ e-commerce exporters are eligible for GST refunds
o The central government’s E-Commerce Export Hub (ECEH)
initiative aims to revolutionise India’s cross-border e-
commerce.

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § These hubs connect SMEs, artisans, and One District
One Product (ODOP) producers to global markets,
boosting logistics efficiency and economic inclusion
in Tier 2 and Tier 3 cities.
o On the Government e-Marketplace (GeM), revised pricing
slabs now cap charges at ₹3 lakh for orders above ₹10
crore, significantly reducing transaction costs.
Ø e-com policies - India, USA spar over business models
o American negotiators are demanding level playing field
for the e-commerce companies on lines of Indian
companies
o The demand is to allow the US companies to
operate on inventory based model (where the
platforms will own and sell the products directly)
o The foreign e-commerce companies are allowed to
operate on marketplace model in India to connect
sellers and buyers
o India on its part says that its policies ensure fair
competition and protect small businesses, protecting
consumer interests
o The govt is considering introducing a model limiting
full access to the inventory based e-commerce
model with India allowing these companies to
participate under certain conditions and maintaining
regulatory control
o The e-commerce sector in India is regulated under
multiple laws
o FDI policy
o Consumer Protection Act 2019
o Information Technology Act 2000
o Competition Commission Act 2002
o The inventory model of e-commerce is permitted for
domestic players only

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o In this model the entity owns and stores inventory
of sellers in the warehouse and sells products
directly to consumers
o The foreign companies are allowed to operate under the
marketplace model where 100% FDI is allowed under
automatic route (they cannot own or sell inventory)
o There are also demands for allowing the inventory
model as this would be a gamechanger for MSMEs
o The MSMEs would enter the export market without
compliance and regulatory hurdles associated with
e-commerce exports and this would help the aim of
Indian govt to achieve the target of $200 bn e-
commerce exports from India by 2030

Global Value Chains (GVCs) & India

• The production and supply of the product can be concentrated
within a single geographic region i.e. one country (can be
present even within one company).
• Value chains will become global when their component
activities i.e. manufacturing of the various components are
geographically dispersed across borders to multiple country
locations
o According to the World Bank, “a GVC is the series of
stages in the production of a product or service for sale to
consumers. Each stage adds value, and at least two stages
are in different countries”.
o For example, a car is assembled in China, with parts from
Germany, Italy, and Malaysia and exported to the USA is a
GVC.
• Importance
o Promotes manufacturing
o Diversification and promotion of exports
o Contribution to employment
o Promotes investment
o Growth and GDP
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o According to World Bank’s World Development Report
2020 (WDR 20, contingent upon deeper reforms in
developing countries and policy continuity in industrial
economies) the GVCs can help reduce poverty, and
continue to augment growth and employment.
o Cross-country estimates suggest that a 1% increase in
GVC participation can boost per-capita income by more
than 1%
• Experience in India
o India’s GVC participation has steadily risen through 1990s
and 2000s. Then came the global financial crisis which
reduced it
o After the crisis, the participation in the GVCs have been
rising and the recent reforms such as PLI, Districts as
Export Hubs are further expected to contribute to it
o For majority period of time India was involved in higher
level of forward participation and this led to low value
addition in the exports. In recent times the trend has
changed and it is getting more and more involved in the
backward GVC participation. This is evident in the fact
that pure backward GVC participation has increased from
13.8% in 2019 to 16.3% in 2022
§ Sectors such as food and beverages, electrical and
optical equipment etc have witnessed remarkable
backward GVC participation
§ GVC Participation are of two types
• Backward GVC Participation - Here the
components are imports and the goods are
produced in India
• Forward GVC Participation - Here the inputs
are exported from India to a this country
where product is manufactured
• The latest research by Professor Veeramani
and Dhir shows that greater backward GVC
participation results in higher absolute levels
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 of gross exports, domestic value-added, and
employment
o However, India’s GVC participation (GVC-related trade as
per cent of gross trade is at 40.3% in 2022). It is lower in
comparison to large economies such as
§ The USA - 43.7%
§ UK - 47.8%
§ Japan - 46.6%
§ South Korea - 56.2%
§ Malaysia - 60%
o Way Forward
§ There is a need to
• Develop quality trade infrastructure
• Integrate micro, small and medium enterprises
in the GVC network
• Simplify procedures for entry and exit of small
businesses
• Work towards trade facilitation measures
§ It is also worth noting that India’s GVC expansion is
taking place in an era that is not particularly
conducive to GVCs. Countries worldwide are
embracing protectionism. Despite this there is scope
for collective country blocs to trade intensively with
one another

China Plus One Strategy

Ø The MNCs from other countries have invested in setting up
manufacturing units in China for the past thirty years and this
has contributed to China becoming the world’s factory. The
phrase “China Plus One Strategy” was introduced in 2013. It is
also known as ‘Plus One’
o The strategy encourages the firms/companies/enterprises
to expand their operations outside of China
Ø The companies in the last five years have adopted China Plus
One Strategy because of
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o Rising tensions between US and China
o The pandemic led disruptions in supply chains exposed
the consequences of over reliance on China
o The strategy will help in reducing the risk exposure to
China
o The cost of doing business in China has been increasing
§ For example China in November 2021, introduced
Personal Information Protection Law. Under this the
companies now must get permission whenever they
want to send user information abroad. This has
increased the compliance costs apart from creating
uncertainty for the companies (as the companies
violating the provision will attract heavy fines)
§ The wages also have risen in China
Ø How India has been attracting investments
o The government has announced multiple reforms such as
§ Production Linked Incentives (PLI) to attract
investment in various industries
§ The tax breaks announced by the government
§ Labour reforms
o India has a large domestic consumer market (for example,
the demand for smartphones in India has been on the
rise)
Ø Issues/Concerns
o It will take time to reduce reliance on China
o Even in countries (Mexico, Vietnam etc) which have
benefited from trade diversion by USA from China, have
seen FDI in their countries from China rising

Research and Development

Ø India’s Gross Expenditure on Research and Development
(GERD) has increased from ₹ 60196 Cr in FY11 to ₹ 1.27 lakh CR
in FY21
o The R&D is low and sectorally concentrated

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o Historically India has been focused on basic research and
not advanced research, as a reason the outcomes of the
R&D lack practical applications needed for private sector
investment
Ø However, the GERD as a percentage of GDP is 0.64%. The
investment in R&D mainly comes from the government
entities. In contrast to this the private sector investment in
most developed and emerging economies is over 50%
Ø Innovation Landscape: major milestones - The Global
Innovation Report 2024 has noted that India needs to enhance
human capital, improve access to finance and reduce the
regulatory burden
o There is a more than two-fold increase in patent filing
since 2014-15, and patent grants have increased by more
than 17-fold from 2014-15
o There is a marked growth in resident filings which
increased to more than 50% of the total filings in FY24
from 28% in FY15.
o The patent filings by domestic educational institutes have
tripled from 7405 in 2021-22 to 23306 in FY24.
o Patent filings by women applicants increased from 15 in
FY15 to 5183 in FY24.
o India’s rank in the Global Innovation Index has improved
to 39th in 2024 among 133 economies from 81st position
in 2015. It ranks 1st among the 38 lower middle-income
group economies and 1st among the 10 economies in
Central and Southern Asia
o India holds the 7th position in intangible asset intensity,
surpassing the growth rates of many high-income
economies and matching the intangible investment
intensity of Germany and Japan (as a share of GDP)
o India holds 4th position in Science and Technology Cluster
Ranking 2024 by WIPO with 4 cities among the world’s
top 100 science and technology clusters

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
Ø R&D Incentives in other countries
o China
§ The strategy is characterised by a significant
government intervention
§ Incentives include tax breaks such as deductions and
reduces corporate income tax rates
§ Preferential treatment is given for the innovative
products and services. Various incentives and
subsidies are provided especially in designated areas
such as Special Economic Zones (SEZs)
o South Korea
§ Focus is on targeted R&D investments with tax
credits for investments in strategic technologies
§ The emphasis is on the creation of tangible assets
o US
§ It is more of market-based mechanism and tax
incentives
§ Include non-refundable tax credits and research
credits with tax incentives for R&D investments in
designated zones
o India
§ The government also has launched initiatives such
as Start Up India, Digital India, Atal Innovation
Mission have been launched to foster
entrepreneurship, research, technological
advancement
§ State governments have also provided stamp duty
waivers and concessions and soft loans
§ India also needs to
• Foster industry-academia collaboration
• Enhance private sector
investment/participation
• Prioritise applied research
Ø ₹ 1 lakh Cr scheme to promote R&D - Research Development
and Innovation (RDI) Scheme
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
o India allocates 0.64% of its gross domestic product to R&D
(far lower than 2 to 5% invested in countries such as US,
Japan and China)
§ China in 2008 implemented Thousands Talents Plan
which aimed at attracting researchers and
entrepreneurs to return home and contribute to
scientific and technological progress
§ Google invests 15% of its revenue in R&D, private
sector companies in India spend up to 5% and India
spends just 0.6%
o The Union cabinet has approved a ₹ 1 lakh Cr scheme to
promote research and development (R&D), aiming to spur
private investment in strategic and high growth sectors
through long term low cost funding.
§ The scheme will have a two tiered mechanism
• First level - Special Purpose Fund (SPF) - act as
a custodian of the funds
o The scheme will operate under the ANRF
of Department of Science and
Technology
§ Within the ANRFs Special Purpose
Fund the centre will appoint an
investment committee which will
be managed by the ANRF Executive
Council
• The funds from SPF will be allocated to second
level managers and this will be in the form of
long term concessional loans
o Funds will flow from ANRF to second
level fund managers - AIF, development
financial institutions and non-banking
finance institutions. These in turn will
finance the individual projects
o Under the scheme long term financing or refinancing at
low cost or nil interest rates will be provided
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o It will also support transformative projects at higher
technology readiness levels, support acquisition of
technologies which are critical or high strategic
importance and facilitate setting up of deep tech fund of
funds
o The overarching strategic direction for the scheme will be
provided by the Anusandhan National Research
Foundation (ANRF)
o Way forward - single window clearance for labs and
import equipment is crucial

Need for Deregulation

Ø India is unique among the emerging markets as it mainly driven
by the services sector
o The share of GDP contributed by manufacturing and
services respectively from the period 1980 to till now
shows that
§ Contribution of manufacturing has crept up
marginally from 16 to 17.5%
§ From services sector it has jumped by a huge
number from 33% to 55%
Ø The reason for this kind of growth is that the regulations
essentially have fallen on the manufacturing sector
Ø The government in the budget has announced setting up of a
high level committee regarding the deregulation
o The centre has underlined deregulation in 10 areas as the
external environment is not as benign as it was earlier
and there is deglobalization taking place
§ From 1990s to 2008 it was high growth of
globalisation
§ Now there is deglobalization happening. This is
evident with higher import restrictions. The value of
trade covered under new import restrictions has
increased from $170 bn in 2014-15 to $1320 bn in
2023-24

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o The government has proposed a deregulation commission
to reduce the regulations in the economy, the economic
survey has also spoken in support of deregulation. The
parliament has also proposed Jan Vishwas Bill to
decriminalize the criminal offences to criminal offences.
Such measures are necessary but what is needed is a shift
in approach cutting the most excessive and punitive
aspects of an oppressive state machinery that has been
built up over the decades
o Some of the areas covered are land related, labour
related, administration related, utilities related etc
o The states emphasising the deregulation and imposing
reforms have witnessed higher levels of industrial activity
Ø The commission should look into
o Conduct a wide ranging assessment of all existing
regulations on multiple parameters
o What is the purpose for which the regulations were
introduced
o Have these been successful in achieving those
objectives
o What is the cost of these regulations on investors,
entrepreneurs and citizens. These costs must be balanced
with the benefits realized from such regulations
Ø What should be done
o The regime of inspections, checks and no objection
certificates should be replaced by self-certification based
approvals and renewals
o The validity of licenses and approvals can be extended by
the states
o Certified third parties can be brought in to provide range
of approvals which will speed up the process
o For promoting ease of doing business, reforms in land and
labour are needed.
§ In case of land

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 • It should be made available for the industries
by removing the restrictions and easing
regulations
• Transparency in documentation, inspections,
NOCs (No Objection Certificates)
• Technology usage for automated approvals
and NOCs
§ In case of labour laws
• There is a need for a finer review as they are
old and archaic. There is a need to eliminate
archaic ones and decriminalise other offences
• Time bound solution in cases of harassment of
departments with penalties for officials
• Facilitating investments and economic growth
should be made part of the performance
evaluation criteria of all departments
• Gig economy will continue be part of the
economy and the labour laws need flexibility
to accommodate this

Deregulation and economic freedom: catalyst for growth (Economic

Survey)
Ø Deregulation has a higher impact on the MMSEs compared to
the larger companies which usually find a way around these
o The cost of compliance is a problem, the smaller entities
do not have the manpower or management to address
these compliances
o The regulations make it cheaper to run two factories
having 150 workers each than running a company with
300 workers
o Regulations hurt the workers by discouraging job
creation, limiting wages and encouraging informal
employment (workers cannot formally work overtime
because law requires employers to pay at least twice the
regular wages)
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 Ø The union govt has implemented reforms such as simplifying
taxation reforms, decriminalising laws, GST etc. The states on
their part also have implemented deregulation reforms
Ø As per the Business Reforms Action Plan (BRAP) formulated by
the Department for Promotion of Industry and Internal Trade
(DPIIT) has stated that deregulation promoted industrialisation
Ø The reforms under following must be taken up by the states
o Reduce the cost of compliance by liberalizing the
standards and controls on Indian businesses
o States can enforce regulations through civil penalties and
cancellation of licenses. Such measures should be done
accurately and with transparency
o The state by imposing tariffs and taxes impose direct
costs on operations and growth of the companies. These
should be rationalized
o Need to have risk-based regulations on the
businesses

Renewable supply – Issues of Round the clock supply

o Status
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
§ As of July 2024, the total installed capacity is 197.20 GW.
• Wind power: 47.07 GW
• Solar Power: 87.20 GW
• Biomass: 10.35 GW
• Small Hydro Power: 5.03 GW
• Large Hydro: 46.92 GW
§ India is the only country among the G20 countries that is
on track to achieve its targets under the Paris Agreement
§ India added a record 18.48 GW of renewable energy
capacity in fiscal 24
§ India has set a target to reduce the carbon intensity by
less than 45 % by the end of the decade, and achieve 50 %
cumulative electric power installed by 2030 from
renewables, and achieve net - zero carbon emissions by
2070.
§ In 2024-25 budget, The Ministry of New & Renewable
Energy (MNRE) has been allocated ₹ 19,100 Cr
• It has been increased by an increase of 143% over
the revised estimate for 2023-24 (₹ 7848 Cr)
§ In 2022-23
• Around 95% of India’s energy supply was sourced
from fossil fuels (coal, crude oil, and natural gas)
• Around 75% of the global emissions are caused by
the fossil fuels
• Hence the government has the objective of moving
away from such consumption as part of climate
change mitigation and this is being done by shifting
to electricity for energy consumption and within
electricity moving away from usage of fossil fuels for
electricity production
• The government has targeted the following as a part
of climate related commitments
o By 2030, India aims to achieve 500 GW of non-
fossil generation capacity and meet at least

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 50% of its electricity requirement from
renewable sources
o Reforms
§ India has a liberal foreign investment policy and permits
100% FDI in the renewable energy sector.
§ Battery Energy Storage Systems (BESS)
• Union cabinet has approved outlay of ₹ 3760 Cr to
promote investments in the Battery Energy Storage
Systems (BESS) via VGF (Viability Gap Funding)
• Under the scheme, up to 40% of capital cost will be
provided and will run for three years and funds will
be disbursed in 5 tranches till FY31
• The scheme will help create 4000 MWh of BESS
• The funding is conditional upon the fact that 85% of
BESS capacity will be made available to the discoms
§ PM-Surya Ghar Muft Bijli Yojana
• It was approved in February 2024
• The aim is to increase the share of rooftop solar
capacity.
• Under this, financial assistance will be provided to 1
Cr households to install rooftop solar
• This is expected to help these houses to obtain free
electricity up to 300 units per month
o Issues
§ Duck Curve Problem and need for storage capacity
• It is a situation of high supply and low demand
o It is partially the result of shift in the peak
demand
o Earlier the demand peaked during the office
hours and now because of urbanization, higher
incomes etc the demand is peaking in evening
hours and the supply of renewables is high
during sunlight hours
o Hot summers have further added to the
demand
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o the peak power in March this year rose to 221
GW against 208 GW in March 2023
§ Financing issue - According to the Standing Committee on
Energy (2022) there is a huge gap between the required
and actual investment for renewable capacity addition
• The demand for the investments per year are
around ₹ 1.5 to ₹ 2 lakh Cr and the actual annual
investment in the last few years was around ₹
75,000 Cr
§ Import dependence
• India even today is heavily dependent on solar
imports such as panels. This is despite government
taking measures earlier to curb the imports
• The government has also launched solar PV module
manufacturing and under this annual solar panel
manufacturing capacity of 48 GW is expected to be
added by 2026
§ Renewable Purchase Obligation (RPO)
• To ensure that there is a demand for renewable
energy, the discoms are to procure/purchase a
certain percentage of their electricity supply from
renewable sources (This is referred to as renewable
purchase obligation - RPO)
• In 2022-23 only 15 states were able to meet their
RPO obligation
• This is because the discoms are of the opinion that
they will have to spend a higher amount of money
to purchase renewable energy.
§ PSL (Priority Sector Loans)
• The Reserve Bank of India (RBI) has allowed up to ₹
30 Cr for green energy projects like wind and solar
as PSL
o It means renewable energy projects of up to ₹
30 Cr get PSL status.
o Way forward
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § The government must ensure sufficient financing is
provided.
• There can be a minimum financing mandate such as
Renewable Finance Obligation (RFO)
• There should be promotion of green bonds and
infrastructure investment trusts
• Public sector lenders must be promoted to provide
more loans for renewable energy projects (such as
Power Finance Corporation)
§ Review PSL threshold
§ Mandating compulsory achievement of RPO norms etc.

Higher Working Hours = Higher GDP?

o Certain sections of Factories Act 1948, which regulate working
hours or days in India
§ Section 51
• Imposes maximum limit of hours that would be
applicable for the workers in a factory
• No factory can ask the workers or make them work
for more than 48 hours a week
§ Section 54
• It is an extension of the section 51
• It states that no adult worker is required to work in
a factory for more than nine hours in a day
§ Section 52
• No adult shall be allowed or required to work in a
factory on the first day of the week (certain
conditions are applicable)
o There has been a rising debate whether there is a need to
increase the number of working hours so that the production
increase sand this will aid India in becoming a developed
country
o Why this argument?

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § After the pandemic, there were demands to increase the
number of working hours to 64 per week so as to
compensate for the loss of output during the years of
pandemic
§ Many of the states have amended the Factories Act to
increase the number of working hours
• These states include Madhya Pradesh, Uttar
Pradesh, Rajasthan, Gujarat, Himachal Pradesh, and
Odisha
• The states of Tamilnadu and Karnataka, both
introduced the amendment to the factories act to
increase the number of working hours from 9 to 12
hours.
• The argument provided was that there is a need to
run the factories round the clock so that the India
become globally competitive
§ Expected benefits
• Higher production and this will help in achieving
higher growth
• It will help India's economy becoming more
competitive
• It will also provide more flexibility to the employer
o India currently follows a 48 hours work week. The arguments in
favour of continuing the same are
§ It will ensure that the workers get sufficient rest and this
is expected to improve their productivity
§ It will also help in having right work life balance
o Concerns with 70 hours work week
§ There is a concern that with a higher number of working
hours, more women (especially mothers) will start opting
out of the jobs. This may affect the female labour force
participation rate
• This would further increase the gender pay gaps

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § Higher working hours may also increase the chances of
absenteeism and attrition rates and all of these may
increase employer costs
§ Higher working hours will always lead to higher growth?
• The average working hours for Indians in the 1970s
was 2077 hours per year. In case of Germany and
Japan the numbers were 1941 and 2137 hours
respectively
• In 2017, the annual working hours in India were
2117 as against this, it was 1738 hrs in Japan and
1354 in Germany
• Hence in case of developed countries the annual
working hours does not explain the how these
countries became rich
§ India already has one of the highest work hours a week
• As per ILO
o It has surveyed 163 countries
o Indian workers are ranked 7th clocking 47.7
hours a week (marginally higher than China
which clocked 46.1 hours)
o Highest is in UAE - 52.6 hours
o Way forward
§ Focus on labour productivity
• India has a lower productivity. It hovers at around
$8.7 per hour for India, which is much lower that the
global average of $19 per hour
• The labour productivity is lower in India on account
of
o India’s manufacturing is into low-value high
volume production
o Investments in innovation and technology is
low and where there is investment, intensity of
its usage is poor due to poor skilling
o There are issues of management quality and
work culture
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 • Higher number of hours do not necessarily increase
the productivity - According to 2021 data,
o Indian workers have worked 47.7 hours,
compared to this, the average weekly working
hours in Japan is 36.3 hours, Germany it was
34.3 hours, and in USA it is 36.4 hours, for
China it was 46.1 hours
o The productivity for all the these countries are
$8.7 per hour, $39.6 per hour, $58.3 per hour,
$70.7 per hour and $13.5 per hour
o Provide more flexibility in terms of working hours and
space
o Invest more in Research and Development (R&D)
§ As per WIPO (World Intellectual Property
Organisation)
• India filed patents of 55718 in 2022
o China - 1.5 mn
o USA - 500000
• India’s R&D spend fell from 0.65% of GDP in
2017-18 to 0.64% in 20-21
§ Higher investment will help India climb the
manufacturing value chain
o Invest more in skilling of the labour
o Focus on high value manufacturing

The government merges skilling initiatives into one

Ø Union government has decided to restructure the skilling
initiatives by merging three of them into Skill India Programme
(central sector scheme)
Ø The government has approved ₹ 8800 Cr for 3 year period -
ending in FY26
Ø Three scheme will become three key components of the
composite Skill India Programme
o The Pradhan Mantri Kaushal Vikas Yojana (PMKVY 4.0)
§ Approval of ₹ 6000 Cr has been given to this
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § PMKVY 4.0 has 3 key components
• Short Term Training (STT) - Courses in the
range of 300 to 600 hrs are provided
• Recognition of Prior Learning (RPL) –
Candidates with prior experience are certified
after assessment
• Special Projects - These are project based short
term skilling initiatives. It includes customized
training for specific industries like AI, robotics,
drones etc
§ The scheme aims to fulfil the needs of both
individuals and industry
o Pradhan Mantri National Apprenticeship Promotion
Scheme (PM-NAPS)
§ ₹ 1942 Cr has been approved
§ It supports transition from education to work,
ensuring apprentices gain industry-specific skills
through real world exposure
§ The centre will provide 25% of the stipend, up to ₹
1500 per month per apprentice, will be provided
through Direct Benefit Transfer (DBT) during the
training period
§ It is designed for individuals aged 14 to 35 years
o Jan Shikshan Sansthan (JSS) scheme
§ It is a community-centric skilling initiative designed
to make vocational training accessible, flexible, and
inclusive, particularly for women, rural youth, and
economically disadvantaged groups
§ This caters to the age group of 15 to 45 years of age
§ Under this low-cost, doorstep training is provided
with flexible schedules
Ø More than 2.27 Cr people have benefitted so far under these
three initiatives
Ø The ministry of skill development was set up in 2014

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
PMKVY completes 10 years
Ø Since 2014, the ministry of skill development and
entrepreneurship (MSDE) has empowered 6 Cr people
Ø At the centre of this is the Skill India Mission (SIM) providing
skillsets to the youth (reskilling, upskilling and skill
development)
Ø The government has merged Pradhan Mantri Kaushal Vikas
Yojana 4.0 (PMKVY 4.0), Pradhan Mantri National
Apprenticeship Promotion Scheme (PM-NAPS) and Jan
Shivshankar Sansthan Scheme (JSS)
Ø Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
o Launched in July 2015
o Encourage and promote skill development
o Free short duration skill training and incentivising will be
done under this
o Aim is to boost productivity and employability of youth
o Under PMKVY 4.0 the focus is on new age skills like
Industry 4.0, Web 3.0, AR/VR etc
o So far over 1.6 Cr candidates have been trained under
PMKVY
§ PMKVY 1.0 - 2015-16; 19.85 lakh candidates were
trained
§ PMKVY 2.0: 1.10 Cr candidates were trained
§ PMKVY 3.0 - There were 2 special programs under
this
• Customised Crash Course Programme for
COVID Warriors (CCCP for CW) to mitigate the
impact of COVID-19 pandemic
• Skill Hub Initiative (SHI) - for integration and
mainstreaming of vocational education with
general education
• 7.37 lakh candidates were trained
§ PMKVY 4.0 - So far over 25 lakh candidates have
been trained

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 Ø Other skilling initiatives
o Pm Vishwakarma Yojana
§ It was launched in September, 2023
§ It aims to provide end-to-end support to artisans
and craftspeople of 18 trades who work with their
hands and tools
§ The Scheme includes
• Recognition through PM Vishwakarma
Certificate and ID Card
• Skill Upgradation
• Toolkit Incentive
• Credit Support
• Incentive for Digital Transactions
• Marketing Support.
§ It is a Central Sector Scheme
§ Will be implemented for five years ending in 2027-
28
§ So far more than 2.7 Cr applications have been
submitted with more than 29 lakh applications
successfully registered
o Deen Dayal Upadhyaya Grameen Kaushalya Yojana
(DDU-GKY)
§ Launched in September 2014
§ It is a part of National Rural Livelihood Mission

Demographic Dividend
Ø India’s demographic trend highlight the growing potential for a
demographic dividend (economic growth potential arising from
a shift in age structure, where working age population
outnumbers the non-working age groups)
o The current young population with a median age of 28
years is a key driver of the growth potential (compared to
ageing population of developed countries)

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o With over 65% of the population below the age of 35
years, there is an opportunity as well as a challenge for
India
Ø Demographic dividend is the economic growth potential from
shifts in populations’ age structure
o This happens when the working age population is much
higher than the dependent population (children and
elderly)
Ø It is measured using the dependency ratio - those below 15
years and those above 64 years as proportion of its working age
population
o When this ratio falls below 50%, the potential for a
demographic dividend is said to have kicked in
o This happened for India in 2019 and is expected to peak
around 2041 (share of working population will hit 59%)
o The dependency ratio has been declining has contributed
to the demographic advantage
§ The dependency ratio is the number of children (age
0-14 years) and older persons (age 60 years and
above) per 100 working age population (15-59
years).
§ Dependency Ratio =100 x((Population (0-14) +
Population (60+) / Population (15-59))
§ The total dependency ratio has declined from 64.6%
in 2011 to 55.7% in 2021 and is estimated to further
decline to 54.3% by 2026
Ø Factors favouring India
o Families have fewer children and less dependents to take
care of
o Other countries are facing issues
§ China’s population has peaked
§ Japan is facing severe demographic decline
o India’s working age population is expected to increase to
1 bn by 2047

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o Rising gig economy is an opportunity for job generation
and flexible employment opportunities
o Rapid urbanisation is also a contributor. Over 35% of the
population resides in urban areas and this is expected to
go up in coming years to 50%. The urban centres will act
as hubs of industrial activities, employment generation,
financial services etc
o Various government policies are driving the industrial
activities in turn leading to demand for labour in the
market
Ø Way forward
o For India to realise the potential, there is a need for
investments in education, skilling, healthcare and
education infrastructure along with other reforms to
address the income inequality, regional disparities,
unemployment and underemployment. All of these will
help in achieving inclusive growth
o Female labour force participation rate
§ The global average is around 47% and India’s is at
around 24%
§ There is a need to promote higher participation of
women which will also help in women
empowerment
• The factors holding back women participation
is socio cultural norms, lack of safety at
workplace, specialised jobs, child care facilities
etc
Ø China and South Korea have leveraged the demographic
dividend to promote industrial growth and development
Ø India will experience the demographic dividend which will last
till 2055, which will help it implement policies

Women Labour Participation - Laapata Ladies of Indian Economy

o In recent days there have been two reports published

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § Bain & Company and Magic Bus India Foundation put out
a report titled – “From Aspiration to Action: Building
India’s 400 million Women Workforce” – which has
discussed about the female labour force participation rate
(F-LFPR)
§ International Labour Organisation has published a report
titled - The impact of Care Responsibilities of Women’s
labour participation – which has highlighted issues
women face in managing both the work and care
responsibilities
o From Aspiration to Action: Building India’s 400 million Worm
Workforce
§ India is likely miss the $30 tn target by 2047 as India will
be facing a shortage of 145 mn women in the workforce
§ India is likely to add 110 mn women to its workforce by
2047 and will reach the LFPR of 45%
• This will take the total to 255 mn
• The requirement is 400 mn
§ The women need to contribute 45% of GDP ($14 tn) and
this would require the F-LFPR to be around 70% (from
existing 35 to 40%)
§ Issues faced in joining the labour force
• In rural areas - limited job opportunities, unstable
work environment
• In urban areas - job-skill mismatches, wage
disparities
§ Way forward
• There’s a need for a cohesive effort from the
government, private sector etc.
• There’s also a need to develop infrastructure,
formulate policies and funding to support women’s
integration into workforce
o The impact of Care Responsibilities of Women’s labour
participation

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 § 53% of India’s women labour force is out of the labour
force due to care responsibilities
• Globally over 708 mn women are out of the labour
force because of care responsibilities
• The women face such barriers because of lower
education levels, limited job opportunities, poor
infrastructure rural residence and inadequate care
and support systems
§ The care economy needs further investment especially in
early childhood care and education (ECCE) to support
labour force participation of unpaid caregivers and gender
equality in the workforce
§ Against this just 1.1% of men stay outside the labour force
due to care responsibilities
§ There is a concern regarding lower women participation
in the workforce
• As per PLFS for 2023-24, 36.7% of female and 19.4%
of workforce engaged in unpaid labour work in
household enterprises
§ India, Egypt, Jordan, Mali, Iran have over 50% of women
outside the labour force. On the other hand Belarus,
Bulgaria, Latvia and Sweden have less than 10% of their
women outside labour force

Ø Global Capability Centres (GCCs)

o GCCs are also referred to as Global In House Centres
(GICs)
o These are offshore units of the multinational corporations
(MNCs)
o These will be managing certain types of business
functions/operations of their parent organisation
o The GCCs in India have grown from 1430 in FY19 to over
1700 in FY24, this is expected to cross 2000 in next few
years
o These employ approximately 1.9 mn professionals
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o In the last 5 years, India has remained at the top of the
global GCC expansion strategy with over 400 new GCCs
and around 1100 new units established
o India accounts for over 28% of total global (Science,
Technology, Engineering, Mathematics - STEM) workforce
and 23% of global software engineering talent
o Measures to promote GCCs
§ Government policies such as FDI, SEZ Policy etc
§ Availability of talent pool
§ Cost efficiency as the operational costs are
comparatively lower in India
o Issues
§ Many of the Global Capability Centres (GCCs) are
facing issues such as inflated payrolls and top-heavy
teams as many of these are struggling to deliver the
value or innovation. If this continues many of them
will become unsustainable
• This has become a problem not only for the
new GCCs set up but also for those operating
for over a decade now
• The employee costs have gone up to 76% in
2024 from 66% in 2020
• One of the reasons behind such rise is that the
companies have spent money to acquire talent
especially after the pandemic
§ Compliance requirements are increasing the cost of
operations for the GCCs
§ Data security, protection and localisation norms
Ø

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)