FOREIGN DIRECT INVESTMENT (FDI)
- India's net foreign direct investment (FDI) inflows experienced a decline, decreasing by nearly 31% to $25.5 billion during the first 10 months of the 2023-24 fiscal year. The Finance Ministry attributed this decline to a broader trend of slowing investments in developing countries, while expressing optimism for a potential increase in investments in the current calendar year.
- Although global FDI flows overall saw a 3% rise to approximately $1.4 trillion in 2023, economic uncertainty and elevated interest rates impacted global investment, resulting in a 9% decrease in FDI flows to developing nations, as outlined in the Ministry's February assessment of economic performance.
- Reflecting the global trend of reduced FDI flows to developing countries, gross FDI inflows to India also experienced a slight decline, from $61.7 billion to $59.5 billion during the period from April 2023 to January 2024. In terms of net inflows, the corresponding figures were $25.5 billion versus $36.8 billion. The decrease in net inflows was primarily attributed to an increase in repatriation, while the decline in gross inflows was minimal.
- While a modest uptick in global FDI flows is anticipated for the current calendar year, attributed to a decrease in inflation and borrowing costs in major markets that could stabilize financing conditions for international investment, significant risks persist, according to the Ministry. These risks include geopolitical tensions, elevated debt levels in numerous countries, and concerns regarding further fragmentation of the global economy
- FDI involves the transfer of funds and resources from one country to another. This capital inflow can help stimulate economic growth in the host country by providing funds for investment in infrastructure, technology, and other areas.
- FDI often leads to the creation of jobs in the host country. When foreign companies establish subsidiaries or invest in existing businesses, they typically hire local employees, which can help reduce unemployment and improve living standards
- Foreign investors often bring advanced technologies, processes, and management practices to the host country. This technology transfer can enhance the host country's productivity, competitiveness, and industrial capabilities
- FDI can provide access to new markets for both the host country and the investing company. Foreign investors can tap into the host country's consumer base, while the host country gains access to the investing company's global distribution networks.
- FDI can contribute to overall economic development in the host country by promoting industrialization, improving infrastructure, and fostering innovation and entrepreneurship.
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Automatic Route: Under the automatic route, FDI is allowed without the need for prior approval from the RBI or the government. Investors only need to notify the RBI within a specified time frame after the investment is made. This route is available for most sectors, except those that are prohibited or require government approval.
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Government Route: In sectors or activities that are not covered under the automatic route, FDI requires government approval. Investors must apply for approval through the Foreign Investment Facilitation Portal (FIFP) or the Foreign Investment Promotion Board (FIPB), depending on the sector.
- Under the automatic route, FDI of up to 100% is allowed for manufacturing of automobiles and components.
- For the manufacturing of electric vehicles (EVs), 100% FDI is allowed under the automatic route.
- In single-brand retail trading, 100% FDI is allowed, with up to 49% allowed under the automatic route. Beyond 49%, government approval is required.
- Multi-brand retail trading (supermarkets and department stores) with FDI is permitted in some states, subject to certain conditions and restrictions. The FDI limit is typically capped at 51%.
- FDI in the insurance sector is allowed up to 74%, with up to 49% under the automatic route. Beyond 49%, government approval is needed
- In the telecom sector, 100% FDI is allowed, with up to 49% under the automatic route. Beyond 49%, government approval is required
- In the defense sector, FDI up to 74% is allowed under the automatic route, with government approval required for investments beyond 49%
- In most segments of the media and broadcasting sector, including print and digital media, 100% FDI is allowed, with up to 49% under the automatic route
- FDI is prohibited in the atomic energy sector, which includes activities related to the production of atomic energy and nuclear power generation.
- FDI is generally prohibited in the gambling and betting industry, which includes casinos and online betting platforms
- FDI is not allowed in the lottery business, except for state-run lotteries
- FDI is prohibited in chit funds, which are traditional Indian savings and credit schemes.
- Nidhi companies are non-banking finance companies (NBFCs) that facilitate mutual benefit funds. FDI is typically not permitted in these entities
- While FDI is allowed in single-brand retail trading, it is generally prohibited in multi-brand retail trading of agricultural products. Some states have allowed it under specific conditions, but this remains a highly regulated area.
- FDI is not allowed in the trading of transferable development rights (TDRs) pertaining to the construction of real estate
- FPIs invest in a country's financial markets, primarily by buying and selling securities traded on stock exchanges and fixed-income instruments like bonds and government securities
- FPIs often seek to diversify their investment portfolios by spreading their investments across different asset classes, sectors, and countries. This diversification helps manage risk and enhance returns
- FPIs have the flexibility to buy and sell securities in the secondary market, providing liquidity to the market and contributing to price discovery
- FPIs typically have a shorter investment horizon compared to Foreign Direct Investors (FDIs). They may engage in short-term trading or hold securities for a few months to a few years.
- FPIs are subject to regulatory frameworks and restrictions in the countries where they invest. These regulations are designed to ensure that foreign investments do not pose undue risks to the local financial markets and economy.
| FPI (Foreign Portfolio Investment) | FDI (Foreign Direct Investment) |
| FPI involves the purchase of financial assets such as stocks, bonds, mutual funds, and other securities in a foreign country. These investments are typically made with the intention of earning returns on capital and do not result in significant control or ownership of the underlying businesses | FDI entails making an investment in a foreign country with the primary objective of establishing a lasting interest and significant control or influence over a business enterprise or physical assets. FDI often involves the acquisition of a substantial ownership stake (typically at least 10%) in a company or the establishment of new business operations. |
| FPI is generally characterized by a shorter investment horizon. Investors in FPI may engage in trading and portfolio rebalancing activities, and their investments are often more liquid. The focus is on earning capital gains and income from investments. | FDI is characterized by a longer-term commitment. Investors in FDI intend to engage in the day-to-day management or decision-making of the business, contribute to its growth and development, and generate profits over an extended period. |
| FPI investors typically have little to no influence or control over the companies in which they invest. They are passive investors who participate in the financial markets and rely on market dynamics to drive returns. | FDI investors actively participate in the management and decision-making of the businesses they invest in. They often seek to exercise control over company operations and strategy, which may include appointing board members or key executives. |
| FPI investments are often made through financial instruments like stocks, bonds, and securities. Investors may use instruments like mutual funds or exchange-traded funds (ETFs) to gain exposure to foreign markets | FDI investments involve a direct equity stake in a company, either through share acquisition or the establishment of a subsidiary or branch in the host country. FDI can also involve the purchase of real assets such as land, factories, or infrastructure |
| FPI can provide short-term capital inflows, but it may be more susceptible to market volatility and sudden capital outflows. It may not have as direct an impact on job creation and economic development as FDI. | FDI often contributes to long-term economic development by creating jobs, stimulating infrastructure development, transferring technology and expertise, and enhancing the competitiveness of local industries |
| FPI investments are subject to regulations that vary by country and may include foreign ownership limits, reporting requirements, and tax considerations. | FDI is subject to regulations that can be more stringent and may involve government approval, sector-specific conditions, and investment protection measures |
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For Prelims: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc
For Mains: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
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Previous Year Questions
1. Both Foreign Direct Investments (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. (UPSC CSE 2011)
Which one of the following statements best represents an important difference between the two?
A.FII helps bring better management skills and technology, while FDI only brings in capital
B.FII helps in increasing capital availability in general, while FDI only targets specific sectors C.FDI flows only into the secondary markets, while FII targets primary market
D.FII is considered to the more stable than FDI
Answer (B)
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CHANDRAYAAN-3
1. Context
- Chandrayaan-3 is the third lunar mission of the ISRO. It follows the Chandrayaan-1 and Chandrayaan-2 missions.
- The primary objective of Chandrayaan-3 is to achieve a successful landing on the Moon's surface, rectifying the setback faced by its predecessor, Chandrayaan-2, in 2019.
- The Chandrayaan-3 mission aims to demonstrate India's capability to soft-land a lander and rover on the lunar surface.
- By executing a precise landing, ISRO intends to showcase the technological advancements and expertise of the Indian space program.
- The mission will contribute to expanding our understanding of the Moon, its geological features, and its evolution.
- To ensure the success of Chandrayaan-3, ISRO has incorporated improvements and modifications based on the lessons learned from Chandrayaan-2.
- These include enhancements in the design and functioning of the lander and rover, as well as improvements in navigation and landing systems.
- Rigorous testing and evaluations have been conducted to address the shortcomings identified during the previous mission.
- It can be expected that they will be similar to those carried by Chandrayaan-2, aiming to study lunar topography, mineralogy, surface composition, and the Moon's environment.
- These instruments will gather valuable data to further our knowledge of the Moon and contribute to scientific research.

3. Chandrayaan-2 Mission and its Objectives and Discoveries
- The Chandrayaan-2 mission, launched on July 22, 2019, had a multifaceted objective.
- While the most discussed goal was to demonstrate the ability to soft-land a lander and rover on the unexplored south pole of the Moon, it also aimed to expand lunar scientific knowledge through various studies.
- These studies included detailed investigations of topography, seismography, mineral identification and distribution, surface chemical composition, topsoil thermo-physical characteristics and the lunar atmosphere composition.
4. Chandrayaan 2 Orbiter
- Despite the challenges faced by the Vikram lunar lander, which crash-landed on the Moon's surface on September 6, 2019, the Mission's orbiter remained fully operational.
- The orbiter gathered a wealth of new information about the Moon and its environment, significantly contributing to our understanding of the lunar surface, sub-surface and exosphere.
- The data collected by the orbiter added valuable insights into the exploration of permanently shadowed regions and the study of craters and boulders beneath the regolith.
5. Reasons for Failure of the Vikram Lander
- The landing attempt of the Chandrayaan-2 Mission's Vikram lander encountered a setback when ISRO lost contact shortly before the scheduled touchdown on September 7.
- The lander was decelerating but failed to slow down to the required safe landing speed of 2 meters per second.
- Designed to absorb an impact even at 5 meters per second, Vikram hit the Moon's surface at a much higher speed, resulting in damage to itself and its instruments.
- The crash landing of the Vikram lander prevented the successful demonstration of soft landing technology in space.
- However, ISRO identified and rectified the small error responsible for the failure, paving the way for the upcoming Chandrayaan-3 mission to showcase this technology without any glitches.
- Furthermore, the crash landing also resulted in missed opportunities for gathering additional data about the lunar terrain, composition and mineralogy.
6. The Way Forward
- The lander Vikram and rover Pragyaan was equipped with instruments to conduct surface observations, which, combined with the orbiter's support, could have provided diverse sets of data contributing to a more comprehensive understanding of the Moon.
- With Chandrayaan-3 on the horizon, ISRO aims to overcome previous challenges, achieve a successful soft landing on the Moon, and advance scientific exploration by collecting valuable information about our celestial neighbour.
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For Prelims: Vikram lander, Chandrayaan-3, Chandrayaan-2, Moon, ISRO, lunar mission, celestial body,
For Mains:
1. Discuss the primary objective of Chandrayaan-3 and its significance in India's space exploration efforts. (250 Words)
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Previous Year Questions 1. In the context of space technology, what is "Bhuvan", recently in the news? (UPSC 2010)
A. A mini satellite, launched by ISRO for promoting the distance education in India
B. The name given to the next Moon Impact Probe, for Chandrayan-II
C. A geoportal of ISRO with 3 D imaging capabilities of India
D. A space telescope developed by India
Answer: C 2. What will be India's second moon mission by ISRO? (Maharashtra Talathi 2019) A. Chandrayaan 1 B. Chandrayaan 1.A C. Chandrayaan 2 D. Chandrayaan 3 Answer: C 3. Chandrayaan - 2 was launched from which of the following states by ISRO? (DSSSB LDC 2019) A. Maharashtra B. Rajasthan C. Kerala D. Andhra Pradesh Answer: D 4. The phases of the moon as we see from the Earth are due to changing relative positions of the sun, the earth and the moon. Which of the following statements is true? (CTET 2022)
A. on a full moon day, the earth comes between the sun and the moon
B. on a new moon day, the moon is in between the earth and the sun
C. on a full moon day, the moon is in between the earth and the sun
D. on a new moon day, the earth is between the sun and the moon.
E. on a new moon day, the sun is between the moon and the earth
1. A, B 2. B, C 3. C, D 4. A, E Answer: 1 5. ISRO is related to: (SSC JE EE 2020) A. space research B. agricultural research C. seed research D. marine research Answer: A 6. “The experiment will employ a trio of spacecraft flying in formation in the shape of an equilateral triangle that has sides one million kilometres long, with lasers shining between the craft.” The experiment in question refers to (UPSC 2020) A. Voyager-2 B. New Horizons C. LISA Pathfinder D. Evolved LISA Answer: D
1. India has achieved remarkable successes in unmanned space missions including the Chandrayaan and Mars Orbiter Mission, but has not ventured into manned space missions, both in terms of technology and logistics? Explain critically (UPSC GS3, 2017)
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Source: The Indian Express
TOTAL FERTILITY RATE (TFR)
2. About the Total Fertility Rate (TFR)
The Total Fertility Rate (TFR) is a key demographic indicator that helps us understand the average number of children a woman in a specific population will have during her lifetime, assuming current birth patterns persist. It's different from the crude birth rate, which simply measures the number of births per 1,000 people in a population in a given year.
What it measures
- The average number of children a woman will have throughout her reproductive lifespan.
- It considers age-specific fertility rates, which means it takes into account the different birth rates at different ages within the population.
- Provides a longer-term perspective on population dynamics compared to the crude birth rate.
Significance
- Helps assess population growth trends and predict future population size.
- Informs policy decisions related to education, healthcare, social security, and economic development.
- Understanding TFR is crucial for analyzing the potential demographic dividend, which refers to the economic and social benefits that can arise from a large working-age population due to declining fertility rates.
Calculation
- Summing the age-specific fertility rates (ASFRs) for all fertile age groups (typically 15-49 years) and multiplying by five.
- ASFRs represent the average number of births per 1,000 women in a specific age group.
Key TFR levels
- Replacement fertility rate: Around 2.1 children per woman, ensures population stability without growth or decline due to births and deaths (excluding migration).
- TFR below replacement: Indicates a declining population, with potential implications for workforce size and economic growth.
- TFR above replacement: Leads to population growth, requiring investments in infrastructure and resources to support the growing population.
3. What does the Total Fertility Rate (TFR) of 2.0 mean?
A Total Fertility Rate (TFR) of 2.0 means that, on average, each woman in the population is expected to give birth to two children over her reproductive lifetime. This value represents the replacement level of fertility, where each generation replaces itself in the population. When the TFR is around 2.0, it indicates that the population is stable, with births balancing deaths over time.
A Total Fertility Rate (TFR) of 2.0 indicates several key things
- Average Children per Woman: In that specific population, on average, a woman will have two children during her lifetime, assuming current birth patterns remain unchanged. This means that each generation of women is replacing itself, without population growth or decline due solely to births and deaths (excluding migration).
- Replacement Fertility Rate: A TFR of 2.0 is often referred to as the replacement fertility rate. This is because it signifies the level of fertility needed to maintain a stable population size over time, considering only births and deaths. However, it's important to note that the exact replacement level can vary slightly depending on mortality rates, particularly child mortality.
- Demographic Transition: A TFR of 2.0 suggests that the population is likely in the later stages of the demographic transition. This transition involves a shift from high birth and death rates to low birth and death rates. In this stage, populations typically experience a decline in fertility, followed by a decline in mortality, leading to a stabilization of population size.
- Global Context: While 2.0 is the replacement fertility rate, the global average TFR is currently around 2.3, indicating slight population growth. However, many developed countries have TFRs below replacement level, which can lead to an ageing population and potential challenges for social security systems and workforce size.
- Policy Implications: Understanding the TFR is crucial for policymakers in various areas like education, healthcare, social security, and economic development. A TFR below replacement may necessitate policies encouraging childbirth or attracting immigration to address potential workforce shortages. Conversely, a high TFR might require investments in infrastructure and resources to support a growing population.
4. What is the Replacement Fertility Rate?
The Replacement Fertility Rate (RFR) is the level of fertility required to maintain a stable population size in a given area, considering only births and deaths (excluding migration). This means that each generation of women has just enough daughters to replace themselves and their mothers in the population.
Key Points about RFR
- Typically around 2.1 children per woman This number varies slightly depending on a country's mortality rates, especially child mortality rates. Higher child mortality necessitates slightly higher fertility to ensure replacement.
- When the TFR matches the RFR, the population neither grows nor declines due to births and deaths.
- Reaching RFR suggests a population in the later stages of the demographic transition, characterized by declining birth and death rates.
- Though the global average TFR is 2.3 (slightly above RFR), many developed countries have TFRs below RFR, leading to ageing populations.
Significance of RFR
- Understanding RFR helps policymakers formulate effective policies in areas like education, healthcare, social security, and economic development.
- TFR below RFR may require policies to encourage childbirth or attract immigration to address potential workforce shortages and support ageing populations. Conversely, a high TFR might necessitate investments in infrastructure and resources to sustain a growing population.
- Analyzing TFR about RFR offers insights into potential population growth or decline, aiding in planning and resource allocation.
5. How is the Total Fertility Rate calculated?
The Total Fertility Rate (TFR) is calculated by considering the age-specific fertility rates (ASFRs) of a population.
- Age-specific fertility Rates (ASFRs) represent the average number of births per 1,000 women within a specific age group. Typically, ASFRs are calculated for five-year age groups ranging from 15-49 years, covering the typical childbearing years for women. Data for calculating ASFRs usually comes from population censuses or demographic surveys.
- Once you have the ASFRs for each age group, you need to sum them all up. This gives you the total number of births expected per 1,000 women across all fertile age groups.
- Since age groups may have different sizes, simply summing ASFRs wouldn't be entirely accurate. To account for this, the sum is multiplied by the average number of women in each age group. This ensures the TFR reflects the fertility rates across all age groups proportionally.
- Often, instead of using the actual number of women in each age group, a standard factor of "5" is used for convenience. This assumes that each age group has roughly the same number of women, which is a reasonable approximation for many populations.
Therefore, the TFR formula becomes: TFR = (Sum of ASFRs across all age groups) * 5
Example:
Imagine a hypothetical population with the following ASFRs:
- 15-19 years: 30 births per 1,000 women
- 20-24 years: 80 births per 1,000 women
- 25-29 years: 120 births per 1,000 women
- 30-34 years: 90 births per 1,000 women
- 35-39 years: 50 births per 1,000 women
- 40-44 years: 20 births per 1,000 women
- 45-49 years: 10 births per 1,000 women
Using the formula:
- TFR = (30 + 80 + 120 + 90 + 50 + 20 + 10) * 5
- TFR = 400 * 5
- TFR = 2000 births per 1,000 women
Therefore, in this example, the TFR is 2.0, indicating that on average, a woman in this population would have 2 children during her lifetime based on the current age-specific fertility rates.
6. The difference between birth rate and Total Fertility Rate (TFR)
While both birth rate and Total Fertility Rate (TFR) measure fertility within a population, they have key differences that offer distinct insights:
| Features | Birth Rate | Total Fertility Rate (TFR) |
| Definition | Number of births per 1,000 people in a year | Average number of children per woman throughout her life |
| Focus | Current fertility level | Long-term fertility pattern |
| Data | Requires population size and number of births | Requires age-specific fertility rates |
| Calculation | Simple division | Summing and adjusting age-specific fertility rates |
| Advantages | Easy to understand, tracks short-term trends | Considers age structure, reflects future potential, informs policy |
| Limitations | Ignores age structure, limited future insight, misleading in fluctuating populations |
Requires complex data, less intuitive, may not perfectly predict future |
7. About demographic dividend
A demographic dividend refers to the potential economic and social benefits that can arise when a large share of the population is in the working-age (typically 15-64 years) compared to the dependent populations (children and elderly). This shift in population structure is often caused by a decline in fertility rates without a corresponding decline in mortality rates, leading to a "bulge" in the working-age population.
Key Features
- A larger working-age population translates to a larger pool of available labour, potentially boosting economic growth and productivity.
- The ratio of dependents (children and elderly) to the working-age population decreases, leading to increased savings and investment as fewer resources are needed to support dependents.
- The potential for increased investments in education and healthcare due to a smaller dependent population, leading to a more skilled and healthy workforce.
Conditions for a Dividend
- A significant and sustained decline in fertility rates is crucial for the demographic dividend to occur.
- The benefits of a demographic dividend can only be realized if the working-age population is adequately educated, skilled, and healthy.
- Expanding job opportunities is essential to absorb the growing workforce and prevent unemployment.
Challenges and Considerations
- The demographic dividend may not be evenly distributed across regions or social groups, potentially leading to inequalities.
- Governments and businesses need to adapt policies and infrastructure to accommodate the changing population structure.
- Ensuring social security and healthcare for the ageing population is crucial to sustain the benefits of the dividend.
Examples
- Several East Asian countries, like China and South Korea, experienced significant economic growth due to their demographic dividends in the latter half of the 20th century.
- India is currently experiencing a demographic transition with a declining fertility rate, creating the potential for a future dividend. However, realizing this potential requires investments in education, healthcare, and job creation.
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For Prelims: Viksit Bharat, Population control goal, Total Fertility Rate, Replacement Fertility Rate
For Mains:
1. Critically analyze the significance of Total Fertility Rate (TFR) in understanding population dynamics and formulating development policies in India. Discuss the potential challenges and opportunities associated with India's projected demographic transition. (250 Words)
2. What are the potential security implications of India's changing population structure? How can these be addressed through proactive policy measures? (250 Words)
3. Imagine you are part of the committee formed by the Finance Minister to study India's population growth. What key recommendations would you propose, considering both demographic trends and the aspirations of a Vikasit Bharat? (250 Words)
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Previous Year Questions
1. The total fertility rate is: (HPPSC GS 2018) (MPSC 2015)
A. The birth of women divided by the total female population
B. The number of births divided by the total population
C. The number of children a woman will likely bear in her lifetime
D. The births to women of a given age divided by the total number of women at that age
Answer: C
Mains
1. "Empowering women is the key to control the population growth.’’ Discuss. (UPSC 2019)
2. Critically examine the effect of globalization on the aged population in India. (UPSC 2013)
3. Discuss the main objectives of Population Education and point out the measures to achieve them in India in detail. (UPSC 2021)
4. Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC 2020)
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RENEWABLE ENERGY
1. Context
2. Why use Renewable energy
- Today we primarily use fossil fuels to heat and power our homes and fuel our cars.
- It’s convenient to use coal, oil, and natural gas for meeting our energy needs, but we have a limited supply of these fuels on Earth.
- We’re using them much more rapidly than they are being created. Eventually, they will run out.
- And because of safety concerns and waste disposal problems, the United States will retire much of its nuclear capacity by 2020.
- In the meantime, the nation’s energy needs are expected to grow by 33 per cent during the next 20 years.
- Renewable energy can help fill the gap
- Even if we had an unlimited supply of fossil fuels, using renewable energy is better for the environment.
- We often call renewable energy technologies “clean” or “green” because they produce few if any pollutants.
- Burning fossil fuels, however, sends greenhouse gases into the atmosphere, trapping the sun’s heat and contributing to global warming.
- Climate scientists generally agree that the Earth’s average temperature has risen in the past century.
- If this trend continues, sea levels will rise, and scientists predict that floods, heat waves, droughts, and other extreme weather conditions could occur more often.
- Other pollutants are released into the air, soil, and water when fossil fuels are burned.
- These pollutants take a dramatic toll on the environment—and humans.
- Air pollution contributes to diseases like asthma.
- Acid rain from sulfur dioxide and nitrogen oxides harms plants and fish. Nitrogen oxides also contribute to smog.
- Renewable energy will also help us develop energy independence and security.
- Replacing some of our petroleum with fuels made from plant matter, for example, could save money and strengthen our energy security.
- Renewable energy is plentiful, and the technologies are improving all the time.
- There are many ways to use renewable energy.
- Most of us already use renewable energy in our daily lives.
2.1.Hydropower
- Hydropower is our most mature and largest source of renewable power, producing about 10 per cent of the nation’s electricity.
- Existing hydropower capacity is about 77,000 megawatts (MW). Hydropower plants convert the energy in flowing water into electricity.
- The most common form of hydropower uses a dam on a river to retain a large reservoir of water. Water is released through turbines to generate power.
- “Run of the river” systems, however, divert water from the river and direct it through a pipeline to a turbine.
- Hydropower plants produce no air emissions but can affect water quality and wildlife habitats.
2.2.Bioenergy
- Bioenergy is the energy derived from biomass (organic matter), such as plants. If you’ve ever burned wood in a fireplace or campfire, you’ve used bioenergy.
- But we don’t get all of our biomass resources directly from trees or other plants.
- Many industries, such as those involved in construction or the processing of agricultural products, can create large quantities of unused or residual biomass, which can serve as a bioenergy source.
2.3.Geothermal Energy
- The Earth’s core, 4,000 miles below the surface, can reach temperatures of 9000° F.
- This heat—geothermal energy—flows outward from the core, heating the surrounding area, which can form underground reservoirs of hot water and steam.
- These reservoirs can be tapped for a variety of uses, such as to generate electricity or heat buildings.
- By using geothermal heat pumps (GHPs), we can even take advantage of the shallow ground’s stable temperature for heating and cooling buildings.
2.4.Solar Energy
- Solar technologies tap directly into the infinite power of the sun and use that energy to produce heat, light, and power.
2.5. Wind Energy
- For hundreds of years, people have used windmills to harness the wind’s energy.
- Today’s wind turbines, which operate differently from windmills, are a much more efficient technology.
- Wind turbine technology may look simple: the wind spins turbine blades around a central hub; the hub is connected to a shaft, which powers a generator to make electricity.
- However, turbines are highly sophisticated power systems that capture the wind’s energy using new blade designs or airfoils.
- Modern, mechanical drive systems, combined with advanced generators, convert that energy into electricity.
- Wind turbines that provide electricity to the utility grid range in size from 50 kW to 6
- Wind energy has been the fastest growing source of energy since 1990.
2.6.Ocean Energy
- The ocean can produce two types of energy: thermal energy from the sun’s heat, and mechanical energy from the tides and waves.
- Ocean thermal energy can be used for many applications, including electricity generation.
- Electricity conversion systems use either the warm surface water or boil the seawater to turn a turbine, which activates a generator.
- The electricity conversion of both tidal and wave energy usually involves mechanical devices.
- A dam is typically used to convert tidal energy into electricity by forcing the water through turbines and activating a generator.
- Meanwhile, wave energy uses mechanical power to directly activate a generator or to transfer to a working fluid, water, or air, which then drives a turbine/generator.
2.7.Hydrogen
- Hydrogen is high in energy, yet its use as a fuel produces water as the only emission.
- Hydrogen is the universe’s most abundant element and also its simplest.
- A hydrogen atom consists of only one proton and one electron.
- Despite its abundance and simplicity, it doesn’t occur naturally as a gas on the Earth.
- Today, industry produces more than 4 trillion cubic feet of hydrogen annually.
- Most of this hydrogen is produced through a process called reforming, which involves the application of heat to separate hydrogen from carbon. Researchers are developing highly efficient, advanced reformers to produce hydrogen from natural gas for what’s called Proton Exchange Membrane fuel cells.
3. Steps were taken by the government to promote Renewable energy
The Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India was ranked fourth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2020.
3.1.Distribution of prominent renewable energy Hubs
- Rajasthan
- Gujarat
- Andhra Pradesh
- Karnataka
- Telangana
- Tamil Nadu

3.2.Steps taken
- Permitting Foreign Direct Investment (FDI) up to 100 per cent under the automatic route,
- Waiver of Inter-State Transmission System (ISTS) charges for inter-state sale of solar and wind power for projects to be commissioned by 30th June 2025,
- Declaration of trajectory for Renewable Purchase Obligation (RPO) up to the year 2022,
- Setting up of Ultra Mega Renewable Energy Parks to provide land and transmission to RE developers on a plug-and-play basis,
- Schemes such as Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM), Solar Rooftop Phase II, 12000 MW CPSU Scheme Phase II, etc,
- Laying of new transmission lines and creating new sub-station capacity under the Green Energy Corridor Scheme for evacuation of renewable power,
- Setting up of Project Development Cell for attracting and facilitating investments,
- Standard Bidding Guidelines for tariff-based competitive bidding process for procurement of Power from Grid Connected Solar PV and Wind Projects.
- Deployment of large-scale renewable energy (RE) has the potential to create numerous employment opportunities in rural India in the coming decades. By 2030, it is projected that the clean-energy sectors could provide jobs for around one million individuals in the country.
- However, the expansion of RE may have significant impacts on communities reliant on the land, involving changes in land use, modifications to ecosystems, shifts in livelihoods, and overall effects on land productivity.
- As India progresses in scaling up RE, striking a balance between these interests may result in project commissioning delays, contributing to a waning interest among developers in RE tenders.
- In 2020, wind developers, facing setbacks such as delays in land allocation, sought to terminate power-purchase agreements for approximately 565 MW wind capacity signed with the Solar Energy Corporation of India (SECI), prompting a decline in developers' enthusiasm for RE projects. Commissioning delays not only pose substantial financial risks but also jeopardize the reputation of RE developers.
- In the pursuit of responsible RE deployment and the enhancement of communities in and around project sites, many developers actively support local development activities and community-led programs through corporate social responsibility (CSR) initiatives.
- As an illustration, Tata Power Solar has established integrated vocational training programs for women and youth in multiple project sites.
- Given the pivotal role of project developers in interacting with communities during land acquisition, construction, and operational phases, they play a crucial role in driving responsible practices. Additionally, regulators and investors prioritize assessing the responsible practices of new projects.
- To encourage all developers to contribute to the rapidly growing RE ecosystem and promote responsible practices, two essential prerequisites need to be addressed
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For Prelims: Current events of national and international Significance
For Mains: General Studies II: Conservation, environmental pollution and degradation, environmental impact assessment.
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Previous Year Questions
1.The term ‘Intended Nationally Determined Contributions’ is sometimes seen in the news in the context of (UPSC CSE, 2016) Answer (b) 2.Consider the following statements: (UPSC CSE, 2023) Answer (b) 3. Consider the following activities: (UPSC CSE, 2023) Answer (c) 4. Consider the following statements: (UPSC CSE, 2025) Answer (c) |
INDEX OF INDUSTRIAL PRODUCTION (IIP)
1. Context
2. About the Index of Industrial Production (IIP)
- The Index of Industrial Production (IIP) is a macroeconomic indicator that measures the changes in the volume of production of a basket of industrial goods over some time.
- It is a composite index that reflects the performance of the industrial sector of an economy.
- The IIP is compiled and released by the Central Statistical Organisation (CSO) in India.
- The IIP is calculated using a Laspeyres index formula, which means that the weights assigned to different industries are based on their relative importance in a base year. The current base year for the IIP is 2011-12.
- The eight core sector industries represent about 40% of the weight of items that are included in the IIP.
- The eight core industries are Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement and Fertilizers.
- It covers 407 item groups included into 3 categories viz. Manufacturing, Mining and Electricity.
- The IIP is a useful tool for assessing the health of the industrial sector and the overall economy.
- It is used by policymakers, businesses, and investors to track trends in industrial production and make informed decisions.
3. Significance of IIP
The IIP is a significant economic indicator that provides insights into the following aspects
- The IIP reflects the growth or decline of the industrial sector, which is a major contributor to overall economic growth.
- The IIP measures the level of industrial activity, indicating the production volume of various industries.
- The IIP serves as a guide for policymakers to assess the effectiveness of economic policies and make informed decisions.
- Businesses use the IIP to assess market conditions, make production plans, and evaluate investment opportunities.
- The IIP influences investor sentiment as it reflects the overall health of the industrial sector.
4. Service Sector and IIP
- The IIP does not include the service sector. It focuses on the production of goods in the industrial sector, such as manufacturing, mining, and electricity.
- The service sector is measured by a separate index, the Index of Services Production (ISP).
- The IIP data is released monthly by the Central Statistical Organisation (CSO) in India.
- The data is released with a lag of six weeks, allowing for the collection and compilation of information from various industries.
5. Users of IIP Data
The IIP data is used by a wide range of stakeholders, including:
- Government agencies and central banks use the IIP to assess economic conditions and formulate policies.
- Companies use the IIP to evaluate market trends, make production decisions, and assess investment opportunities.
- Investors use the IIP to gauge the health of the industrial sector and make investment decisions.
- Economic analysts and researchers use the IIP to study economic trends and develop forecasts.
- The IIP is widely reported in the media and is of interest to the general public as an indicator of economic performance.
6. Manufacturing Drives Industrial Production Growth
- Factory output gained on the back of a 9.3 per cent increase in manufacturing, which accounts for 77.6 per cent of the weight of the IIP (Index of Industrial Production).
- Manufacturing output had grown by 5 per cent in July and had contracted by 0.5 per cent in August 2022.
- In absolute terms, it improved to 143.5 in August from 141.8 in July and 131.3 in the year-ago period.
- As per the IIP data, seven of the 23 sectors in manufacturing registered a contraction in August, with furniture, apparel, and computer and electronics among the significant non-performers.
- Among the performing sectors, fabricated metal products, electrical equipment and basic metals fared better.
- Garments and chemicals witnessed negative growth. This can be attributed to lower growth in exports as these two are export-dependent.
- The electronics industry also witnessed negative growth, which again can be linked to existing high stocks and lower export demand.
- In terms of the use-based industries, consumer durables output returned to positive territory for the second time this fiscal with 5.7 per cent growth in August, reflecting a pickup in consumption demand.
- However, it came on the back of a 4.4 per cent contraction in consumer durables output in the year-ago period.
- Primary, infrastructure/ construction, and capital goods recorded double-digit growth rates in August at 12.4 per cent, 14.9 per cent and 12.6 per cent, respectively.
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For Prelims: The Index of Industrial Production (IIP), Central Statistical Organisation,
For Mains:
1. Discuss the significance of the Index of Industrial Production (IIP) as an economic indicator and its role in assessing the health of the industrial sector and the overall economy. (250 Words)
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| Previous Year Questions
1. In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37.90%. Which of the following are among those Eight Core Industries? (UPSC CSE 2012)
1. Cement
2. Fertilizers
3. Natural gas
4. Refinery products
5. Textiles
Select the correct answer using the codes given below:
A. 1 and 5 only B. 2, 3 and 4 only C. 1, 2, 3 and 4 only D. 1, 2, 3, 4 and 5
Answer: C
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NILGIRI TAHR

The Nilgiri tahr is the sole species of mountain-dwelling ungulate native to southern India, out of the twelve such species found nationwide. It holds the distinction of being Tamil Nadu’s state animal.
Historically, the Nilgiri tahr inhabited the entire stretch of the Western Ghats. However, its range has now diminished drastically, and it survives only in a few isolated patches. Much of its original population has vanished, primarily due to extensive habitat destruction and hunting pressures.
This species, which is unique to the Western Ghats, is currently classified as Endangered on the IUCN Red List and receives the highest level of legal protection under Schedule I of the Wildlife (Protection) Act, 1972.
According to a 2015 report by WWF India, the wild population of Nilgiri tahrs is estimated to be around 3,122 individuals
3. Distrinution and habitat of Nilgiri tahr
- The Nilgiri tahr is a sure-footed ungulate that inhabits the open montane grassland habitats at elevations from 1200 to 2600 m of the South Western Ghats. Currently, the Nilgiri tahr distribution is along a narrow stretch of 400 km in the Western Ghats between Nilgiris in the north and Kanyakumari hills in the south of the region.
- Though there are smaller populations found in the Palani hills, Srivilliputtur, and the Meghamalai and Agasthiyar ranges, only two well-protected, large populations are documented -- one from the Nilgiris and the other from the Anamalais, including the high ranges of Kerala.
- The Eravikulam National Park in Anamalai hills, Kerala, is home to the largest population of the Nilgiri tahr, with more than 700 individuals
4. Threats for Nilgiri tahr
- The Nilgiri tahr faces several threats to its survival, primarily due to widespread deforestation, which leads to significant loss of natural habitat. Its living space is further reduced by grazing competition from domestic livestock, the development of hydroelectric projects within its native range, and the spread of monoculture plantations.
- Additionally, although rare, the species is sometimes hunted for its meat and skin.
- The severe fragmentation of its habitat has caused a sharp decline in population in recent years. Activities such as plantation expansion continue to disturb the tahr’s natural environment, especially the grasslands and shola forests that are essential for its survival
5. Mukurthi National Park
- Mukurthi National Park is a protected area located in the Nilgiri Hills of Tamil Nadu and forms a part of the larger Nilgiri Biosphere Reserve, which spans across Tamil Nadu, Kerala, and Karnataka.
- The park lies in the western part of the Nilgiris Plateau and is particularly significant for its unique ecosystem comprising montane grasslands interspersed with shola forests. These high-altitude tropical forests are known for their rich biodiversity and ecological importance.
- Covering an area of around 78 square kilometers, Mukurthi National Park was originally established to protect the Nilgiri tahr, an endangered mountain ungulate endemic to the Western Ghats. Over the years, it has become a vital sanctuary not only for the Nilgiri tahr but also for many other endemic and endangered species of flora and fauna.
- The landscape of the park is marked by rolling grasslands, rugged peaks, and deep valleys. It receives heavy rainfall and has a cool, misty climate for most of the year, contributing to its lush vegetation.
- The park is home to a variety of wildlife, including species such as the Indian leopard, jungle cat, jackal, sambar deer, and a diverse range of birds, reptiles, and butterflies.
- Mukurthi is part of the Western Ghats, a UNESCO World Heritage Site, recognized for its exceptional biological diversity. The park also plays a crucial role in preserving water sources, as many rivers and streams originate in this region.
- Owing to its fragile ecosystem and conservation priorities, tourism in Mukurthi is tightly regulated, with limited access to ensure minimal human interference.
- Overall, Mukurthi National Park stands as a symbol of conservation efforts in the Nilgiris, especially for the protection of the Nilgiri tahr and the preservation of the unique shola-grassland ecosystem that is increasingly under threat due to habitat degradation and climate change
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For Prelims: Nilgiri tahr, Western ghats, IUCN Red List
For Mains: GS III - Environment & Ecology
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Previous Year Questions
1.The "Red Data Books" published by the International Union for Conservation of Nature and Natural Resources (IUCN) contain lists of (UPSC CSE 2011)
1. Endemic plant and animal species present in the biodiversity hotspots.
2. Threatened plant and animal species.
3. Protected sites for the conservation of nature and natural resources in various countries.
Select the correct answer using the codes given below:
A.1 and 3
B.2 only
C.2 and 3
D.3 only
Answer (B)
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Source: The Hindu
