UPSC Essentials | Mains answer practice — GS 3 : Questions on Sovereign Green Bonds and PM Dhan-Dhaanya Krishi Yojana (Week 90)

QUESTION 1

Discuss the concept of Sovereign Green Bonds (SGrBs) and assess the factors contributing to their low demand in India.

QUESTION 2

Discuss the objectives and key features of the Prime Minister Dhan-Dhaanya Krishi Yojana (PMDDKY) introduced in the Union Budget 2025-26. How does this scheme aim to address challenges in India’s agricultural sector?

General points on the structure of the answers

Introduction

— The introduction of the answer is essential and should be restricted to 3-5 lines. Remember, a one-liner is not a standard introduction.

— It may consist of basic information by giving some definitions from the trusted source and authentic facts.

Body

— It is the central part of the answer and one should understand the demand of the question to provide rich content.

— The answer must be preferably written as a mix of points and short paragraphs rather than using long paragraphs or just points.

— Using facts from authentic government sources makes your answer more comprehensive. Analysis is important based on the demand of the question, but do not over analyse.

QUESTION 1: Discuss the concept of Sovereign Green Bonds (SGrBs) and assess the factors contributing to their low demand in India.

Introduction:

— Green bonds are debt instruments issued by governments, businesses, and multilateral banks to finance projects that cut emissions or improve climate resilience.

— Green bonds are often issued at lower yields than conventional bonds, ensuring investors that the revenues will be utilised solely for green investments. The cost advantage of green bonds is determined by the difference in yield, often known as the green premium or greenium.

— A higher greenium helps issuers to raise capital at a lower cost, making green ventures more appealing.

Body:

— Sovereign green bonds (SGrBs) are issued by sovereign bodies, such as the Government of India, which has developed a framework for issuing such bonds in 2022. The framework defines “green projects” as those that promote energy efficiency in resource utilisation, lower carbon emissions, increase climate resilience, and improve natural ecosystems.

— Investors in green bonds frequently want consistent, long-term returns and may have internal or external mandates to devote a portion of their money to green financing. Despite their potential, green bonds make up a modest portion of the debt market and overall climate financing, as governments improve reporting processes and offer incentives to entice investors.

— Since 2022–23, India has issued SGrBs eight times. Every year, the government utilises nearly half of the proceeds from SGrBs to subsidise the development of energy-efficient three-phase electric locomotives via the Ministry of Railways.

Factors contributing to their low demand in India

— India’s SGrB offerings have struggled to acquire traction due to low investor demand, making it harder for the government to secure a green bond. Despite efforts to ease regulations for international investors, auctions have witnessed low participation, with bonds frequently devolving to main dealers.

— While greenium prices have risen to 7-8 basis points globally, they are frequently only 2-3 basis points in India. This restricts the growth of SGrBs as a viable funding source.

— Liquidity presents a significant challenge. Small issue sizes and investors who keep bonds until maturity have hampered secondary market activity, lowering their appeal.

— Furthermore, India lacks a robust ecosystem of social impact funds and responsible investment requirements, which in other countries generate green bond demand.

Conclusion:

— According to a recent World Bank report, emerging market sovereign issuers issue more bonds that fund a mix of green and social projects than advanced market sovereign issuers, who primarily issue green bonds.

— The report also stated that sovereigns take a long time to prepare the post-issuance allocation and effect report, which affects investor interest.

(Source: What are sovereign green bonds? Why is demand for such bonds weak in India? by Aggam Walia)

Points to Ponder

What are green bonds?

What are green projects?

Read more about the National Green Hydrogen Mission

Related Previous Year Question

Examine the pattern and trend of public expenditure on social services in the post-reforms period in India. To what extent this has been in consonance with achieving the objective of inclusive growth? (2024)

QUESTION 2: Discuss the objectives and key features of the Prime Minister Dhan-Dhaanya Krishi Yojana (PMDDKY) introduced in the Union Budget 2025-26. How does this scheme aim to address challenges in India’s agricultural sector?

Introduction:

— The Union Finance Minister indicated that, motivated by the success of the Aspirational Districts Programme, the government will launch the ‘Prime Minister Dhan-Dhaanya Krishi Yojana’ in collaboration with states.

— The program’s goals include increasing agricultural output, promoting crop diversity and sustainable agriculture practices, expanding post-harvest storage at the panchayat and block levels, improving irrigation systems, and making long-term and short-term finance more accessible.

Body:

— According to the Finance Minister, the program has the following five objectives:

(i) Enhancing agricultural productivity;

(ii) Adopting crop diversification and sustainable agriculture practices;

(iii) Augmenting post-harvest storage at the panchayat and block level;

(iv) Improving irrigation facilities; and

(v) Facilitating availability of long-term and short-term credit.

How does this scheme aim to address challenges in India’s agricultural sector?

— The PMDKY program will cover 100 areas based on three major criteria: poor productivity, moderate crop intensity, and below-average credit parameters.

— According to sources, the Ministry of Agriculture and Farmers’ Welfare has been collecting data on these factors, which will be used to identify districts.

— A comprehensive multi-sectoral ‘Rural Prosperity and Resilience’ plan would be launched in collaboration with states, according to the Union Finance Minister. This will solve agricultural underemployment by increasing skill levels, investing in technology, and revitalising the rural sector.

— The program aims to catalyse enterprise development, employment, and financial independence for rural women; accelerate the creation of new jobs and businesses for young farmers and rural youth; cultivate and modernise agriculture for productivity improvement and warehousing, particularly for marginal and small farmers; and diversify opportunities for landless families.

— “This programme is likely to help 1.7 crore farmers,” Sitharaman stated.

Conclusion:

— Cropping intensity is a measure of how efficiently land is used and is calculated as the ratio of gross cropped area to net area seeded. Cropping intensity was recorded as 155% in India in 2021-22, though this figure varied widely by state. Cropping intensity was just 111% in 1950–51.

— The initiative will cover 100 areas with poor productivity, moderate crop intensity, and below-average credit characteristics by bringing together existing schemes and specialised methods.

(Source: What Prime Minister Dhan-Dhaanya Krishi Yojana aims to achieve, how PMDKY will be implemented by Harikishan Sharma, pib.gov.in)

Points to Ponder

What is cropping diversity?

What are sustainable agricultural practices?

Related Previous Year Questions

Explain the changes in cropping pattern in India in the context of changes in consumption pattern and marketing conditions. (2023)

What is an Integrated Farming System? How is it helpful to small and marginal farmers in India? (2022)

Previous Mains Answer Practice

UPSC Essentials: Mains answer practice — GS 3 (Week 89)

UPSC Essentials: Mains answer practice — GS 3 (Week 88)

UPSC Essentials: Mains answer practice — GS 2 (Week 89)

UPSC Essentials: Mains answer practice — GS 2 (Week 88)

UPSC Essentials: Mains answer practice — GS 1 (Week 88)

UPSC Essentials: Mains answer practice — GS 1 (Week 87)

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