UPSC Key: Economic survey, New UGC rules on caste bias and Gram Swaraj

— Know about the key highlights of the Economic Survey 2025-26

— What are the concerns highlighted by the economic survey?

— What is the orange economy?

— What does the Economic survey says about inflation, trade deficit, GDP growth

— What are the recommendations made by the Survey amidst geopolitical uncertainties?

— What does the survey mean by Swadeshi as a disciplined strategy?

— What are the concerns and recommendations regarding the AI ecosystem?

Key Takeaways:

— Everything looks good — from growth, inflation, credit growth to rainfall, agri, and corporate balance sheets, it said.  But what is causing some concern to Chief Economic Advisor V Anantha Nageswaran, the principal author of the Survey, is the global capital strike, and its adverse impact on rupee’s stability, despite strong macroeconomic fundamentals. The rupee, he said, is “punching below its weight”.

— In the preface to the 687-page Economic Survey, the CEA describes India as “a victim of geopolitics”, adding that the rupee’s valuation does not accurately reflect India’s “stellar economic fundamentals”, which causes investors to pause.

— While an undervalued rupee helps offset the impact of higher US tariffs, the investor reluctance to commit to India warrants examination, he notes.

— The paradox of 2025 has been that India’s “strongest macroeconomic performance in decades has collided with a global system that no longer rewards macroeconomic success with currency stability, capital inflows, or strategic insulation”, he said.

— Citing data from the Australia-based Lowy Institute’s Power Gap Index, the Survey said it suggests India is operating below its full strategic potential with its power gap score at -4.0, the lowest in Asia, excluding Russia and North Korea.

— Dependent on global capital flows, India has to plan for liquidity and external capital buffers in the coming year, the Survey said. The negative effects of the ongoing global political and economic turmoil may manifest with a lag, and India runs the risk of contraction in liquidity,  disruption of capital flows, and a consequent impact on the rupee.

— Therefore, proactive reforms are essential to attract more foreign investment. India also needs to generate sufficient investor interest and export earnings in foreign currency to cover its rising import bill. Regardless of the success of indigenisation efforts, rising imports will invariably accompany rising incomes, it said.

— For the coming year, the Survey detailed three possible scenarios of global crises — ‘business as in 2025’, disorderly multipolar breakdown, and a systemic shock cascade in which financial, technological, and geopolitical stresses amplify one another rather than unfolding independently.

— Out of these three case scenarios, the common risks for India will be “disruption of capital flows” and the “consequent impact on the rupee”. “Only the degree and the duration will vary,” it said.

— Stating the high cost of capital as a structural macroeconomic outcome, the Survey said the country’s long-run challenge is not merely to manage liquidity or credit cycles, but to transform itself into a surplus-generating economy.

— A country that persistently runs current account deficits and depends on foreign savings must, by definition, pay a risk premium to global capital. In contrast, economies that generate sustained external surpluses — through exports, productivity and financial depth — can finance investment cheaply and stably at home, it said.

— Noting that the FDI (foreign direct investment) inflows remain below their potential, especially for infrastructure needs, despite a clear government intent and proven economic management, the Survey listed several cross-country examples of tax holidays…

— Creating a task force to engage top global companies and promote India’s advantages — stability, macroeconomic strength, sustained growth and market size — could boost FDI, especially in targeted sectors, it said.

— Terming 2025-26 as an “unusually challenging year” for the economy on the external front due to the elevated global trade uncertainty and the high tariffs which affected business confidence.

— The Survey said the government had used the crisis as an opportunity to push through key measures such as the rationalisation of the Goods and Services Tax (GST) and faster progress on deregulation, among others. Indiscriminate Quality Control Orders, which adversely affected downstream industries, were put on hold, it said.

— Manufacturing competitiveness and exports are important for maintaining long-term currency stability and strength, it said, highlighting that manufacturing has to take on a far greater strategic dimension when the security of supply of  essential and infrastructure goods is no longer assured.

— The cumulative impact of policy reforms over recent years appears to have lifted the economy’s medium-term growth potential closer to 7 per cent, the Survey said. “

— The Survey flagged concerns about fiscal populism, the crowding out of capital expenditure by cash transfers, and the rise of revenue deficits in states, with revenue surplus states reducing in number from 19 in FY19 to 11 in FY25.

From the Front page: Easing PSU stake sale to duty correction: Pointers for Budget

— Allowing minimum government shareholding in listed public sector undertakings (PSUs) to be reduced to 26% to facilitate deeper disinvestment, further correcting inverted duty structures and focusing on input tariff neutrality to enhance manufacturing competitiveness: these are some of the specific recommendations made in the Eco­n­omic Survey 2025-26 that could be among the focus areas of the upcoming Union Budget.

— The Survey, tabled Thursday, also called for a more pragmatic approach to Quality Control Orders (QCOs), proactive steps to attract more foreign direct investment (FDI), and deepening long-term finance, among other reform measures.

— The Survey said that sustained reforms across five pillars are critical in positioning industry as a key growth engine: ease of doing business; research and development (R&D) and innovation; skilling; infrastructure and logistics; and scaling up of micro, small, and medium enterprises (MSMEs).

— The Survey suggested creation of a task force to engage top global companies and promote India’s advantages — “stability, macroeconomic strength, sustained growth and market size” — in order to boost FDI. It added that efforts to improve the investment environment by simplifying processes and procedures will need to be kept up.

From the Parliament page: PISA-like Class 10 assessment proposed

— Schools rely on internal and board examinations that assess content recall rather than generate diagnostic evidence necessary to identify learning gaps, and a complementary initiative to this could be the introduction of a “PISA-like assessment” at the end of grade 10, the Economic Survey states.

— PISA (Programme for International Student Assessment) tests 15-year-olds across countries in reading, maths and science, to assess the school systems in these countries. It doesn’t measure rote learning, but assesses application of knowledge and skills.

— India has participated only once in the PISA test – in 2009, when it ranked 72nd out of 73 countries. It is conducted every three years by the Organisation for Economic Cooperation and Development (OECD).

From the Parliament page: MGNREGA achieved significant gains, VB-G RAM G represents decisive shift in rural job policy

— The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) achieved “significant gains in participation, digitisation and transparency over time” but “persistent structural weaknesses limited its effectiveness”, states the Economic Survey 2025-26, while pointing out that the Viksit Bharat—Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB-G RAM G Act, 2025) represents a decisive shift in India’s rural employment policy.

— According to the Survey, the VB-G RAM G Act, 2025 is a comprehensive statutory overhaul of MGNREGS, aligning rural employment with the long-term vision of Viksit Bharat 2047, while strengthening accountability, infrastructure outcomes and income security.

From the Parliament page: Live entertainment sector surpassed Rs 10,000 cr in ’24

— The live entertainment sector has made a strong recovery post-Covid-19, surpassing Rs 10,000 crore in 2024 and extending its impact to tourism and urban services, according to the Economic Survey for 2025-26 released on Thursday.

— The “Orange Economy” refers to the segment of the economy driven by creativity, culture and intellectual property. It includes activities where value is derived mainly from ideas, knowledge, artistic expression and cultural content.

— According to the Economic Survey, a significant portion of this economy is the concert sector, which involves large-scale live music and entertainment events, and also includes various associated value chains, such as ticketing, hospitality, travel, logistics, media production, advertising and local services, extending beyond just physical attendance at the events.

Chief Economic Advisor V Anantha Nageswaran and his team with the Economic Survey report on Thursday. ANI

From the Parliament page: In fight against climate change, stress laid on pragmatism & balance over ‘signalling

— Taking forward the argument it has been making for the last couple of years, India on Thursday once again emphasised on “pragmatism” and “balance” in the fight against climate change and said it would continue to place adaptation and development at the core of its climate action agenda.

— For developing countries like India, where institutional and financial hurdles to decarbonisation were far stiffer, mitigation actions, like quick energy transitions within some externally-mandated time frame, entailed significantly higher challenges and had uncertain outcomes, it said.

— The survey said it was not trying to downplay climate risks, or the role of mitigation actions, but only emphasising on the importance of prioritising pragmatism over “signalling”.

— In emerging economies like India, “growth, energy security and resilience must advance alongside low-carbon pathways, and not be displaced by it,” the survey said.

From the Parliament page: Economic Survey calls for re-examination of RTI Act

— The Economic Survey 2025-26 tabled in Parliament Thursday has called for a re-examination of the Right to Information (RTI) Act, 2005, and suggested exploring ‘adjustments’ to exempt disclosures on deliberative process of policy making and possibly have a ministerial veto with parliamentary oversight to guard against disclosures that could ‘unduly constrain governance’.

— While acknowledging the sunshine law as a powerful democratic reform and a tool for accountability and against corruption, it said that the legislation carries risks of becoming an “end in itself”, where disclosures are celebrated regardless of contribution to better governance. It said that the Act was never intended “as a tool for idle curiosity”, nor as a mechanism to micromanage government from the outside.

— Among the suggestions it made to revisit the Act included, exempting brainstorming notes, working papers, and draft comments until they form part of the final record of decision-making, protection of service records, transfers, and confidential staff reports.

— Crucially, it suggested exploring a “narrowly defined” ministerial veto, subject to parliamentary oversight to guard against disclosures that could “unduly constrain governance”.

— The survey sought to draw parallels between the RTI Act and similar laws in the US, UK and Sweden and argued that unlike the RTI Act, internationally, internal personnel rules, inter-agency memos, and financial regulations are exempt from disclosures.

From the Parliament page: Digital addiction, rising obesity key health challenges

— The Economic Survey has flagged the rapid rise of digital addiction and screen-related mental health issues, particularly among children and adolescents. In fact, it recommends very structured interventions and preventive protocols from what is clearly becoming a major adolescent health issue.

— The Survey recommends structured interventions including cyber-safety education, peer-mentor programmes, mandatory physical activity in schools, parental training on screen-time management, age-appropriate digital access policies, and platform accountability for harmful content.

— On mental healthcare delivery, the survey proposes expanding the national Tele-MANAS programme beyond crisis counselling to actively address digital addiction. Integration with school and college systems and training of dedicated counsellors is recommended to normalise help-seeking behaviour and enable early intervention at scale.

From the Economy page:  States’ fiscal populism, cash transfers risk crowding out productive capex

— Fiscal populism, especially through unconditional cash transfers, in several states poses emerging risks by crowding out growth-enhancing capital expenditure, said the Economic Survey for 2025-26.

— This also increasingly affects the cost at which the government borrows and India’s overall fiscal credibility, noted the survey, tabled in Parliament on Thursday.

— According to the report, between 2018-19 (FY19) and FY25, a total of 18 states saw a deterioration in their revenue balances. Out of this, 10 states slipped into revenue deficit from revenue surplus, five worsened their revenue deficit, and three managed to stay in revenue surplus although they witnessed a deterioration.

— In FY19, a total of 19 states were in revenue surplus, which reduced to 11 in FY25. This led to an increase in revenue deficit of states to 0.7% from 0.1% of GDP in FY19. Revenue deficit occurs when revenue expenditure is more than revenue receipts.

— Qualitatively, revenue expenditure is less desirable as it is meant for committed expenditure like salaries, pension, as against capital expenditure which creates long-term assets like infrastructure, roads, factories etc.

From the Economy page: Survey flags India Inc’s ‘lack of investment appetite’, says Swadeshi ‘inevitable’

— Swadeshi is “inevitable and necessary” as the global trading environment is marked by export controls, technology denial regimes and carbon border mechanisms that signal the end of “naïve globalisation”, Economic Survey 2025-26 said.

— The Survey said that unlike private corporations in post-war America, Germany, Japan, and East Asia – which either participated in ‘nation building’ while pursuing profits or behaved in an ‘arm’s-length and rules-bound manner’ – Indian corporates have a relative “lack of appetite” to invest efforts towards long-term risk absorption.

— The Survey pointed out that national transformation is most durable when business leaders see themselves not merely as beneficiaries of growth but as trustees of a larger developmental project.

— The survey stressed that a well-designed regulatory architecture is not in itself enough to generate higher state capacity, and must thus be helped out by the corporate sector.

From the Economy page: ‘Need to focus on AI applications rather than frontier models’

— In a departure from global AI development trends, the Economic Survey 2025-26 has proposed creating an ‘AI-OS’ initiative where the government acts as a monetary shareholder in AI infrastructure, similar to how UPI and Aadhaar function as public goods.

— The Survey has also called for India to focus on sector-specific AI applications rather than pursuing resource intensive large language models, and has recommended a change in the school education structure to allow students to participate in the AI economy.

— The proposed AI-OS would turn artificial intelligence into a public good, establishing a centralised code repository –functioning like a government-supported GitHub – under the IndiaAI mission where developers, researchers, and enterprises can share code and build upon each other’s work.

From the Explained page: Why rupee’s challenges are primarily external

— The stability of the Indian rupee becomes a casualty as India’s net trade surplus in services and remittances is not enough to offset the goods trade deficit, the Economic Survey 2025-26 said, as the rupee on Thursday hit another lifetime low of Rs 91.98 per US dollar.

— To achieve currency strength, India must first raise manufacturing strength, Chief Economic Advisor V Anantha Nageswaran said.

— This was driven by sustained outflow of foreign portfolio investments (FPIs). FPIs withdrew $4 billion so far in January, and the outflow amounted to $11.8 billion in 2025.

— “The Indian rupee underperformed in 2025. India runs a trade deficit in goods. Its net trade surplus in services and remittances is not enough to offset it. India depends on foreign capital flows to maintain a healthy balance of payments. When they run drier, rupee stability becomes a casualty,” the Survey said.

— However, it added that the “rupee’s valuation does not accurately reflect” India’s stellar economic fundamentals, as the economic growth is good, the outlook remains favourable, inflation is contained, and rainfall and agricultural prospects are supportive.

— This comes at a time when exports could come under pressure due to steep 50 per cent US tariffs. While the impact on outbound shipments has been limited, exporters have said that fresh orders from the US have stopped coming in and continued US tariffs could cause irreversible damage.

— The Survey said that the Information Technology-Enabled Services sector has been India’s mainstay for growth, and international experience indicates that while service exports are economically valuable, they do not systematically compel broad upgrades in state capacity, as successful firms can bypass weak institutions, relocate easily, and generate limited economy-wide pressure on governments to reform.

Other Important Articles Covering the same topic:

📍Knowledge Nugget | Economic Survey 2025-26: Key takeaways for your UPSC exam

📍UPSC Issue at a Glance | Economic Survey 2024-25 Decoded — What it says, what it warns, and what it recommends

Previous year UPSC Prelims Question Covering similar theme:

(1) Which among the following steps is most likely to be taken at the time of an economic recession? (UPSC CSE 2021)

(a) Cut in tax rates accompanied by increase in interest rate

(b) Increase in expenditure on public projects

(c) Increase in tax rates accompanied by reduction of interest rate

(d) Reduction of expenditure on public projects

Previous year UPSC Mains Question Covering similar theme:

Among several factors for India’s potential growth, savings rate is the most effective one. Do you agree? What are the other factors available for growth potential? (UPSC CSE 2017)

Supreme Court stays new UGC rules on caste bias: ‘Will divide society’

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation; Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes.

What’s the ongoing story: In a significant order on the new rules to deal with discrimination on campuses, mainly over caste, the Supreme Court on Thursday stayed the University Grants Commission (Promotion of Equity in Higher Education Institutions) Regulations, 2026, observing that they raise important questions which, if left unexamined, could have “very sweeping consequences” and “divide society”.

— What are key features of the new UGC regulations?

— What were the reasons for the protest?

— What are the arguments for and against the UGC regulations 2026?

— What is Article 142?

— What is Article 15?

— Which constitutional provisions provide protection against any form of discrimination?

— What is reverse discrimination?

— What are the concerns related to discrimination in higher education?

— Suggest measures need to be taken to address discrimination of any form in the educational institutions

Key Takeaways:

— Issuing notice to the Centre and UGC on three petitions challenging the new rules, a bench of Chief Justice of India Surya Kant and Justice Joymalya Bagchi ordered that “the 2026 Regulations be kept in abeyance”. “In exercise of our powers under Article 142, we further direct that the 2012 Regulations will continue in force till further orders,” the bench ordered.

— Hearing the matter, the bench also said orally that the Government must constitute a committee of eminent jurists to address the issue.

— The petitioners — Mritunjay Tiwari, advocate Vineet Jindal and Rahul Dewan — have primarily challenged Section 3(1)(c) of the Regulations, saying it refers to discrimination only on the basis of caste or tribe against the members of SC, ST and OBC communities while excluding those from the general category.

— CJI Kant pointed out that there may be instances of economically well-off students within a caste harassing others within the same caste, and sought to know how the Regulations address such a scenario.

From the Explained page: Definitions to action: The differences in 2012 and 2026 UGC rules

— How do the 2026 regulations differ from the 2012 guidelines?

— Definitions of discrimination vs caste-based discrimination: The 2026 regulations defines ‘discrimination’ (section 3(1)(e)) and ‘caste-based discrimination’ (section 3(1)(c)) separately, while the 2012 version defines ‘discrimination’.

UGC NET Equity rules: How did students and fraternity react?

— Under the new guidelines, caste discrimination is “discrimination only on the basis of caste or tribe against the members of the scheduled castes, scheduled tribes, and other backward classes.” This definition was challenged before the Supreme Court for excluding the general category.

— This is similar to the 2012 regulations, but the latter included language and ethnicity in addition to religion, caste, gender, and disability. The 2012 regulations also separately defined ‘harassment’, ‘victimisation’, and ‘ragging’, which are omitted from the new guidelines.

— SPECIFIC FORMS OF DISCRIMINATION NOT DEFINED IN 2026: The 2012 regulations listed specific forms of discrimination, harassment, or victimisation. This included breaching the reservation policy in admissions; discrimination in accepting and processing applications for admissions; limiting or denying access to benefits for students; announcing the names of castes, tribes, religion or region of students; labelling students as ‘reserved category’…

— These specific forms of discrimination have been left out of the 2026 regulations, which task the ‘equal opportunity centre’ within institutions to prepare and disseminate an illustrative list of acts that shall be construed as discrimination.

— The new rules also instruct institutions to ensure that any selection, segregation, or allocation into hostels, classrooms, mentorship groups, or any other academic purposes is transparent, fair, and non-discriminatory.

— PUNITIVE ACTION NOW INTRODUCED: Under the new rules, non-compliant institutions can be debarred from participating in UGC schemes, offering degree and online programmes, or removed from the list of institutions that can receive central grants.

— The UGC is also required to establish a monitoring mechanism to review progress made in achieving the objectives of the regulations and to constitute a national-level monitoring committee to oversee the implementation. The old regulations did not provide for any such action.

— EQUAL OPPORTUNITY CENTRES AND PROCEDURES: While the 2012 regulations provided for ‘Equal Opportunity Cells’ to be set up at institutions to promote equality, they did not specify the composition and functions of these cells, or the procedure to be followed in an instance of discrimination.

— The 2026 version mandates ‘Equal Opportunity Centres’ at institutions, with ‘equity committees’ which must be represented by OBCs, Persons with Disabilities, SCs, STs, and women.

— Why were the new regulations framed? The new regulations were formulated after a plea in the Supreme Court filed by Radhika Vemula and Abeda Salim Tadvi, the mothers of Rohit Vemula and Payal Tadvi.

Do You Know:

— Article 142 provides a unique power to the Supreme Court, to do “complete justice” between the parties, where, at times, the law or statute may not provide a remedy. In those situations, the court can extend itself to put an end to a dispute in a manner that would fit the facts of the case.

Other Important Articles Covering the same topic:

📍What is Article 142, invoked by Supreme Court to overturn Chandigarh mayoral poll results?

📍How far can UGC’s new anti-discrimination rules go to address caste on campus? Academics weigh in

Previous year UPSC Prelims Question Covering similar theme:

(2) With reference to the Constitution of India, prohibitions or limitations or provisions contained in ordinary laws cannot act as prohibitions or limitations on the constitutional powers under Article 142. It could mean which one of the following? (UPSC CSE 2019)

(a) The decisions taken by the Election Commission of India while discharging its duties cannot be challenged in any court of law.

(b) The Supreme Court of India is not constrained in the exercise of its powers by laws made by the Parliament.

(c) In the event of grave financial crisis in the country, the President of India can declare Financial Emergency without the counsel from the Cabinet.

(d) State Legislatures cannot make laws on certain matters without the concurrence of Union Legislatures

Previous year UPSC Mains Question Covering similar theme:

“Caste system is assuming new identities and associational forms. Hence caste system cannot be eradicated in India.” Comment. (UPSC CSE 2018)

THE IDEAS PAGE

Reading between the lines of the Economic Survey

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-III: Inclusive growth and issues arising from it

What’s the ongoing story: According to the National Statistical Office’s first advance estimates, India’s real GDP is expected to grow by 7.4 per cent in fiscal 2026, surpassing last year’s call of 6.3-6.8 per cent.

— What is the significance of private investment in the growth of the economy?

— The Survey cautions that negative impacts of the current global turmoil can materialise with a delay. What do you understand from this statement?

— What is fiscal consolidation? What is its significance?

— What is bond yield?

— Government and private capex are not substitutes, but complementary. How?

Key Takeaways:

Call to scale up private investment

— Dharmakirti Joshi writes: The global economy performed better than expected because the impact of the US tariffs was softened by exemptions, frontloading of shipments to the US, diversification to other markets and growth in services exports.

— India’s standout performance was also underpinned by accommodative monetary and fiscal policies, a favourable above-normal monsoon and lower crude oil prices.

— That said, India saw sustained capital outflows and the rupee depreciated sharply, showing that even a small current account deficit and good macroeconomic performance do not guarantee capital flows and currency stability. Volatility is expected to course through the next fiscal as well.

— The advantage of frontloading will fade as the tariffs’ full impact is felt, especially in the absence of an India-US trade deal. Diversification will be more impactful only once other trade agreements are fully implemented.

— The global economy is expected to grow steadily in 2026, though the outlook remains fragile. The Survey cautions that negative impacts of the current global turmoil can materialise with a delay.

— We assess the Survey on the current triad of relevance: Fiscal consolidation, reforms and private investment push.

— On the first, there are three reasons proactive steps are critical. One is that macroeconomic buffers are essential in an uncertain environment, and the fiscal buffer is the cornerstone of those safeguards.

— Two, the benefit of high nominal GDP growth for reducing the fiscal deficit has been waning… Efforts at expenditure rationalisation and tapping new sources of non-tax revenues are thus necessary to sustainably tame the deficit.

— Three, the current milieu demonstrates that even when monetary policy is accommodative, inflation is low and the central government fiscally prudent, sovereign bond yields can remain elevated if fiscal discipline lapses, especially at the subnational level as witnessed in the current fiscal year.

— Together, these three reasons underscore that robust and holistic fiscal consolidation is indispensable for preserving macroeconomic stability, reducing crowding out and keeping borrowing costs in check. The Survey acknowledges this.

— Second, the relevance of economic reforms. The Survey has evolved into an analytics-driven document that places greater emphasis on advocacy. The latest Survey acknowledges these changes and notes that “the transformation is now based on the depth and time-relevance of national priorities”.

— This year’s Survey, too, bats for continued reduction in compliance burden and deregulation, arguing that it shifts the administrative effort toward problem-solving, monitoring and execution.

— Third, private investment: After prioritising infrastructure spending through direct budgetary support, central government capital expenditure is now normalising, making a rise in private capex essential for a sustainable investment boost.

— It should be noted that government and private capex are not substitutes, but complementary. The government has mainly been funding large-scale infrastructure projects, while corporates have been focusing on manufacturing and other productive pursuits.

— The Survey noted that India needs to scale up private participation in building infrastructure. The Budget should continue to support capex, even if at a slower pace, aligning it with fiscal consolidation goals.

— It should simultaneously create an environment that encourages private investment and public-private partnership in infrastructure. To what extent will the Budget listen to the Survey? We will soon know.

It ducks the hard questions

— Subhash Chandra Garg writes: Economic Surveys (ES), prepared under the leadership of the Chief Economic Advisor (CEA), are meant to inform policymakers, businessmen and citizens on three key aspects of the government’s role in the economy and society, and in global economic engagement.

— First, a fair and objective assessment of the economy’s performance, both macroeconomic and sectoral. Second, a critical diagnostic of key issues facing the economy and suggested policy solutions. Third, an honest critique of budget performance, offering choices for course-correction.

— Besides a performance review, it discusses three major issues: The effectiveness of Swadeshi/import substitution strategy; input cost reduction strategy to build competitiveness; and progression to strategic indispensability in a fractured world.

— ES-26 does not explain why the difference between nominal and real is only 0.6 per cent. The worst part is that the rupee has depreciated by more than 6.5 per cent so far. An 8 per cent nominal GDP growth with 6.5 per cent rupee depreciation means dollar GDP growth of only 1.5 per cent!

— This is amongst the lowest globally, with India having the highest real GDP and among the lowest levels of dollar GDP growth in the same year. Yet, Nageswaran offers no explanation, despite the jeopardy to the Prime Minister’s guarantee of making India the third-largest economy before the next Lok Sabha elections.

— He dismisses rupee depreciation as a “wrinkle in the ointment”, characterising India as a “victim of geopolitics and a strategic power gap”.

— The ES-26 offers no analysis of even one government policy or programme failure. The government had announced three employment-linked -incentive schemes (ELIs) in the 2024-25 Budget to create more than 2 crore jobs and an ambitious incentive scheme for 1 crore internships.

— The internship scheme has been an abject failure with less than 10,000 youth interning in the last 18 months. ELIs are also creating questionable jobs. Nageswaran’s Survey offers neither a diagnostic nor advice for course-correction.

— Manufacturing has been a major bugbear for India, stagnating at around 12-13 per cent despite programmes like Make In India, production-linked incentives (PLIs), etc. ES-26 only offers a static and favourable description of various programmes.

— PLIs have been hailed without explaining why they have not disbursed even 10 per cent in four years (out of their six years’ life) and why some big ones have not even started disbursing (e.g. ACC batteries, IT Hardware and automobiles).

Other Important Articles Covering the same topic:

📍Economic Survey flags the right questions 

Previous year UPSC Mains Question Covering similar theme:

Explain the meaning of investment in an economy in terms of capital formation. Discuss the factors to be considered while designing a concession agreement between a public entity and a private entity. (UPSC CSE 2020)

 

EXPLAINED

Gandhi’s Gram Swaraj ideal, and why true devolution of power has remained out of reach

Syllabus:

Preliminary Examination: History of India and Indian National Movement

Mains Examination: General Studies-I: Modern Indian history from about the middle of the eighteenth century until the present –significant events, personalities, issues

What’s the ongoing story: A week before the commencement of Parliament’s Budget session, Congress President Mallikarjun Kharge criticised the Union government for changing the name of the MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) to VB-G RAM G (The Viksit Bharat — Guarantee for Rozgar and Ajeevika Mission-Gramin).

— What was the role of Mahatma Gandhi in India’s freedom struggle?

— What is the difference between MGNREGS and VB-G RAM G?

— What was the Gandhian idea of rural development?

— What do you understand about Gandhi’s swaraj?

— Know about the Champaran satyagrah

— What were the major magazines or newspapers published by Gandhi?

— How independent India has embodied the ideas of Gandhi?

Key Takeaways:

— Introduced in 2005 under the Manmohan Singh-led UPA government, the MGNREGS was notified with effect from February 2006 to provide basic livelihood opportunities in rural India…. The “Mahatma Gandhi” prefix, however, was added to the scheme only on October 2, 2009.

— The Congress also criticised the removal of Gandhi’s name from the scheme, evoking his philosophy, which championed the self-sufficiency of rural areas for the health of the nation as a whole.

— Gram swaraj of Gandhi: Across his writings, Gandhi envisioned the all-round development of villages and their self-reliance.

President Droupadi Murmu, PM Narendra Modi, Defence Minister Rajnath Singh along with others pay homage to Mahatma Gandhi on his death anniversary at Rajghat, on January 30, 2026 in New Delhi. (Express Photo By Renuka Puri)

— He wrote on June 23, 1946, “I regard the growth of cities as an evil thing, unfortunate for mankind… The British have exploited India through its cities. The latter have exploited the villages. The blood of the villages is the cement with which the edifice of the cities is built. I want the blood that is today inflating the arteries of the cities to run once again in the blood vessels of the villagers.”

— His speech was matched by action, be it in Champaran, where he led his first major satyagraha in 1917, and Sevagram, a self-sufficient ashram he established in Maharashtra.

— Gandhi regularly wrote on the subject in his magazines Harijan and Young India. On July 26, 1942, he wrote in Harijan on the idea of Gram Swaraj, “My idea of Village Swaraj is that it is a complete republic, independent of its neighbours for its own vital wants, and yet interdependent.

— In the early years of Independence, policy focus was on urban-centric development. The urban-rural gap kept widening, prompting migration to major industrial townships for jobs, even if that meant those coming from the villages ended up in slums, living in suboptimal conditions.

— What happened to Gandhi’s idea of Gram Swaraj? Genuine devolution of power — financial, political and administrative — is still out of reach, often hinging upon the political will of those at higher levels of governance, and their reluctance to let go of control. Changing these impulses will require much more than policy and funding-related changes.

Do You Know:

— The law on the governance of India’s villages was a manifestation of one of Mahatma Gandhi’s central principles. He often championed the idea of a Panchayati Raj setup, where local people participate in the functioning of their villages – in improving the condition of schools, roadways and water bodies.

— In fact, Gandhi stated that after Indian independence from British rule in 1947, he wished for the Congress Party to transform into a volunteer organisation consisting of panchayat-like units in all Indian villages to interact with villagers for achieving swaraj. We explain what Gandhi meant when he spoke about the concept and why the law was a milestone.

Other Important Articles Covering the same topic:

📍This Quote Means: When Mahatma Gandhi said, ‘Every village has to become a self-sufficient republic’

Previous year UPSC Prelims Question Covering similar theme:

(3) In 1920, which of the following changed its name to “Swarajya Sabha”? (UPSC CSE 2018)

(a) All India Home Rule League

(b) Hindu Mahasabha

(c) South Indian Liberal Federation

(d) The Servants of India Society

Previous year UPSC Mains Question Covering similar theme:

Assess the importance of the Panchayat system in India as a part of local government. Apart from government grants, what sources the Panchayats can look out for financing developmental projects? (UPSC CSE 2018)

 

THE EDITORIAL PAGE

In Central PSU turnaround stories, there’s a lesson for the states

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-III: Indian Economy and issues relating to planning, mobilisation, of resources, growth, development and employment.

What’s the ongoing story: Soumya Kanti Ghosh writes: With the Union Budget only a couple of days away, it is important to trace the evolution of public-sector enterprises (PSEs) over the last decade. With the collapse of economic planning, worldwide, PSEs have been in a process of transformation. This has been visible across countries such as China and, most importantly, India in the last decade.

— What are public-sector enterprises (PSEs)?

— What is the need of PSEs in a country like India?

— What is gross capital formation?

— What are the challenges facing PSEs?

— What was the twin balance sheet crisis?

— What are the different types of Central Public Sector Enterprises?

— Capital expenditure has become critical in determining India’s growth. Elaborate.

Key Takeaways:

— Globally, reforms in PSEs were triggered by the massive influence exerted by the public sector on the economy, requiring better efficiency and delivery of services. Among the many reforms over the years, the listing of enterprises and technology upgrades are prominent; adopting corporate governance standards and taking the lead in low-carbon transitions are more recent developments.

— As per the OECD, in 2023, the public sector owned over 25 per cent of 2,037 listed companies worldwide, representing 11.6 per cent of total market capitalisation.

— The term PSE has wide connotations in India and includes both Central and state PSEs. For our purpose, we will primarily concentrate on Central PSEs (CPSEs).

— In the Indian context, the 2020 New PSE Policy for Atmanirbhar Bharat streamlines PSEs by classifying sectors as strategic or non-strategic. In the non-strategic sectors, the government has minimised presence, while in the strategic sectors (defence, energy, space, etc.) it will maintain a bare minimum presence with one to four PSEs, making room for private-sector participation.

— During the last decade, CPSEs in India have shown a remarkable turnaround, from policy paralysis and stagnant growth to becoming significant drivers of financial value, higher profitability, and capital expenditure.

— The number of profit-making CPSEs has increased from 157 in FY15 to 227 in FY25, while the number of loss-making CPSEs declined from 77 to 63 during the same period

— Gross capital formation by non-financial CPSEs has grown by 11.9 per cent and has been a mainstay of investment demand in core sectors.

— Among the financial CPSEs, banks have seen phenomenal turnarounds after the twin balance sheet crisis. Following the amalgamation exercise, the financial performance of PSU banks has improved, and the pace of technology adoption has increased.

— Another remarkable aspect of the PSE reforms has been their growing contribution to exports. CPSEs have achieved notable success in defence, engineering, and commodities exports with defence exports surging to a record high of Rs 23,622 crore in 2024-25.

— Following the government decision to allow CPSEs to acquire foreign assets, Indian oil PSUs have established a significant presence globally, with a total of 45 assets spread across 21 countries. They have a cumulative investment of about $40.6 billion.

— In the coming decades, CPSEs will continue to face headwinds and challenges as technology evolves and market dynamics change.

— Growing use of technology will put the focus on the need for skill upgrades to achieve the desired agility. R&D spending will also be an area that may need attention.

Other Important Articles Covering the same topic:

📍Easing PSU stake sale to duty correction: Pointers for Budget

Previous year UPSC Mains Question Covering similar theme:

Public Undertakings of the Central Government could be booked upon both as an asset and a liability. Which measures would you suggest to enhance their utility as an asset and to reduce their drag as a liability? Examine in depth the working of one central public undertaking in this context. (UPSC PSIR Optional 1990)

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PRELIMS ANSWER KEY

1. (b)  2. (b)  3. (a)

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