August 13th Current Affairs
Table of Contents
Current affairs
Operation Sindoor
July 21st Current Affairs Home / Operation Sindoor Why in News? Parliament’s Monsoon Session, starting July 21, 2025, is expected to feature
July 21, 2025
Current affairs
Alaska Earthquakes
July 21st Current Affairs Home / Alaska Earthquakes Why in News? On July 21, 2025, Alaska Peninsula was struck by
July 21, 2025
Current affairs
August 2, 2027 Solar Eclipse
July 21st Current Affairs Home / August 2, 2027 Solar Eclipse Why in News? A total solar eclipse is set
July 21, 2025
Current affairs
India’s milestone in clean energy transition
July 21st Current Affairs Home / India’s milestone in clean energy transition Why in News? India achieved a milestone by
July 21, 2025
Current affairs
‘Baby Grok’, child-friendly AI app
July 21st Current Affairs Home / ‘Baby Grok’, Child-friendly AI app Why in News? Elon Musk’s AI company xAI has announced
July 21, 2025
Current affairs
Impeachment proceedings against Justice Yashwant Verma
July 22nd Current Affairs Home / Impeachment proceedings against Justice Yashwant Verma Context On July 22, 2025, impeachment proceedings against
July 22, 2025
Continue Bachelor of Elementary Education (BElEd) programme, in favour of the new ITEP.
Context
A Parliamentary Standing Committee has opposed the National Council for Teacher Education’s (NCTE) proposal to scrap the four-year BElEd teacher training program, calling the move “short-sighted” and urging the preservation of its established expertise.
Background
Aligning with the National Education Policy (NEP) 2020, the NCTE proposed replacing the BElEd with the Integrated Teacher Education Programme (ITEP), citing BElEd’s high faculty requirements and limited expansion over the last three decades.
Constitutional Provisions
- Seventh Schedule, List-III (Concurrent List), Entry 25: This entry places ‘Education, including technical education, medical education and universities’ on the Concurrent List. This means both the Union and State governments can legislate on the subject. The parliamentary panel’s recommendation for the Centre to consult states before altering teacher education structures is rooted in this provision.
- Article 21A: This article guarantees the fundamental right to education for children between 6 and 14 years. The quality of this education is intrinsically linked to the quality of teachers, making the debate over the best teacher training program (BElEd vs. ITEP) crucial for its effective implementation.
- Article 45: This Directive Principle of State Policy urges the state to provide early childhood care and education. Well-trained elementary teachers are fundamental to fulfilling this directive.
Laws
- National Council for Teacher Education (NCTE) Act, 1993: The NCTE is a statutory body established under this Act to regulate the standards, procedures, and curricula of teacher education programs in India. The draft regulations proposing to scrap BElEd are issued under the authority of this Act.
- Right of Children to Free and Compulsory Education (RTE) Act, 2009: The RTE Act mandates specific pupil-teacher ratios and minimum qualifications for teachers. The choice of teacher education program directly impacts the supply of qualified teachers needed to meet RTE norms.
- National Education Policy (NEP) 2020: This policy is the primary driver of the proposed change. It mandates that a four-year integrated B.Ed. degree will become the minimum qualification for school teachers by 2030, which the NCTE is implementing through the ITEP.
Supreme Court Cases
- State of Tamil Nadu v. K. Shyam Sunder (2011): The Supreme Court held that the right to education under Article 21A is not merely a right to access but a right to quality education. This verdict underscores the importance of maintaining high-quality teacher training programs like BElEd, which are acclaimed for their rigor.
- T.M.A. Pai Foundation v. State of Karnataka (2002): While dealing with the rights of minority institutions, this case established broad principles on the autonomy of educational bodies versus state regulation. It provides a legal backdrop for how much regulatory control bodies like NCTE can exert over institutions offering specific courses.
Reasons for the Proposed Discontinuation
- High Resource Demand: BElEd is considered a “high faculty demand programme,” requiring 16 faculty members for a batch of 50 students.
- Lack of Scalability: Despite being around for 30 years, the program is offered in only 99 institutions, primarily in Delhi and Uttar Pradesh.
- Policy Alignment: The government aims to standardize teacher education under a single four-year model, the ITEP, in line with NEP 2020.
- Efficiency: The proposed ITEP is more resource-efficient, requiring only 9 faculty members for the same batch size.
Significance of the Programme's Continuation
- Proven Track Record: BElEd is an “internationally acclaimed” program with over 30 years of history in producing high-quality elementary school teachers.
- Pedagogical Excellence: It is known for its rigorous, research-based curriculum and focus on social consciousness, which is crucial for elementary education.
- Preservation of Expertise: Discontinuation would dismantle decades of accumulated academic and institutional expertise.
- Promoting Diversity: Allowing multiple successful models of teacher education to coexist prevents a monolithic, “one-size-fits-all” approach.
Definition of Technical Terms
- BElEd (Bachelor of Elementary Education): A four-year integrated undergraduate degree program initiated in 1994-95, designed to prepare teachers for the elementary level (Classes 1 to 8). It is known for its strong emphasis on theory, research, and practical application.
- ITEP (Integrated Teacher Education Programme): A four-year dual-major holistic undergraduate degree (e.g., BA B.Ed., BSc B.Ed.) introduced as per NEP 2020. It is designed to be the new minimum degree qualification for teachers by 2030.
- NCTE (National Council for Teacher Education): The statutory body under the Government of India responsible for the planned and coordinated development of the teacher education system and for the regulation and proper maintenance of norms and standards.
Educational
- Quality vs. Quantity: The core of the debate is the classic policy tension. BElEd represents a high-quality, intensive model that is difficult to scale. ITEP is designed for scale and uniformity to address the massive teacher shortage (~10 lakh vacancies), potentially at the cost of pedagogical depth.
- Specialization vs. Generalization: BElEd is a specialist program for elementary education. Scrapping it for a more generalized ITEP could dilute the specific skills needed to teach younger children effectively.
- Pedagogy vs. Structure: The conflict is not just between two courses but two philosophies. The panel supports BElEd for its proven pedagogical value, while the NCTE supports ITEP for its structural efficiency and alignment with a new national policy.
Impacts on Education
- Teacher Quality: The decision will directly shape the quality and orientation of future elementary school teachers. Scrapping BElEd could lead to the loss of a cohort of teachers specifically trained in child-centered pedagogy.
- Institutional Disruption: The 99 institutions offering BElEd will have to undergo significant academic and administrative restructuring to transition to ITEP, potentially losing their unique character.
- Addressing Vacancies: A streamlined ITEP could potentially produce teachers faster, helping to fill the large number of vacancies. However, the quality of these teachers remains a point of debate.
- Curriculum Development: The unique, research-based curriculum of the BElEd program risks being lost if it’s completely dismantled instead of being integrated into new frameworks.
Challenges
- Scaling BElEd: The primary challenge that led to the discontinuation proposal remains: how to expand a resource-intensive program like BElEd across the country without diluting its quality.
- Faculty Development: Meeting the high faculty-student ratio of BElEd is a significant financial and logistical hurdle for many institutions.
- Policy Cohesion: The move to scrap a successful program creates policy dissonance, suggesting that administrative uniformity is being prioritized over proven educational outcomes.
- Centre-State Friction: Pushing a uniform model without adequate consultation with states could lead to implementation challenges, as education is a concurrent subject.
Way Forward
- Adopt a Hybrid Model: The most viable solution is to integrate the core strengths, curriculum, and pedagogical principles of BElEd into the new ITEP framework, as suggested by the panel.
- Allow for Multiple Models: Permit states and universities to offer both BElEd and ITEP, allowing for diversity and innovation in teacher training.
- Phased and Consultative Transition: Instead of a sudden discontinuation, implement a gradual transition with extensive consultations involving states, universities, and academic experts.
- Invest in Faculty: Provide financial incentives and support for institutions to hire and train the faculty required to run high-quality teacher education programs, whether BElEd or a revamped ITEP.
- Focus on Outcomes: The NCTE’s focus should shift from regulating structural inputs (like faculty numbers) to ensuring quality learning outcomes for student-teachers, regardless of the program’s name.
Prelims MCQ
Q. Consider the following statements: 1. The National Education Policy (NEP) 2020 explicitly recommends the discontinuation of the BElEd programme. 2. Since 'Education' is on the Concurrent List, the Central Government must obtain the consent of state governments before changing teacher education regulations. Which of the statements given above is/are correct?
Mains Question
Q. The proposed discontinuation of the BElEd programme in favour of the ITEP highlights a classic policy dilemma between scalability and quality in teacher education. Critically analyze.(150 words)
The World Elephant Day 2025 celebration in Coimbatore.
Context
The Union Environment Ministry is celebrating World Elephant Day in Coimbatore, focusing on mitigating human-elephant conflict. This highlights India’s leading role in conserving its ~60% share of the world’s wild elephant population.
Background
Observed annually on August 12, World Elephant Day raises awareness for elephant conservation. India designated the elephant its National Heritage Animal in 2010 and launched Project Elephant in 1992 to protect this keystone species.
Constitutional Provisions
- Article 48A: This Directive Principle of State Policy mandates that “The State shall endeavour to protect and improve the environment and to safeguard the forests and wildlife of the country.” This is the constitutional foundation for conservation initiatives like Project Elephant.
- Article 51A(g): This Fundamental Duty requires every citizen “to protect and improve the natural environment, including forests, lakes, rivers and wildlife, and to have compassion for living creatures.” This underpins the call for widespread public support in conservation.
- Seventh Schedule, Concurrent List (Entry 17B): ‘Protection of wild animals and birds’ is on the Concurrent List, empowering both the Union and State governments to legislate. This explains the collaborative nature of the event between the MoEF&CC and the Tamil Nadu Forest Department.
Laws
- Wildlife (Protection) Act, 1972 (WPA): This is India’s primary legislation for wildlife conservation.
- The Asiatic Elephant (Elephas maximus) is listed in Schedule I of the Act, affording it the highest degree of legal protection.
- Hunting, poaching, or illegal trade of elephants or their parts (like ivory) attracts severe penalties.
- Environment (Protection) Act, 1986: This umbrella legislation is used to notify Eco-Sensitive Zones (ESZs) around Protected Areas, including elephant reserves and corridors, to regulate and restrict developmental activities that could harm their habitat.
- Project Elephant (1992): A Centrally Sponsored Scheme launched by the MoEF&CC to provide financial and technical support to states for the protection of elephants, their habitats, and corridors, and to address human-elephant conflict.
Supreme Court Cases
- Hospitality Association of Madurai v. The District Collector (2020): In this landmark case, the Supreme Court upheld the Tamil Nadu government’s notification of the ‘Madukkarai Elephant Corridor’ near Coimbatore and ordered the sealing of several resorts and hotels operating there. This verdict strongly affirmed the legal sanctity of elephant corridors.
- T.N. Godavarman Thirumulpad v. Union of India (ongoing): This long-running case has led to numerous judicial interventions for forest protection across India, directly benefiting elephant habitats by preventing deforestation and encroachment.
- Animal Welfare Board of India v. A. Nagaraja (2014): The ‘Jallikattu’ case expanded the interpretation of the ‘right to life’ for animals under the Prevention of Cruelty to Animals Act, establishing that animals have a right to be free from unnecessary suffering. This principle applies broadly to the welfare of all wildlife, including elephants impacted by conflict.
Reasons for Focus on Human-Elephant Conflict (HEC)
- Habitat Fragmentation: Increasing diversion of forest land for agriculture, industry, and linear infrastructure (highways, railways) is shrinking and breaking up elephant habitats.
- Crop Raiding: Elephants are drawn to palatable crops like sugarcane and paddy, leading to significant economic losses for farmers and fostering animosity.
- Corridor Blockage: Obstruction of traditional elephant corridors forces elephants to venture into human-dominated landscapes, increasing the probability of negative interactions.
- Mutual Casualties: HEC results in the unfortunate loss of both human and elephant lives annually.
Significance of the Event
- Policy Dialogue: It serves as a crucial platform for policymakers, forest officials from various states, and experts to share best practices and challenges in HEC mitigation.
- Public Awareness: Involving 12 lakh students fosters a conservation ethic in the younger generation, which is vital for long-term success.
- Inter-Agency Coordination: The presence of officials from the Ministry of Railways highlights a focus on mitigating elephant deaths on railway tracks, a major conflict issue.
- Global Leadership: The event reaffirms India’s commitment and showcases its conservation model to the world.
Definition of Technical Terms
- Human-Elephant Conflict (HEC): Any negative interaction between humans and elephants that results in harm or loss to either the human population (death, injury, property damage) or the elephants (death, injury, habitat loss).
- Elephant Corridor: A narrow strip of forested land that connects two or more larger elephant habitats, allowing for movement and genetic exchange between elephant populations. India has identified around 150 such corridors.
- Keystone Species: A species on which other species in an ecosystem largely depend, such that if it were removed, the ecosystem would change drastically. Elephants are ‘ecosystem engineers’ who shape their environment.
- National Heritage Animal: A symbolic title granted to the Indian elephant in 2010 to raise its conservation profile and encourage greater protection, similar to the status of the tiger as the National Animal.
Environmental implications
- Elephants as Ecosystem Engineers: Elephants play a critical role in maintaining forest health. They disperse seeds over vast distances, create gaps in the canopy that allow sunlight to reach the forest floor, and dig for water in dry riverbeds, which benefits numerous other species.
- Corridor Ecology: Corridors are not just pathways; they are vital for maintaining the genetic diversity of elephant populations. Blocking them isolates populations, leading to inbreeding and a higher risk of local extinction.
- Impact of Invasive Species: The spread of invasive alien plants like Lantana camara in forests reduces the availability of palatable food for elephants, forcing them to seek sustenance in agricultural fields outside the forest.
- Climate Change: Erratic weather patterns can alter the fruiting and flowering seasons of forest plants, disrupting elephant food sources and pushing them into conflict zones.
Impacts on Human-Wildlife Conflict
- Improved Mitigation: The workshop can lead to the adoption of more effective, scientifically-backed HEC mitigation strategies like early warning systems, sensor-based alarms, and community-managed solar fencing.
- Increased Community Tolerance: Large-scale awareness campaigns and community participation initiatives, as planned under Project Elephant, can help foster greater tolerance and reduce retaliatory killings of elephants.
- Policy Integration: Collaboration with the Ministry of Railways can lead to integrated solutions like building underpasses at critical locations and regulating train speeds in identified corridors.
Challenges
- Linear Infrastructure: Unplanned expansion of railways and highways through forest areas remains the biggest threat, fragmenting habitats and causing direct mortality.
- Legal Status of Corridors: Many of the 150 identified corridors lack legal protection, making them vulnerable to encroachment and land-use change.
- Inadequate and Delayed Compensation: Farmers suffering crop loss often receive low and delayed compensation, leading to anger and retaliation against elephants.
- Resource Constraints: State forest departments often face shortages of funding and trained frontline staff to manage HEC effectively across vast landscapes.
- Electrocution: Illegal electric fences set up by farmers are a major cause of unnatural elephant deaths.
Way Forward
- Legally Secure Corridors: Grant legal protection to all identified corridors under the Environment (Protection) Act, 1986, or by declaring them as ‘community reserves’ or ‘conservation reserves’ under the WPA, 1972.
- Landscape-Level Management: Move beyond a protected-area-centric approach to a landscape-level plan that integrates conservation and development needs across forests, farms, and villages.
- Technology-Aided Mitigation: Scale up the use of AI-based early warning systems, GPS-collaring for tracking elephant herds, and mobile apps (like the Gaj Soochna App) to provide real-time alerts to villagers and forest staff.
- Community as Stakeholders: Empower local communities by making them conservation partners. Promote crop insurance schemes and eco-tourism to provide alternative livelihoods and reduce dependency on agriculture.
- Habitat Restoration: Undertake massive drives to remove invasive species from forest areas and enrich habitats with native food plants and water sources to keep elephants inside protected areas.
Prelims MCQ
Consider the following statements: 1. The Asiatic Elephant is listed in Schedule I of the Wildlife (Protection) Act, 1972, and has been designated as India's National Aquatic Animal. 2. Under the provisions of Project Elephant, the Chief Wildlife Warden of a state can permit the culling of an elephant if it is declared 'vermin'. Which of the statements given above is/are correct?
Mains Question
Q. Human-elephant conflict is more of a developmental issue than a wildlife one. Discuss, suggesting a multi-pronged mitigation strategy. (150 words)
The government has approved four new semiconductor plants in Odisha, Punjab, and Andhra Pradesh.
Context
The Union Cabinet has approved four new semiconductor projects worth ₹4,594 crore in Odisha, Punjab, and Andhra Pradesh. This expansion under the India Semiconductor Mission aims to boost domestic electronics manufacturing and strategic capabilities.
Background
Launched in 2021, the India Semiconductor Mission (ISM) is a ₹76,000-crore initiative to attract investments in chip manufacturing. This move aims to reduce India’s heavy reliance on imported semiconductors for its burgeoning electronics industry.
Laws
- The Companies Act, 2013: This law governs the incorporation, functioning, and compliance requirements for the private limited companies undertaking these projects.
- Environment (Protection) Act, 1986: Semiconductor fabrication is highly resource-intensive (water, energy) and produces hazardous waste. All units must obtain stringent Environmental Impact Assessment (EIA) clearances under this act.
- Special Economic Zones (SEZ) Act, 2005: If these units are established within SEZs, they will be governed by this Act, which provides benefits like tax holidays and simplified procedures to promote exports and investment.
Government Schemes
- India Semiconductor Mission (ISM): This is the flagship scheme driving these approvals. Launched by the Ministry of Electronics and Information Technology (MeitY), it is a comprehensive program to develop a sustainable semiconductor and display ecosystem. It provides:
- Fiscal support of up to 50% of the project cost for setting up Silicon CMOS-based Semiconductor Fabs.
- Support for display fabs, compound semiconductors, silicon photonics, sensors fabs, and semiconductor packaging (ATMP/OSAT) units.
- Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing: This broader scheme incentivizes domestic production of electronic goods like mobile phones and IT hardware. A local chip supply chain directly supports the goals of this PLI scheme by providing critical components.
- Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): This scheme provides a financial incentive of 25% on capital expenditure for the manufacturing of a specified list of electronic components and semiconductors, further strengthening the ecosystem.
Significance
- Strategic Autonomy: Reduces India’s critical dependence on a few nations like Taiwan, South Korea, and China for semiconductors, which are vital for defence, aerospace, telecommunications, and critical infrastructure.
- Economic Growth: Lowers the massive import bill for electronics, creates high-skilled jobs, and attracts significant foreign and domestic investment, boosting GDP.
- Technological Advancement: The project’s focus on emerging technologies like Silicon Carbide (SiC) for power electronics and advanced packaging, building India’s capabilities beyond traditional silicon chips.
- Supply Chain Resilience: A domestic manufacturing base makes India’s electronics industry less vulnerable to global supply chain disruptions, as witnessed during the COVID-19 pandemic.
- Regional Development: By establishing plants in states like Odisha and Punjab, the mission promotes balanced regional growth in the high-technology sector.
Definition of Technical Terms
- Semiconductor: A material, most commonly silicon, which has electrical conductivity between that of a conductor (like copper) and an insulator (like glass). It’s the fundamental building block of all modern electronic devices.
- Silicon Carbide (SiC): A compound semiconductor made of silicon and carbon. It can operate at much higher temperatures, voltages, and frequencies than pure silicon, making it ideal for power electronics in electric vehicles, solar inverters, and 5G base stations.
- Discrete Semiconductor: A single, individual electronic component, such as a diode, transistor, or thyristor. These are simpler than complex Integrated Circuits (ICs) but are essential for managing power and signals in virtually all electronic devices.
- Advanced Packaging (ASIP/OSAT): Refers to the technologies used to encase semiconductor chips and connect them to circuit boards. Advanced methods like 3D stacking and using substrates like glass are crucial for improving performance and efficiency, as it becomes harder to shrink chips further.
- Glass Substrate: Using a thin sheet of glass as the base material for packaging integrated circuits. It offers superior electrical performance and thermal stability compared to traditional organic substrates, enabling smaller and more powerful devices.
Digital Technology facts
- Beyond Moore’s Law: The focus on an “advanced packaging” unit signifies an understanding of the industry’s shift. As Moore’s Law (the doubling of transistors on a chip every two years) slows down, performance gains are increasingly achieved through innovative packaging—connecting multiple smaller chips (‘chiplets’) in a single package.
- Niche over Mainstream: The emphasis on Silicon Carbide (SiC) is a strategic choice. Instead of competing head-on with giants like TSMC in cutting-edge logic chips (3nm, 5nm), India is targeting a high-growth niche market where it can build a competitive advantage. SiC is the future of power management in EVs and renewable energy systems.
- Building the Full Stack: The approved projects cover different parts of the semiconductor value chain: a compound semiconductor fab (SiCSem), a discrete component facility (Continental), and advanced packaging (3D Glass Solutions). This reflects a holistic strategy to build an entire ecosystem, not just isolated, high-profile fabs.
Impacts on the IT Sector
- Reduced Vulnerability: The IT hardware and electronics manufacturing sectors will be less susceptible to global chip shortages and price volatility, ensuring stable production lines.
- Fostering an Innovation Ecosystem: The presence of local fabs and packaging units will spur growth in ancillary industries, including chip design startups (fabless companies), R&D institutions, and suppliers of specialty chemicals and gases.
- Support for Digital India: A reliable domestic supply of chips is foundational for manufacturing the hardware needed for India’s digital ambitions, including 5G equipment, data centers, IoT devices, and AI infrastructure.
- Lowering Costs: In the long run, domestic production and reduced import duties can lower the cost of electronic devices for consumers and businesses, driving digital adoption.
Challenges
- Extreme Capital Intensity: Semiconductor fabs are among the most expensive factories in the world. The current investments, while significant for India, are a fraction of what global leaders invest annually.
- Resource Requirements: Fabs need an uninterrupted supply of ultra-pure water and extremely stable, high-quality power, which remain significant infrastructure challenges in many parts of India.
- Skilled Talent Deficit: There is a critical shortage of engineers and technicians with the highly specialized skills and experience required to operate and maintain a modern semiconductor fab.
- Intense Global Competition: India is a late entrant competing against established ecosystems in Taiwan, South Korea, the U.S., and now China, all of which have decades of experience and offer massive subsidies.
- Rapid Technological Obsolescence: The semiconductor industry evolves at a breakneck pace. A fab built today can become outdated in a few years without continuous and massive investment in R&D and upgrades.
Way Forward
- Focus on Niche Dominance: Continue to prioritize strategic niches like compound semiconductors (SiC, GaN), analog chips, memory, and advanced packaging, rather than competing directly in leading-edge logic chip manufacturing.
- Create a Robust Talent Pipeline: Aggressively scale up the Chips to Startup (C2S) programme. Forge deep collaborations between industry and academia (like IITs, NITs) to create specialized curricula and hands-on training centers for semiconductor manufacturing.
- Develop the Full Ecosystem: Use ISM and PLI schemes to incentivize the entire value chain—from raw material suppliers (specialty gases, wafers) and equipment manufacturers to chip design and testing companies.
- Guarantee Critical Infrastructure: Develop dedicated “Aqua and Power Corridors” for semiconductor parks, ensuring guaranteed access to the ultra-pure water and stable power essential for fabrication.
- Ensure Policy Stability: Provide a stable, long-term policy and regulatory framework to give investors the confidence to make the massive, patient capital investments that semiconductor manufacturing requires.
Prelims MCQ
Q. Consider the following statements:
1. The India Semiconductor Mission (ISM) provides 100% fiscal support for the project cost of setting up new semiconductor fabrication plants in the country.
2. Silicon Carbide (SiC) semiconductors are often preferred over traditional silicon semiconductors for high-power applications like electric vehicles because of their ability to operate efficiently at higher temperatures and voltages.
Which of the statements given above is/are correct?
Mains Question
Q. Beyond fiscal incentives, what ecosystem-level interventions are critical for India’s success in becoming a global semiconductor hub? (250 words)
100% FDI in the Indian Insurance Sector
Context
The Indian government has approved raising the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%. This is aimed at attracting more capital, technology, and competition to boost growth and improve insurance penetration in India.
Background
This policy change was announced in the Union Budget on February 1, 2025. It is part of a broader trend of liberalizing the Indian economy to attract foreign capital and expertise, following similar moves in other sectors like defense and telecom.
Laws
- The Insurance Act, 1938: This foundational law governs the investment by insurers, emphasizing safety and liquidity. It also restricts Indian insurance companies from investing funds outside India, ensuring all capital remains within the country. The Act mandates that insurers must maintain a certain excess of assets over liabilities to ensure financial stability.
- The Insurance Regulatory and Development Authority of India (IRDAI) Act, 1999: This Act established the IRDAI, the primary regulator for the insurance sector, responsible for overseeing fair business practices, solvency monitoring, and grievance redressal to protect policyholders.
- The Companies Act, 2013: This act governs all companies in India, including insurance firms, on matters of corporate governance, board composition, and dividend payments.
- The Indian Insurance Companies (Foreign Investment) Rules, 2015: These rules, which are subject to amendment, govern various aspects of foreign investment in Indian insurance companies, including repatriation of profits and the composition of the Board of Directors.
- The Banking Regulation Act, 1949: A recent amendment to this Act has extended the maximum continuous tenure of directors of cooperative banks (excluding the Chairperson and Whole-time Directors) from 8 to 10 years, effective August 1, 2025.
- Constitutional Provisions: The power to legislate on insurance and foreign investment falls under the Union List (List I) of the Seventh Schedule of the Constitution of India. This gives the Parliament the exclusive authority to make laws on these subjects, ensuring a unified national policy.
Significance
- Increased Capital Inflow: The policy change will attract greater long-term, stable capital into the insurance sector. This will enable insurers to expand their operations, especially in underserved rural and semi-urban areas, and invest in new technologies.
- Enhanced Competition and Innovation: The entry of more foreign players will intensify competition, leading to a wider range of innovative and affordable products for consumers. This will also facilitate the transfer of global best practices and technological know-how, particularly in areas like artificial intelligence (AI) for underwriting and claims processing.
- Job Creation: The expansion of the insurance sector is expected to generate new employment opportunities in various functions, from underwriting and claims management to sales and technology development.
- Improved Insurance Penetration: With more players and better products, India’s insurance penetration rate, which has historically been lower than the global average, is likely to increase. This will extend financial security to a larger portion of the population.
Definition of Technical Terms
- Foreign Direct Investment (FDI): An investment made by a firm or individual in one country into business interests located in another country. It involves a long-term interest and implies a degree of control over the management of the business. It is distinct from Foreign Portfolio Investment (FPI), which is a passive investment in securities.
- Insurance Penetration: The ratio of total insurance premiums to a country’s Gross Domestic Product (GDP). It indicates the level of insurance sector development and its importance in the economy.
- Solvency Margin: The surplus of an insurer’s assets over its liabilities. It is a key measure of an insurer’s financial health and its ability to meet policyholder claims. IRDAI mandates a control level of 150% solvency at all times.
- Underwriting: The process of evaluating risk and exposure to determine the premium for an insurance policy.
Financial
- Capital Availability: The insurance sector is capital-intensive. Increasing the FDI limit provides a new and significant source of capital to fund expansion and meet solvency requirements.
- Investment Mandates: While foreign capital is welcome, the Insurance Act, 1938, mandates that all funds of insurance companies must be compulsorily invested in India. This ensures that the capital inflows are not immediately repatriated and contribute to the country’s economic development.
- Repatriation of Profits: The Indian Insurance Companies (Foreign Investment) Rules, 2015, and the Companies Act, 2013, govern the repatriation of profits and payment of dividends, ensuring that a portion of the financial gains remains within the country.
Impacts on Social Security
The liberalisation of the insurance sector can have a profound impact on social security in India. A more competitive and accessible insurance market means that more individuals and families can secure themselves against unforeseen events such as illness, accidents, or death. This shift from reliance on traditional, informal support systems to formal financial protection strengthens the overall social safety net and reduces the financial vulnerability of households. The availability of diverse and affordable insurance products, including micro-insurance and customized policies for gig workers, can play a crucial role in extending social security benefits to the unorganized sector.
Challenges
- Regulatory Alignment: The existing laws, such as the Insurance Act, 1938, will need to be carefully aligned with the new FDI rules to maintain a balance between attracting foreign investment and protecting policyholder interests.
- Competition for Domestic Players: Smaller domestic insurance companies may find it difficult to compete with larger, well-capitalized foreign players, potentially leading to mergers and acquisitions.
- Consumer Education: Despite increased availability, a large portion of the Indian population lacks awareness and understanding of insurance products. Educating consumers remains a significant challenge.
- Cybersecurity Risks: With increased automation and reliance on digital technologies, the sector faces a heightened risk of cyberattacks and data breaches.
Way Forward
- Strengthening Regulatory Framework: The IRDAI must enhance its supervisory and monitoring capabilities to ensure that foreign players comply with all regulations and ethical practices.
- Promoting Financial Literacy: The government and IRDAI should collaborate to launch widespread campaigns to increase insurance literacy, especially in rural and semi-urban areas.
- Support for Domestic Players: Policies should be put in place to help domestic players innovate and compete, possibly through targeted support and incentives.
- Focus on Technology and Data Security: Mandating strong cybersecurity standards and encouraging investment in secure IT infrastructure will be crucial to protect consumer data and build trust.
Prelims MCQ
Q.Consider the following statements regarding the insurance sector in India:
1. The Insurance Act, 1938, mandates that all funds of Indian insurance companies must be compulsorily invested in India.
2. The recent increase in the FDI limit to 100% requires all foreign insurers to invest their entire premium income in India.
Which of the statements is/are correct?
Mains Question
Critically analyze the economic and social implications of raising the FDI limit to 100% in the Indian insurance sector. (250 words)
International Use of UPI
Context
The Unified Payments Interface (UPI) is experiencing a sharp rise in international transactions, with over 6 lakh cross-border transactions in the first four months of fiscal year 2025-26. This surge highlights the increasing global adoption of India’s digital payment infrastructure.
Background
The government, RBI, and NPCI have actively promoted the linking of UPI with fast-payment systems of other countries. Starting with Singapore in February 2023, UPI is now operational in seven countries, with efforts underway to expand its reach further.
Law
Payment and Settlement Systems Act, 2007: This act provides the legal framework for the regulation and supervision of payment systems in India. The Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) operate under this act.
Significance
- Enhanced Financial Connectivity: The international expansion of UPI enables seamless and low-cost cross-border payments, benefiting tourists, students, and businesses by eliminating the need for cash or expensive traditional remittance services.
- Soft Power and Leadership: The adoption of UPI by other nations enhances India’s global stature as a leader in digital public infrastructure. It’s a key example of India’s ‘soft power’ influencing global technological standards.
- Economic Diplomacy: The collaboration with other countries to link payment systems or help build their own (e.g., Namibia) strengthens diplomatic ties and economic partnerships. This fosters a shared digital ecosystem that benefits all participating nations.
- Boost to Trade and Tourism: Simplified payment methods for tourists and small businesses can significantly boost bilateral trade and tourism between India and the countries where UPI is operational.
Definition of Technical Terms
- Unified Payments Interface (UPI): An instant real-time payment system developed by the NPCI that facilitates inter-bank peer-to-peer and person-to-merchant transactions. It is built on the Immediate Payment Service (IMPS) framework.
- Fast-Payment System (FPS): A payment system that enables real-time or near-real-time fund transfers between bank accounts. UPI is India’s fast-payment system. Singapore’s equivalent is PayNow.
- Project Nexus: An initiative by the Bank for International Settlements (BIS) that aims to create a global blueprint for connecting different countries’ fast-payment systems. This project seeks to standardize the technical and legal frameworks for cross-border instant payments.
Economic
- Reduced Transaction Costs: UPI’s international use significantly lowers the cost of cross-border transactions compared to traditional banking channels, which often involve high fees and unfavorable exchange rates.
- Stimulus for Remittances: The availability of a fast and cheap payment channel like UPI can encourage the use of formal remittance channels, potentially reducing the reliance on informal and unrecorded money transfers.
- Increased Foreign Exchange Inflow: As a low-cost and efficient channel, UPI can facilitate faster and more frequent remittance flows into India, contributing to the country’s foreign exchange reserves.
Impacts on Finance
- Disruption of Traditional Remittance Market: The rise of UPI is challenging the dominance of traditional financial institutions and money transfer operators by offering a more efficient and affordable alternative for international remittances.
- Competition and Innovation: The success of UPI is prompting global financial players to innovate and improve their cross-border payment systems to remain competitive. This could lead to a more efficient and interconnected global financial ecosystem.
- Financial Inclusion: By providing a simple and accessible method for cross-border payments, UPI helps to financially include individuals who might not have access to traditional banking services for international transactions.
Challenges
- Interoperability and Standardization: A major challenge is the lack of a global standard for fast-payment systems. Different countries have different technical and regulatory frameworks, making it complex to link them.
- Regulatory Compliance and Security: Ensuring compliance with diverse anti-money laundering (AML) and counter-terrorist financing (CTF) regulations in each country is a significant hurdle. Maintaining the security of transactions across different systems is also a concern.
- Competition from Existing Players: UPI faces competition from established international payment networks like Visa and Mastercard, which have a vast global presence and strong merchant networks.
- Scalability: While the current numbers are promising, scaling up to handle billions of transactions annually, similar to domestic UPI, will require robust and resilient infrastructure.
Way Forward
- Promoting Project Nexus: India should continue to actively participate in and promote initiatives like Project Nexus to create a globally standardized framework for connecting fast-payment systems.
- Bilateral Agreements: Continued efforts to sign bilateral agreements with more countries, particularly those with significant Indian diaspora, are crucial for expanding UPI’s global footprint.
- Building a Global UPI Brand: The NPCI should invest in marketing and building a strong brand identity for UPI globally, highlighting its efficiency, security, and low cost.
- Harmonizing Regulations: Working with global bodies and central banks to harmonize regulations and create a more conducive environment for cross-border digital payments is essential.
Prelims MCQ
Q. Consider the following statements regarding the international use of UPI:
1. Project Nexus is an initiative of the Bank for International Settlements (BIS) to standardize the linking of fast-payment systems.
2. The National Payments Corporation of India (NPCI) has a legal mandate under the Payment and Settlement Systems Act, 2007, to operate UPI internationally.
Which of the statements given above is/are correct?
Mains Question
Q. Examine how the internationalization of UPI is shaping India’s economic diplomacy and its role in the global financial architecture. (150 words)
