Telegram Web Link
UPSC GS Economy (GS 3) by CA Rahul Kumar
Photo
India is transitioning its stance on stablecoins to preparing for formal engagement, as highlighted by Finance Minister Nirmala Sitharaman’s statement about the need to engage with assets such as stablecoins.
• There are three main types of stablecoins: fiat-backed (e.g., USDT, USDC), crypto-backed (e.g., DAI), and algorithmic, each with differing mechanisms for maintaining price stability and varying degrees of risk.
• Stablecoins are part of a broader modernization of financial infrastructure, offering benefits like instant cross-border settlement, lower remittance costs, and new opportunities for decentralized financial services within India’s growing fintech landscape.
• Globally, regulatory frameworks are emerging—such as the EU’s MiCA and the US GENIUS Act—aimed at ensuring stablecoins are transparent, well-backed, and integrated safely into traditional finance. India is considering similar approaches to balance innovation with financial stability.
• The article foresees that interoperable digital assets like stablecoins, integrated with technologies such as UPI and Aadhaar, will fundamentally redefine payment systems by making money movement faster, more inclusive, and machine-speed efficient, bridging gaps between banks, blockchains, and algorithms.
UPSC GS Economy (GS 3) by CA Rahul Kumar
Photo
Capital Formation
Capital formation refers to the process of building up the capital stock of a country through investing in productive plants and equipment, infrastructure, and other assets that increase the production capacity and economic growth of an economy.

Key Points from the Article
- The article argues that it is urgent for Indian private capital to focus on domestic investment rather than seeking quick returns overseas, especially in an uncertain global environment with trade disruptions and shrinking export demand.
- Historically, public investment by the Indian government has driven growth, but now private sector investment is lagging behind despite high profits, which hampers job creation and inclusive economic progress.
- There is a need for private capital to align with national priorities, including manufacturing, innovation, regional development, and sectors such as green energy, digital infrastructure, and R&D, in order to make India globally competitive.
- The article highlights that India's GDP growth above 7%, strong foreign reserves, and large-scale public investment have created a foundation for a potential economic leap, but sustained long-term growth depends on ramping up domestic private investment moving forward.

- The path ahead requires Indian business houses to collaborate closely with the government, adapt to changing global realities, and channel private sector funds into domestic opportunities to ensure resilient, inclusive, and innovati
UPSC GS Economy (GS 3) by CA Rahul Kumar
Photo
Gold Monetisation Scheme
Gold Monetisation Scheme (GMS) refers to an initiative by the Government of India that aims to mobilise the gold held by households and institutions and put it into productive use, reducing the country’s reliance on gold imports, and enabling depositors to earn interest on their gold accounts.

Key Points from the Article
• The article highlights Atmanirbharta (self-reliance) as a central part of India’s story, especially in the context of financial resilience; recent global uncertainties strengthen the case for mobilising India’s vast domestic wealth.
• Despite Indian households holding nearly 25,000 tonnes of gold (worth over half of India’s GDP), the country remains one of the largest importers of gold, with imports causing a significant trade deficit—presenting both a challenge and an opportunity.
• The author calls for a revitalised, trust-based gold monetisation scheme, which can integrate household gold into the formal economic system, lowering the cost of capital and fostering sustainable domestic growth.
• For effective gold monetisation, three essentials are needed: strong infrastructure (hallmarking and purity-testing centres), robust logistics (secure bank-led collection and movement), and digitalisation (allowing households to transparently track gold holdings and earnings)
• The article concludes that mobilising household gold can reinforce India’s financial self-reliance, creating a vast pool of domestic capital for investment, infrastructure, and innovation, thus enabling India to define its own growth trajectory
3
UPSC GS Economy (GS 3) by CA Rahul Kumar
Photo
Key Points
The India-UK Free Trade Agreement (FTA) signed recently marks a bipartisan consensus in the UK and sets a broad framework for cooperation, including trade reaching an expected $110 billion by 2030 and increasing bilateral trade to $26 billion. It promotes competitive market access and duty-free exports for Indian goods.

Economic cooperation covers goods, services, IT, financial and professional services, and mutual recognition of qualifications, especially in engineering and education sectors. The agreement supports Indian startups and SMEs with easier market access in the UK.

Defense cooperation includes a new roadmap for collaboration in design, production of defense technologies, and joint exercises, enhancing security ties amid geopolitical uncertainties.

The education partnership envisions growing Indian student numbers in UK universities, scholarship and young professional schemes, and mutual recognition of academic qualifications to boost talent exchange.

Cultural and people-to-people ties are emphasized through film co-production, creative industries growth, and easing visa opportunities for skilled professionals, reinforcing the historical connections and future collaboration.

UPSC Key Term
Free Trade Agreement (FTA) - An accord between countries to reduce or eliminate trade barriers like tariffs, quotas, and import restrictions, thereby promoting freer flow of goods and services and enhancing economic cooperation.
UPSC GS Economy (GS 3) by CA Rahul Kumar
Photo
The Indian semiconductor sector has seen rising investor interest, with more than half a dozen startups in talks to raise funds from domestic venture capital firms, partly due to the government's push for self-reliance and geopolitical uncertainties.

The DLI scheme offers government incentives to selected companies, enabling them to access funding more easily and making the Indian semiconductor space attractive to both VC firms and large corporations like Zoho.

Several startups, such as CalligoTech, 3rdiTech, SandLogic, and Terminus Circuits, have directly benefited from DLI by raising substantial investments, with Indian semiconductor startups raising $90 million in five years.

The DLI tag acts as a filter, helping venture capitalists shortlist promising semiconductor startups for investment, and companies receiving DLI support are more likely to attract pre-seed discussions with investors.

The emergence of AI and advanced chip technologies has further intensified investment interest, with global semiconductor majors also joining or launching Indian AI chip ventures.

UPSC Key Term Definition
Design-Linked Incentive (DLI) Scheme:
A government initiative aimed at supporting and incentivizing domestic semiconductor design startups by offering financial and infrastructural assistance, which helps increase innovation, self-reliance, and global competitiveness in the semiconductor sector
UPSC GS Economy (GS 3) by CA Rahul Kumar
Photo
Key Points:

India has begun small but significant steps to extend the use of rupee in international trade with neighboring countries like Nepal, Bhutan, and Sri Lanka by allowing rupee-denominated trade loans and special rupee accounts for foreign partners.

While the idea of being able to convert any amount of rupees to dollars and easing capital controls sounds appealing, it carries risks such as large outflows causing forex reserve depletion and rupee value volatility.

India’s aim is to gradually reduce reliance on the US dollar in international trade and finance, moving towards a more internationalized rupee, but full convertibility requires strong capital account management and economic strength.

The article draws historical lessons from Britain’s experience with sterling convertibility post-WW2, which failed due to capital flight, and China's gradual internationalization of the RMB, stressing that such transitions are complex and require caution.

Small incremental reforms like the recent RBI steps are prudent, but ambitious full convertibility of the rupee is not advisable for decades to come due to structural economic factors and risks in capital flows.

UPSC Key Term:
Capital Account Convertibility - The freedom to convert local financial assets into foreign financial assets and vice versa at market-determined rates without restrictions. It allows capital flows across countries but requires strong financial stability and regulatory oversight to prevent economic shocks.
1
China has expanded its export controls to include five more rare earth elements (holmium, erbium, thulium, europium, ytterbium), significantly tightening its grip over the global rare earth supply ahead of important trade talks with the US.
• These rare earth elements are crucial for high-tech industries such as semiconductors, fiber optics, X-ray and laser equipment, nuclear reactors, and advanced medical imaging, underscoring their strategic importance.
• The new controls mean foreign companies must now get licenses from the Chinese government to export items containing even minimal amounts of these rare earths, with license applications for military or sensitive use typically being denied.
• China processes about 90% of the world’s rare earths, giving it major leverage in the global technology supply chain and making these export restrictions a powerful bargaining tool in international trade disputes
• In total, 12 out of the 17 rare earth elements now face export restrictions, highlighting increasing efforts by China to protect its national interests and influence key global industries like EVs, aircraft, and military equipment.
2025/10/21 18:09:20
Back to Top
HTML Embed Code: