Subject: Economy – Public Distribution System; NFSA, 2013; SARTHAK PDS; AI, ML, Blockchain Integration.

Why in News?

• The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, approved the SARTHAK Public Distribution System (PDS) Scheme.
• The scheme will run until March 2031.

What is SARTHAK PDS?

Full Form

• Scheme for Assistance in Ration Transport and Handling – Attracting Komputing (contextual; full form not officially expanded in article, but SARTHAK means “meaningful” in Sanskrit)

Nature

• Umbrella scheme that integrates two ongoing initiatives:
  1. Assistance to State Agencies for intra-State movement of foodgrains and FPS dealers’ margin under NFSA.
  2. Scheme for Modernization and Reforms through Technology in Public Distribution System (SMART PDS).

Objective

• Create a single administrative structure for improving foodgrain distribution.
• Strengthen implementation of the National Food Security Act (NFSA), 2013.

Key Components and Features

Advanced Technology Integration

• Artificial Intelligence (AI) – for data analytics and predictive modelling.
• Machine Learning (ML) – for pattern recognition and efficiency optimisation.
• Natural Language Processing (NLP) – for grievance redressal and citizen interaction.
• Blockchain – for transparent and tamper-proof record-keeping.

Unified Data Architecture

• Create unified databases and standardised digital architecture for real-time monitoring of the PDS network.
• AI-enabled analytics and grievance redressal systems.
• State Command Control Centres for monitoring operations through data-based oversight.

Certification

• ISO-certified process frameworks to strengthen transparency, security standards, and operational sustainability.

Objectives

• Improve foodgrain distribution efficiency.
• Enhance transparency and accountability in PDS.
• Reduce leakages and diversion of foodgrains.
• Strengthen implementation of NFSA, 2013.
• Leverage technology for real-time monitoring and grievance redressal.

National Food Security Act (NFSA), 2013 – Context

Coverage

• Up to 75% of rural population and 50% of urban population entitled to subsidised foodgrains.

Entitlements

• 5 kg per person per month at subsidised prices:
  • Rice: ₹3/kg
  • Wheat: ₹2/kg
  • Coarse grains: ₹1/kg

Beneficiaries

• Over 81 crore people covered under NFSA.

Implementation

• State governments identify beneficiaries under Antyodaya Anna Yojana (AAY) and Priority Households (PHH) categories.
• Foodgrains allocated by Central government; States responsible for delivery through Fair Price Shops (FPS).

Legal Right

• NFSA provides a legal entitlement to foodgrains (not just a welfare scheme).

Key Terms for Prelims

• SARTHAK PDS: Umbrella scheme integrating transport assistance and SMART PDS
• SMART PDS: Scheme for Modernization and Reforms through Technology in Public Distribution System
• NFSA, 2013: National Food Security Act – legal entitlement to subsidised foodgrains
• CCEA: Cabinet Committee on Economic Affairs (chaired by Prime Minister)
• AI (Artificial Intelligence): Technology for data analytics and predictive modelling
• ML (Machine Learning): Technology for pattern recognition and optimisation
• NLP (Natural Language Processing): Technology for grievance redressal
• Blockchain: Distributed ledger technology for transparency
• ISO Certification: International standards for quality and security
• FPS (Fair Price Shop): Retail outlet for PDS distribution (also called ration shops)
• AAY (Antyodaya Anna Yojana): Poorest of the poor beneficiaries (35 kg per family per month)
• PHH (Priority Households): Households entitled to 5 kg per person per month
• One Nation One Ration Card (ONORC): Allows portability of ration cards across states

Possible Prelims MCQs

Q1: SARTHAK PDS is an umbrella scheme that integrates assistance to State Agencies for intra-State movement of foodgrains and:

• SMART PDS (Scheme for Modernization and Reforms through Technology in PDS)

Q2: SARTHAK PDS scheme will run until:

• March 2031

Q3: Under NFSA, 2013, the subsidised price for rice is:

• ₹3 per kg
• (rice ₹3/kg; wheat ₹2/kg; coarse grains ₹1/kg)

Q4: Which technology is NOT mentioned as part of SARTHAK PDS for technology integration?

• Quantum Computing

Q5: The SARTHAK PDS scheme aims to strengthen implementation of which Act?

• National Food Security Act, 2013

Q6: What is the full form of SMART PDS?

• Scheme for Modernization and Reforms through Technology in Public Distribution System

Q7: The SARTHAK PDS scheme proposes to introduce which certification for process frameworks?

• ISO

Q8: Under NFSA, 2013, Antyodaya Anna Yojana (AAY) beneficiaries are entitled to:

• 35 kg per family per month

Source/Reference:

https://www.thehindu.com/news/national/cabinet-approves-extension-of-sarthak-pds-scheme-with-central-outlay-of-25530-crore/article71028748.ece#google_vignette

Subject: Art & Culture – Folk Music; Padma Shri 2026; Algoza Instrument; Rajasthan; Thar Desert; Taga Ram Bheel.

Why in News?

• Taga Ram Bheel, a renowned folk artist from Jaisalmer, Rajasthan, was conferred the Padma Shri (Art category) in May 2026.
• He was honoured for preserving and promoting the traditional music of the Thar Desert through the rare folk instrument, the Algoza.

About Taga Ram Bheel

Village: Moolsagar, Jaisalmer district, Rajasthan
Age: 62 years (as of 2026)

Musical Journey

• Developed interest in Algoza during childhood; mastered by age 10.
• Bought his first Algoza at age 11.
• First public performance: Jaisalmer Desert Festival (1981).
• First international performance: France (1996).
• Performed in over 35 countries (US, Russia, Japan, Singapore, several African and European nations).

Unique Skills

• Also crafts Algoza instruments with his own hands – handmade instruments in demand worldwide.
• Continued working in mining for livelihood despite global recognition.

Significance of his Padma Shri

• Recognised for keeping the traditional musical heritage of Marudhara (Thar Desert) alive on the global stage.
• Credited with giving a new identity to the rare art of Algoza playing.

About Algoza

Type

• Traditional pair of woodwind instruments (twin flutes).

Geographical Association

• Widely associated with Rajasthan, Punjab, Sindh, and parts of western India and Pakistan.
• One of India’s oldest surviving folk wind instruments.

Name Meaning

• Derived from “two flutes” – played using two wooden pipes simultaneously.

How it is Played

• One flute plays the melody.
• The other provides a continuous drone or rhythmic base.
• Together, they create a hypnotic, layered sound unique to desert folk music.

Circular Breathing Technique

• Musicians must master circular breathing – demanding technique allowing continuous blowing without stopping for breath.
• Sound is generated by breathing into it rapidly; quick recapturing of breath on each beat creates a bouncing, swing rhythm.
• Creates the instrument’s signature uninterrupted flow – making performances sound seamless and meditative.
• Artists describe Algoza playing as a true “game of breath”.

Key Terms for Prelims

• Algoza: Traditional twin woodwind instrument; “two flutes” – one melody, one drone
• Taga Ram Bheel: Padma Shri awardee (2026); Algoza maestro from Jaisalmer, Rajasthan
• Circular Breathing: Technique to produce continuous sound without pausing for breath
• Marudhara: Traditional name for the Thar Desert region (Rajasthan)
• Jaisalmer Desert Festival: Annual cultural festival (January/February)
• Padma Shri: Fourth highest civilian award in India
• Rajasthani folk music: Includes instruments like Algoza, Morchang, Kamaicha, Bhapang, Dholak, Khartal

Possible Prelims MCQs

Q1: Algoza, a traditional twin woodwind instrument, is primarily associated with which Indian state?

• Rajasthan

Q2: Who was conferred the Padma Shri in 2026 for preserving and promoting Algoza music?

• Taga Ram Bheel

Q3: Which demanding technique allows Algoza players to produce continuous sound without stopping for breath?

• Circular breathing

Q4: The Algoza consists of:

• Two flutes (melody + drone)

Q5: Taga Ram Bheel belongs to which district of Rajasthan?

• Jaisalmer

Q6: What is the traditional name for the Thar Desert region of Rajasthan?

• Marudhara

Q7: Taga Ram Bheel first performed at the Jaisalmer Desert Festival in which year?

• 1981

Source/Reference:

https://timesofindia.indiatimes.com/city/jaipur/world-famous-jaisalmers-folk-algoza-maestro-taga-ram-bheel-to-receive-padma-shri-award-today/articleshow/131306382.cms

Subject: Science & Tech – Digital Infrastructure; Economy – Broadband Connectivity; PM-WANI; Public Wi-Fi; Digital Divide.

Why in News?

• The Department of Telecommunications (DoT) introduced a series of user-friendly reforms under the Prime Minister’s Wi-Fi Access Network Interface (PM-WANI) framework.
• New measures include: QR-based authentication for laptops and secondary devices, flexible short-duration Wi-Fi plans, and standardisation of hotspot names.

About PM-WANI

Launch

• Launched by the Department of Telecommunications (DoT) in December 2020.

Objective

• Enhance proliferation of public Wi-Fi hotspots to create robust digital communications infrastructure, especially in rural areas.

Goals

• Overcome the digital divide by increasing internet connectivity, especially in remote and rural regions.
• Empower individuals and businesses to participate in the digital economy through affordable internet access.
• Encourage local entrepreneurs by enabling shopkeepers and individuals to become Public Data Office (PDO) operators.

PM-WANI Ecosystem Components

New Upgrades (May 2026)

• QR-based authentication for laptops and secondary devices (simpler login without OTP).
• Flexible short-duration Wi-Fi plans (hourly, daily, etc.) – more affordable for occasional users.
• Standardisation of PM-WANI hotspot names – easier identification and enhanced reliability.

Implementation Deadline

• All stakeholders to implement revised guidelines by July 2026.

Key Terms for Prelims

• PM-WANI: Prime Minister’s Wi-Fi Access Network Interface (launched December 2020)
• PDO (Public Data Office): Local hotspot operator (no license required)
• PDOA (Public Data Office Aggregator): Aggregator of PDOs (authorization and accounting)
• App Provider: Develops app to discover WANI-compliant hotspots
• Central Registry: Maintains details of all stakeholders (operated by C-DoT)
• C-DoT: Centre for Development of Telematics (DoT’s R&D centre)
• QR-based authentication: Scan QR code to connect (no OTP needed)
• Digital Divide: Gap between those with and without access to digital technologies
• DoT: Department of Telecommunications (under Ministry of Communications)

Possible Prelims MCQs

Q1: PM-WANI was launched by the Department of Telecommunications in which year?

• 2020

Q2: Which entity maintains the central registry of PDOs under PM-WANI?

• C-DoT

Q3: Under PM-WANI, a Public Data Office (PDO) is:

• A local shop or individual operating a Wi-Fi hotspot without license

Q4: Which of the following is NOT a component of the PM-WANI ecosystem?

• Telecom Regulatory Authority (TRAI)

Q5: What is the primary objective of PM-WANI?

• To enhance proliferation of public Wi-Fi hotspots, especially in rural areas

Q6: The recent PM-WANI upgrades include all EXCEPT:

• Free unlimited internet for all

Q7: The PM-WANI ecosystem allows local shopkeepers to become PDO operators without:

• License, registration, or fees to DoT

Source/Reference:

https://newsonair.gov.in/pm-wani-gets-major-citizen-friendly-upgrade-to-make-public-wi-fi-simpler-and-more-accessible/

Subject: Economy – Health Expenditure; Social Justice – Out-of-Pocket Expenditure; NHA Estimates; Government Health Expenditure.

Why in News?

• The Ministry of Health and Family Welfare released the National Health Accounts (NHA) Estimates for India 2022-23 – the 10th edition in the series that began in 2013-14.
• The report shows increased government expenditure on healthcare and a decline in Out-of-Pocket Expenditure (OOPE).

About National Health Accounts (NHA)

Prepared By

• National Health Accounts Technical Secretariat (NHATS) under the National Health Systems Resource Centre (NHSRC), Ministry of Health and Family Welfare.

Framework

• Uses internationally accepted System of Health Accounts (SHA) 2011 framework.

Purpose

• Provides time-series analysis of actual health expenditure incurred by government, private sector, and other sources.

Key Findings (2013-14 vs 2022-23)

Current Health Expenditure (CHE) – 2022-23

• CHE: ₹7,66,814 crore (final consumption of healthcare goods and services, excluding capital expenditure).

Who Pays?

• Out-of-Pocket Expenditure (OOPE): 49.9% of CHE (nearly half).
• Government Health Expenditure (GHE): 35.6% of CHE (dropped from 41.1% in 2021-22).
• Private Health Insurance: 9.2% of CHE.
• Social Security Expenditure (SSE): 9.9% of THE (includes PM-JAY, medical reimbursements, social health insurance).

Who Provides?

• Private hospitals: 30.83% of CHE (largest share).
• Government hospitals: 16.73% of CHE.
• Pharmacies: 21.2% of CHE.

Spending by Type

• Preventive care: Only 8.88% of CHE.
• Curative care (inpatient + outpatient): Over 56% of CHE (largest spending head).

Concerns Raised by Experts (Jan Swasthya Abhiyan)

• Public spending still short of WHO recommendation (5% of GDP) and National Health Policy target (2.5% of GDP).
• Government Health Expenditure (GHE) as % of CHE dropped sharply from 41.1% in 2021-22 to 35.6% in 2022-23 – COVID-era increase not sustained.
• Out-of-Pocket Expenditure still nearly half of CHE (49.9%) – financial protection incomplete.
• Government-financed health insurance schemes (including PM-JAY) account for only 3% of THE – meagre compared to private health insurance (9.2%).
• Healthcare remains deeply privatised – private hospitals + pharmacies account for 52% of CHE.
• Preventive care neglected – only 8.88% of CHE, despite NCDs causing 60% of all deaths (SRS data 2022-24).

Key Terms for Prelims

• NHA (National Health Accounts): Tracks health expenditure across government, private, and other sources
• NHATS (National Health Accounts Technical Secretariat): Prepares NHA estimates
• NHSRC (National Health Systems Resource Centre): Under Ministry of Health and Family Welfare
• SHA 2011 (System of Health Accounts): Internationally accepted framework for health expenditure accounting
• THE (Total Health Expenditure): Total health spending (including capital expenditure)
• CHE (Current Health Expenditure): Final consumption of healthcare goods and services (excludes capital expenditure)
• GHE (Government Health Expenditure): Government spending on healthcare (including capital expenditure)
• OOPE (Out-of-Pocket Expenditure): Direct payment by households for healthcare (not reimbursed by insurance)
• SSE (Social Security Expenditure): Government-funded health insurance (PM-JAY), medical reimbursements, social health insurance
• Private Health Insurance: Insurance purchased by individuals/employers from private insurers
• Primary Healthcare: First level of contact with health system (Ayushman Bharat Health and Wellness Centres)

Possible Prelims MCQs

Q1: The National Health Accounts (NHA) estimates for India are prepared by:

• National Health Accounts Technical Secretariat (NHATS) under NHSRC

Q2: As per NHA 2022-23, Government Health Expenditure (GHE) as a percentage of GDP (new GDP series) stood at:

• 1.48%

Q3: Out-of-Pocket Expenditure (OOPE) as a share of Total Health Expenditure (THE) declined from 64.2% in 2013-14 to:

• 43.4%

Q4: Which sector accounts for the largest share of Current Health Expenditure (CHE) in India (2022-23)?

• Private hospitals

Q5: The System of Health Accounts (SHA) 2011 framework used for NHA is developed by:

• OECD, Eurostat, and WHO

Q6: What percentage of Total Health Expenditure (THE) is accounted for by government-financed health insurance schemes (including PM-JAY)?

• 3%

Source/Reference:

https://www.thehindu.com/news/national/tamil-nadu/national-health-accounts-figures-indicate-high-burden-of-health-care-costs-on-people/article71034428.ece#google_vignette

Subject: Science & Tech – Biotechnology; Protein Imaging; CLEAR Technology; Cancer Research; Precision Medicine; JNCASR.

Why in News?

• Researchers at the Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR), Bengaluru, developed a novel imaging platform called Cleavable Light-Erased Antibody Reporter (CLEAR).
• The technology could significantly improve the visualisation and mapping of proteins within biological samples, aiding research and diagnosis in cancer and neurological disorders.

What is CLEAR Technology?

Full Form

• Cleavable Light-Erased Antibody Reporter

Developed By

• Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR), Bengaluru.
• Lead researcher: Sarit S. Agasti.

Collaborators

• Indian Institute of Science (IISc), Bengaluru – demonstrated the technology in complex biological settings, particularly immune cell systems.

Publication

• Findings published in the journal Royal Society of Chemistry’s Chemical Science.

How It Works

Core Mechanism

• Uses a light-cleavable probe system that allows repeated cycles of protein labelling and imaging within the same spectral window.
• After imaging a set of proteins, the fluorescent signal is erased using a gentle pulse of 365 nm LED light.
• Researchers can then label and image a new set of proteins in the same cell.
• The process functions like a chalkboard that can be erased and rewritten repeatedly.

Key Feature

• Enables scientists to visualise a large number of proteins within the same biological sample using a single fluorescent marker – overcoming a major challenge in spatial protein mapping.

Advantages Over Existing Methods

Applications and Significance

Disease Detection

• Potential to improve early disease detection, particularly in cancers and neurological disorders.

Immunology Research

• Helps researchers better understand immune responses and cellular behaviour.

Precision Medicine

• In the long term, could contribute to precision medicine by enabling detailed molecular analysis that can support targeted therapies and personalised treatment approaches.

Protein Mapping

• Allows increasingly detailed protein maps to be generated across specimens ranging from single cells to complex tissue sections.

Key Terms for Prelims

• CLEAR Technology: Cleavable Light-Erased Antibody Reporter – novel protein imaging platform
• JNCASR: Jawaharlal Nehru Centre for Advanced Scientific Research (Bengaluru) – autonomous institute under Department of Science and Technology (DST)
• IISc: Indian Institute of Science (Bengaluru) – collaborator
• Sarit S. Agasti: Lead researcher
• Chemical Science: Journal of the Royal Society of Chemistry where findings were published
• 365 nm LED light: Used to erase fluorescent signal (gentle pulse)
• Multiplex imaging: Visualising multiple proteins in same sample
• Spatial protein mapping: Determining location and organisation of proteins within cells/tissues
• Precision medicine: Personalised treatment based on molecular analysis
• Fluorescent marker: Molecule that emits light when excited (used to label proteins)

Possible Prelims MCQs

Q1: What does CLEAR stand for in CLEAR Technology?

• Cleavable Light-Erased Antibody Reporter

Q2: CLEAR Technology was developed by researchers at which Indian institution?

• Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR), Bengaluru

Q3: Which type of light is used to erase the fluorescent signal in CLEAR Technology?

• 365 nm LED light

Q4: CLEAR Technology enables visualisation of many proteins using:

• A single fluorescent marker with repeatable erasure

Q5: Who was the lead researcher of the CLEAR Technology development team?

• Sarit S. Agasti

Q6: CLEAR Technology is described as functioning like:

• A chalkboard that can be erased and rewritten repeatedly

Q7: CLEAR Technology can contribute to precision medicine by:

• Enabling detailed molecular analysis for targeted therapies

Source/Reference:

https://ddnews.gov.in/en/scientists-develop-clear-technology-for-advanced-protein-imaging-in-cancer-research/

Subject: Environment | Biodiversity | Species Rediscovery

Why in News?

A rare dragonfly species, the Long-tailed Duskhawker, was recently rediscovered in Arunachal Pradesh’s Namdapha landscape after more than a century since its last scientific record in 1914. 

About the Species

• Common Name: Long-tailed Duskhawker 

• Scientific Name: Gynacantha khasiaca 

• Belongs to Order: Odonata (dragonflies and damselflies) 

• • Family: Aeshnidae 
  • Rediscovered in Namdapha National Park and Tiger Reserve, Arunachal Pradesh. 

• Last recorded from erstwhile Abor Hills in 1914. 

• Known for near-360° vision due to compound eyes with thousands of lenses. 
• Crepuscular species — active mainly during dawn and dusk. 
• Dragonflies are important bioindicators of freshwater ecosystem health. 

Ecological Importance

• Predators of mosquitoes and small insects. 

• Sensitive to pollution and habitat degradation. 

• Rediscovery indicates relatively undisturbed forest–freshwater ecosystems in Eastern Himalayas. 
• Highlights importance of citizen science in biodiversity monitoring. 

Related Keywords for Prelims

• Odonata 
• Bioindicators 
• Eastern Himalayan Biodiversity Hotspot 
• Namdapha National Park 
• Crepuscular Species 
• Aeshnidae 

Prelims Significance

UPSC frequently asks questions on 

• newly discovered or rediscovered species, 
• biodiversity hotspots, 
• insect taxonomy, 
• protected areas, and 
• ecological indicators. 

Themes linked to dragonflies as bioindicators and Northeast biodiversity are highly relevant for elimination-based prelims questions.

The rediscovery of Gynacantha khasiaca underscores the ecological richness of Northeast India and reinforces the importance of habitat conservation, freshwater ecosystem protection, and long-term biodiversity documentation.

Related UPSC Prelims Questions

Q1. With reference to Odonata, consider the following statements:

1. It includes dragonflies and damselflies. 
2. Members of this order are considered indicators of freshwater ecosystem health. 
3. All Odonata species are nocturnal in nature. 

Which of the statements given above are correct?

• 1 and 2 only

Q2. Recently seen in news, Gynacantha khasiaca is:

• A dragonfly species

Q3. Namdapha National Park, recently in news, is located in:

• Arunachal Pradesh

Source/Reference:

https://www.thehindu.com/news/national/arunachal-pradesh/rare-dragonfly-resurfaces-in-arunachal-after-110-years/article71028237.ece

GS Paper III – Economy (Financial Sector) | GS Paper II – Governance
Insolvency and Bankruptcy Code (IBC), 2016; Credit Discipline; NPA Resolution; Amendments

Introduction

The Insolvency and Bankruptcy Code (IBC), 2016 transformed India’s insolvency regime by creating a unified, creditor-driven, and time-bound framework for resolving financial distress. It replaced fragmented laws and institutions with a single system regulated by the Insolvency and Bankruptcy Board of India (IBBI) and adjudicated through the NCLT/NCLAT. The IBC has significantly improved recoveries and value resolution, while the IBC (Amendment) Act, 2026 seeks to further reduce delays, strengthen creditor oversight, and enhance procedural clarity.

Main Body

The Pre-IBC Framework and Need for Reform

Multiple Overlapping Laws:

• Companies Act (winding up provisions).
• Sick Industrial Companies Act (SICA) – for revival of sick industries (repealed).
• SARFAESI Act, 2002 – for secured creditors to enforce securities without court intervention.
• Debt Recovery Tribunals (DRTs) – for recovery of debts above a threshold.

Problems:

• Fragmented proceedings and overlapping jurisdiction.
• Cases pending for years; asset values deteriorated.
• Weak credit discipline; low investor confidence.

Solution – IBC, 2016:

• Consolidated multiple laws into a single framework.
• Transition from debtor-controlled to creditor-driven resolution.
• Time-bound process (180 days + 90 days extension; total 330 days).

Institutional Structure Under the IBC

Insolvency and Bankruptcy Board of India (IBBI):

• Regulatory authority overseeing insolvency processes, Insolvency Professionals (IPs), and related institutions.
• Frames regulations and standards.

Insolvency Professionals (IPs):

• Administer affairs of distressed entities, safeguard assets, facilitate creditor meetings.
• Oversee resolution process in compliance with the Code.

Adjudicating Authorities:

• NCLT (National Company Law Tribunal): Adjudicating authority for corporate insolvency.
• NCLAT (National Company Law Appellate Tribunal): Hears appeals against NCLT orders.

Information Utilities (IUs):

• Store financial information (defaults, debt records) to reduce information asymmetry.

The Corporate Insolvency Resolution Process (CIRP)

Key Features:

• Time-bound: 180 days (extendable up to 330 days).
• Creditor-driven: Committee of Creditors (CoC) of financial creditors evaluates resolution plans.
• Moratorium (Section 14): No suits, recovery proceedings, or asset transfers during CIRP.
• Resolution plans: Must meet criteria under Section 29A (ineligible persons – defaulting promoters, related parties – cannot bid).
• If resolution fails, entity moves to liquidation (Section 33).

Changes under 2026 Amendment:

• Adjudicating Authority must decide admission applications within 14 days (accountability for delays).
• Withdrawal of cases restricted: cannot occur before CoC constituted; barred after resolution plans invited.
• Moratorium clarified to apply to guarantees (no parallel actions through indirect routes).
• Creditor role extended into liquidation stage (can supervise liquidator, even replace if necessary).

Success of the IBC

Overall Recoveries (till March 2026):

• 8,987 CIRPs admitted.
• 1,419 corporate debtors resolved through approved resolution plans.
• Creditors realised approximately ₹4.32 lakh crore through approved resolution plans.
• Recoveries exceeded 116.85% of liquidation value and more than 94.56% of fair value.

Banking Sector Recoveries (RBI Report 2024-25):

• Total recovered by Scheduled Commercial Banks (SCBs) through various channels: ₹1,04,099 crore.
• IBC alone contributed ₹54,528 crore – 52.4% of total recoveries.
• Higher than SARFAESI, DRTs, and Lok Adalats.

Legislative Progression: Key Amendments (Pre-2026)

2018 Amendment:

• Provisions for withdrawal of applications (Section 12A).
• Changes in voting thresholds for CoC decisions.
• Strengthened creditor participation.
• Modified eligibility criteria under Section 29A.

2019 Amendment:

• Introduced overall time limit of 330 days for CIRP completion (including litigation).

2020 Amendment (COVID-19 response):

• Introduced safeguards, including immunity for corporate debtors after resolution.
• Suspended insolvency proceedings for specified defaults.

2021 Amendment:

• Introduced pre-packaged insolvency resolution process for MSMEs (faster debtor-in-possession resolution with creditor supervision).

Major Changes in the IBC (Amendment) Act, 2026

1. Clearer Definitions:

• “Service provider” defined (IPs, IP agencies, IUs, other notified persons).
• “Security interest” clarified – exists only through agreement/arrangement; not by operation of law.
• “Avoidance transactions” defined (preferential, undervalued, fraudulent, unfair credit).
• “Fraudulent or wrongful trading” separately defined (Section 66).

1. Faster Entry into Insolvency:

• Adjudicating Authority must decide applications within 14 days; if not, reasons must be recorded.

1. Discipline on Withdrawal (Section 12A):

• Withdrawal cannot occur before CoC constituted; barred after resolution plans invited.

1. Stronger Moratorium:

• Clarified that moratorium applies to guarantees – no parallel actions through indirect routes.

1. Improved Process Efficiency:

• Simplified appointment process for resolution professionals.
• Expanded obligation to cooperate – employees, promoters, associated persons must assist.

1. Creditor Role in Liquidation:

• CoC empowered to supervise conduct of liquidation and replace liquidator if necessary.
• Creditors remain in control throughout lifecycle.

1. Accountability for Past Transactions:

• Proceedings for avoidance transactions and fraudulent/wrongful trading can continue after resolution or liquidation.
• Creditors, members, or partners can approach Adjudicating Authority if such transactions not reported.

1. Expanded Asset Base:

• Assets of guarantors can be included in resolution process (subject to creditor approval and conditions).

1. Fair Treatment of Dissenting Creditors:

• Dissenting creditors will receive at least lower of liquidation value or amount receivable under resolution plan (distributed as per Section 53 priority waterfall).

1. Practical and Enforceable Resolution Plans:

• Phased approval of plans allowed.
• Protects licences, permits, and regulatory approvals during implementation.
• Clarifies treatment of past claims.

1. Flexibility Before Liquidation:

• One-time restoration of resolution process within defined timelines before liquidation finalised.

1. Structured Liquidation:

• Introduces structured timelines, clearer roles, and improved supervision during liquidation.

1. Creditor-Led Insolvency Process (New):

• New mechanism allows creditors to initiate insolvency directly (subject to defined approval thresholds and procedural safeguards).
• Time-bound; reduces dependency on formal admission stages.

Conclusion

The IBC, 2016 transformed India’s insolvency regime into a unified, creditor-driven, and time-bound framework, replacing multiple overlapping laws. It has improved recoveries, strengthened credit discipline, and revived stressed firms. The IBC (Amendment) Act, 2026 further enhances the system by reducing delays, strengthening creditor oversight, protecting assets and licences, and making the process more predictable and resolution-oriented.

UPSC Mains Practice Question

1. The Insolvency and Bankruptcy Code (IBC), 2016 has strengthened India’s credit ecosystem and improved recovery outcomes, yet delays continue to undermine its effectiveness. Critically examine the achievements and challenges of the IBC framework. (250 words, 15 marks)

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2266139&reg=3&lang=1

GS Paper II – Polity & Governance (Centre-State Relations) | GS Paper III – Economy (Federal Finance)
Finance Commission (Article 280); Vertical & Horizontal Imbalances; Tax Devolution; Equity vs. Efficiency

Introduction

The Finance Commission (Article 280) recommends the distribution of taxes between the Centre and States and among States. Its role is to correct fiscal imbalances and promote equity, but debates persist over whether equity should mean equal treatment, compensation for backwardness, or rewards for fiscal performance. The Terms of Reference of each Finance Commission shape these priorities, often generating political and economic tensions.

Main Body

The Equity Dilemma: What Does “Equity” Mean?

Conceptual Approaches:

• Needs-based equity (Grants-in-aid): Compensating states with higher poverty, lower per capita income, or geographic disadvantages (hilly/coastal areas). This is the traditional “equalization” principle used in most federal systems, including India and Canada.
• Performance-based equity (Tax devolution formula): Rewarding states for better tax effort, lower fiscal deficit, or population control (demographic performance). This rewards efficiency but may penalize poorer states with lower tax bases.
• Population-based equity: Using the 1971 Census (as mandated by the Constitution for Lok Sabha seats) or a later Census (which would penalize states that successfully controlled population growth).

The Tension:

• A transfer system cannot simultaneously maximize needs-based compensation, performance rewards, and population neutrality. Trade-offs are inevitable.
• The FC’s ToR, set by the central government, influences which equity principle is prioritized.

Vertical Fiscal Imbalance (VFI)

Definition:
The gap between the revenue-raising capacity of the Centre and States. The Centre collects a majority of taxes (income tax, corporation tax, customs, GST on inter-state supplies), while States bear a majority of spending responsibilities (health, education, police, agriculture).

Trends:

• FCs have recommended increasing the States’ share of the divisible pool from 32% (13th FC) to 42% (14th FC) and maintaining 41% (15th FC).
• Despite this, States still depend heavily on central transfers (tax devolution + grants) to meet their expenditure needs.

Equity Issue:

• A higher vertical share reduces States’ dependence on the Centre, enhancing fiscal autonomy.
• However, some States argue that the 41% share is still inadequate given their growing spending responsibilities (especially after the 2019-20 economic slowdown and post-pandemic recovery).

Horizontal Fiscal Imbalance (HFI)

Definition:
The disparity in fiscal capacity among States. Some States (Maharashtra, Gujarat, Tamil Nadu, Karnataka) have higher per capita incomes and stronger tax bases; others (Bihar, UP, MP, Odisha, Rajasthan, West Bengal) have lower per capita incomes and weaker tax bases.

Tools for Addressing HFI:

• Tax devolution formula (as used by 15th FC):
  • 12.5% weight on per capita income distance (higher for poorer states).
  • 45% weight on population (2011 Census).
  • 15% weight on demographic performance (rewarding states with lower fertility rates).
  • 10% weight on area (larger states need more resources).
  • 15% weight on forest cover (compensating for conservation).
  • 2.5% weight on tax effort.
• Grants-in-aid: Recommended separately for specific purposes (e.g., disaster relief, local government, health, education).

Equity Issue:

• The 2011 Census weight penalizes southern states (Tamil Nadu, Kerala, Karnataka, Andhra, Telangana) that successfully controlled population growth under the 84th Amendment’s incentive framework. This is a major point of contention.
• Demographic performance weight (15%) attempts to offset this, but southern states argue it is insufficient.

Specific Equity Issues in Current FC Debates

1. The Demographics Penalty Problem:

• The Constitution froze Lok Sabha seats based on the 1971 Census to encourage population stabilization.
• However, the 15th FC used 2011 Census for tax devolution, effectively penalizing states that achieved population stabilization.
• Southern states have argued that this violates the spirit of the constitutional freeze. The 16th FC is likely to face renewed pressure on this issue.

1. Grants-in-Aid vs. Tax Devolution:

• Tax devolution is unconditional (States can spend as they wish).
• Grants-in-aid are conditional (tied to specific sectors or projects).
• States prefer unconditional tax devolution; the Centre often prefers conditional grants to influence State spending priorities.
• The 15th FC significantly increased the share of conditional grants, which some States view as an infringement on fiscal autonomy.

1. Disaster Management:

• After the 15th FC, a separate Disaster Management Fund (with contributions from both Centre and States) was created.
• States argue that the Centre’s share of disaster funding is inadequate, especially given increasing climate-related disasters (floods, cyclones, landslides).

The 16th Finance Commission (2026-2031)

Current Status (as of May 2026):

• The 16th FC has been constituted (as per the timeline, it is likely in the process of gathering submissions or finalizing its report).
• Key terms of reference (ToR) will determine the commission’s approach to equity.

Expected Contentious Issues:

• Census year for tax devolution (2011 vs. a later Census; or reverting to 1971 for equity?).
• Weight on demographic performance (should it be increased to further protect southern states?).
• Share of grants-in-aid vs. unconditional tax devolution.
• Treatment of GST compensation and revenue deficits.

Southern States’ Demand:

• A clear principle that no State should receive less than its historical share of the divisible pool, to prevent penalizing population stabilization.

Way Forward: Balancing Equity and Efficiency

For the Union Government:

• The 16th FC’s ToR should explicitly address the demographic penalty concern to maintain federal trust.
• The share of unconditional tax devolution should be kept high; conditional grants should be limited to clearly identified national priorities with genuine externalities.

For the States:

• High-income, high-tax-effort States should recognize the constitutional requirement to support poorer States.
• States should improve their own tax collection and expenditure efficiency to reduce dependence on transfers.

For the Finance Commission:

• Continue to evolve a formula that balances needs (per capita income distance), demography (population, demographic performance), and incentives (tax effort).
• Provide a clear rationale for each weight to enhance transparency and legitimacy.

Conclusion

Finance Commission transfers address vertical imbalance (Centre–States) and horizontal imbalance (among States). The 15th FC recommended 41% tax devolution, using criteria such as 2011 population, income distance, and demographic performance. This triggered controversy as southern States viewed the use of 2011 population as penalising their success in population control. The 16th FC will confront the same challenge. Since every formula creates winners and losers, the way forward lies in balancing needs-based equity with incentives for fiscal and demographic performance, while respecting the constitutional freeze linked to the 1971 Census.

UPSC Mains Practice Question

1. Finance Commission transfers must balance equity with incentives, but the use of 2011 Census data has triggered concerns over penalising population control. Critically examine. What should guide the 16th Finance Commission? (250 words, 15 marks)

https://www.thehindu.com/opinion/lead/finance-commission-transfers-and-equity-issue/article71022107.ece