Editorials/Opinions Analysis For UPSC 15 January 2026

Content

1. To Become a Developed Economy, Four Reforms 
2. India’s Critical Minerals Partnerships & Clean Energy Transition

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To Become a Developed Economy, Four Reforms 

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Core Context

• India’s declared ambition: USD 30–35 trillion economy by 2047 (Viksit Bharat).
• Central question addressed: How to finance high, sustained growth in a durable and efficient manner?
• Editorial reframes debate from “how much capital India can mobilise” to “how productively capital is deployed”.

Relevance

• GS III (Indian Economy)
  • Savings–investment dynamics, capital formation.
  • Financial sector reforms: bond markets, long-term finance, ICOR.
  • Role of start-ups, deep tech, capital efficiency in growth.
• GS II (Governance)
  • Regulatory certainty, contract enforcement, ease of doing business.
  • Cooperative federalism for project clearances and execution.

Practice Question

• “India’s growth constraint lies less in capital scarcity and more in capital efficiency.”
  Examine this statement in the context of India’s ambition to become a developed economy by 2047. ( 15 marks | 250 words)

Central Argument  

• India’s biggest growth risk is dependence on short-term capital combined with execution frictions, not lack of capital per se.

Reform 1: Rebuild Long-Term Domestic Savings

Problem Diagnosis

• India’s growth model historically rests on domestic savings.
• Key trends:
  • Household financial savings declined to ~5.3% of GDP (FY2023).
  • Investment rate fell from >40% of GDP to ~30%+.
• Current savings skewed towards:
  • Pensions
  • Insurance
  • Debt instruments
• Gap:
  • Inadequate long-term risk capital for infrastructure & manufacturing.

Structural Issue

• Borrowing increasingly finances:
  • Consumption
  • Working capital
• Rather than:
  • Long-gestation asset creation.

Reform 2: Shift from Short-Term to Long-Term Financing

Problem Diagnosis

• Banks:
  • Liability structure = short- to medium-term deposits
  • Asset need = long-term project finance
• Result:
  • Asset–liability mismatch.
• MSMEs:
  • Over-reliant on working capital loans.
  • Limited access to long-term finance.

Proposed Solution

• Expand market-based financing:
  • Corporate bond market
  • G-SEC market depth
  • Private placements
• Strengthen:
  • Secondary market liquidity
  • Retail + institutional participation.

Data Point 

• India’s corporate bond market remains <20% of GDP (far below developed economies).

Reform 3: Improve Capital Efficiency (ICOR Focus)

Key Insight

• Growth sustainability depends on Incremental Capital Output Ratio (ICOR).
• Current reality:
  • Rising capital-output ratio → lower growth per unit of capital.
• Causes:
  • Execution delays
  • Regulatory uncertainty
  • Contract enforcement issues

Policy Prescription

• Faster project approvals
• Predictable regulation
• Stronger dispute resolution
• Risk reduction to:
  • Improve investment returns
  • Reduce pressure on savings & fiscal resources

Reform 4: Start-Ups & Deep Tech for Capital-Light Growth

Structural Advantage

• Technology-driven growth allows:
  • Higher productivity
  • Lower capital intensity
• Sectors highlighted:
  • Logistics
  • Manufacturing
  • Healthcare
  • Energy
  • Public services

Why This Matters ?

• Start-ups:
  • Reduce ICOR
  • Enable leapfrogging
  • Complement infrastructure-heavy growth

Policy Enablers Needed

• Patient risk capital
• Stable tax regimes
• Long-horizon regulation
• Recognition of longer gestation cycles

What the Editorial Critiques ?

Implicit Criticisms

• Over-reliance on:
  • Bank credit
  • Short-term capital
• Under-developed:
  • Bond markets
  • Pension & insurance-led infrastructure financing
• Execution deficits more damaging than capital scarcity.

Constitutional & Governance Angle

• State capacity & regulatory quality directly affect capital productivity.
• Cooperative federalism needed for:
  • Faster land, power, logistics clearances.
• Rule of law critical for:
  • Long-term investor confidence.

Ethical & Social Dimension

• Poor capital allocation:
  • Wastes public savings
  • Reduces inter-generational equity
• Efficient capital use:
  • Frees resources for social sector
  • Supports inclusive growth.

Way Forward

• Deepen long-term savings instruments (pension, insurance, infra bonds).
• Accelerate corporate bond & secondary debt markets.
• Reduce execution risks via:
  • Contract enforcement
  • Time-bound approvals.
• Encourage tech-led, capital-light growth models.
• Align financial sector reforms with 2047 horizon, not electoral cycles.

Prelims Pointers

• Household financial savings fell sharply post-COVID.
• ICOR indicates efficiency of capital use.
• Market-based finance reduces bank balance-sheet stress.
• Start-ups reduce capital intensity of growth.

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India’s Critical Minerals Partnerships & Clean Energy Transition

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Why this Matters ?

• Clean energy transition (EVs, renewables, batteries) is mineral-intensive.
• India is highly import-dependent for critical minerals & rare earths.
• China’s tightening export controls have exposed India’s strategic vulnerability.
• Core question: Have India’s critical mineral partnerships delivered real capability, or do they need recalibration?

Core Thesis

• India needs a two-pronged strategy:
  • Immediate overseas access + long-term domestic processing & technology capability, not extraction-only diplomacy.

Relevance

• GS II (International Relations)
  • Strategic partnerships, supply chain diplomacy, geo-economics.
  • India’s engagement with Australia, Africa, EU, U.S., Japan.
• GS III (Economy, Energy & S&T)
  • Clean energy transition, EVs, batteries.
  • Critical minerals, industrial policy, processing & refining capacity.

Practice Mains Question

• Access to critical minerals alone does not ensure energy security; control over processing and technology does. Discuss India’s critical mineral strategy in light of this statement.(15 marks | 250 words)

Structural Context: Why Critical Minerals Matter

• Critical minerals underpin:
  • EV batteries (lithium, cobalt, nickel)
  • Renewables (rare earths)
  • Grid storage & clean tech
• Global reality:
  • Supply chains are geopolitically concentrated.
  • Processing & refining are the real choke points, not ore availability.

India’s Strategy So Far

• Past 5 years:
  • ~Dozen bilateral & multilateral partnerships across continents.
  • Parallel strengthening of domestic mineral policies.
• Key issue:
  • Delivery gap between MoUs and on-ground capability.

Assessment of Key Partnerships 

 

Australia – Most Reliable Partner

• Strengths:
  • Political stability
  • Large lithium & cobalt reserves
  • Strategic alignment
• Concrete progress:
  • India–Australia Critical Minerals Investment Partnership (2022).
  • Five lithium & cobalt projects identified for potential investment.
• UPSC Insight:
  • Model of credible, long-term supply cooperation.

Japan – Institutional Resilience Model

• Strategic lesson:
  • Post-China rare earth shock, Japan pursued:
    • Diversification
    • Stockpiling
    • Recycling
    • Sustained R&D
• India–Japan cooperation:
  • Beyond Indian Rare Earths Limited.
  • Expanding into:
    • Joint extraction
    • Processing
    • Stockpiling (bilateral & third countries).
• Value:
  • Long-term planning > reactive deals.

Africa – Opportunity with Conditions

• Advantages:
  • Mineral abundance
  • Long-standing India–Africa ties
• Recent moves:
  • Namibia: lithium, rare earths, uranium.
  • Zambia: copper & cobalt asset talks.
• Caution:
  • Competition from China & Western consortia.
  • Risk of extraction-only engagement.
• Key requirement:
  • Local value addition & processing.

Latin America – New Strategic Frontier

• Countries:
  • Argentina, Chile, Peru, Brazil.
• Action:
  • Khanij Bidesh India Limited signed a ₹200 crore exploration agreement with Argentina.
• Importance:
  • Central to global copper, lithium & nickel supply.
• Challenge:
  • Engagement still early-stage.

Canada – High Potential, Political Sensitivity

• Strengths:
  • Nickel, cobalt, copper, rare earths.
  • Trilateral agreement with India & Australia.
• Constraint:
  • Political stability & trust deficit.
• Role:
  • Could become a major upstream partner.

United States – Volatile Partner

• Issue:
  • Cooperation stuck at dialogue level.
  • Tariffs, trade rule shifts & Inflation Reduction Act incentives create uncertainty.
• Frameworks exist:
  • TRUST Initiative
  • Strategic Minerals Recovery Initiative
• Reality:
  • U.S. useful for technology & downstream innovation, not stable supply.

European Union – Standards & Sustainability Leader

• Key instruments:
  • European Union’s Critical Raw Materials Act
  • European Battery Alliance
  • Circular economy regulations
• Implication for India:
  • Must align with:
    • Transparency
    • Lifecycle standards
    • Environmental norms
• Insight:
  • Regulation + sustainability + industrial policy reinforce competitiveness.

West Asia – Midstream Potential

• UAE & Saudi Arabia:
  • Investing in:
    • Battery materials
    • Refining
    • Green hydrogen
• Role for India:
  • Midstream processing hub, sourcing ores from Africa & Latin America.
• Limitation:
  • Lack of deep institutional frameworks.

Russia – Hedge, Not Foundation

• Strengths:
  • Large rare earth, cobalt, lithium reserves.
  • Strong scientific ties.
• Constraints:
  • Sanctions
  • Financing barriers
  • Logistical unpredictability
• Strategic role:
  • Diversification option, not core pillar.

Where India is Falling Short ?

• Securing ore ≠ securing supply chains.
• Real vulnerability lies in:
  • Processing
  • Refining
  • Recycling
  • Technology ownership
• Announcements without:
  • Project execution
  • Technology transfer
  • ESG credibility
    → deliver limited resilience.

Integrated Value-Chain Strategy

Country-by-Country Functional Mapping

• Upstream extraction:
  • Africa, Australia, Canada, Latin America
• Midstream processing:
  • Japan, West Asia (Gulf)
• Downstream technology & recycling:
  • EU, U.S.
• Strategic hedge:
  • Russia

Governance, ESG & Domestic Capacity

• International partnerships increasingly demand:
  • ESG compliance
  • Transparency
  • Responsible mining
• India must strengthen:
  • Environmental safeguards
  • Social consent
  • Governance standards
• Without this:
  • Global partnerships will stall.

Way Forward

• Shift from MoU diplomacy → project execution.
• Prioritise:
  • Processing & refining capacity at home.
  • Recycling & circular economy.
• Use partnerships for:
  • Technology acquisition, not just access.
• Strengthen:
  • Domestic ESG & transparency frameworks.
• Adopt long-term strategic vision, not fragmented bilateralism.

Prelims Pointers

• Critical minerals = lithium, cobalt, nickel, rare earths.
• Processing, not mining, is the global choke point.
• ESG increasingly central to mineral diplomacy.
• KABIL = India’s overseas mineral acquisition arm.

Takeaway

India’s critical mineral security will be decided less by how many partners it has, and more by how deeply it integrates technology, processing and ESG credibility into those partnerships.

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