Content
- Analysing India’s cycle of deprivation and affluence
- The shift of critical minerals to India’s strategic centre
Analysing India’s cycle of deprivation and affluence
Context
- Recent analysis using CMIE Consumer Pyramids Household Survey (2014–2025) highlights sharp income mobility shifts, revealing rising downward mobility despite official narratives of falling inequality.
- Study uses real (inflation-adjusted) per capita income and a balanced household panel, allowing dynamic mobility tracking beyond static poverty headcount or Gini coefficients.
- Findings coincide with two major political cycles (2014–19, 2019–24) and the COVID-19 shock, raising questions about structural resilience and distributional justice.
Relevance
GS Paper II – Polity & Governance
- Article 38(2): Minimising income inequalities.
- Directive Principles (Arts. 39, 41, 43): Livelihood security and distributive justice.
- Welfare architecture and informal sector recovery post-COVID.
- Role of data (CMIE panel) in evidence-based policymaking.
GS Paper III – Economy
- Income mobility vs poverty ratio/Gini coefficient.
- Downward mobility (26.8% in 2025) exceeding upward mobility (23.5%).
- Rural distress and informal sector fragility.
- MSMEs (~30% GDP; 45% exports) and employment-intensive growth.
Practice Questions
- “Rising downward income mobility challenges the constitutional promise of distributive justice.” Examine in the light of Articles 38 and 39.(250 Words)
Conceptual Foundations: Income Mobility
What is Income Mobility?
- Income mobility refers to movement of households across income ranks over time, classified as upward, downward, or no change relative to base-year (2014) position.
- Households grouped into Top 10%, Middle 40%, Bottom 50% based on 2014 per capita income rank, enabling longitudinal assessment of distributional dynamics.
- Unlike poverty ratio or Gini index, mobility captures directional vulnerability, reflecting lived economic insecurity and opportunity access.
National-Level Trends (2014–2025)
- Downward mobility nearly doubled, rising from 14% (2015) to 26.8% (2025); by 2025, more than one in four households worse-off relative to 2014 position.
- Share of households remaining in the same income group fell from over 70% to below 50%, signalling erosion of income stability.
- Upward mobility increased modestly from 14.1% to 23.5%, but consistently lagged behind downward shifts, indicating asymmetry toward economic decline.
- District-level inequality statistically associated with greater downward mobility, suggesting higher income dispersion hardens economic boundaries rather than encouraging aspiration.
Rural–Urban Divide
- By 2025, nearly 29% of rural households experienced downward mobility, significantly higher than urban areas, reflecting rural vulnerability to income shocks.
- Urban areas show relatively higher upward mobility, yet downward movement still rises gradually, implying uneven but not inclusive growth.
- Rural distress linked to informal sector fragility and agricultural stagnation; absence of coherent revival strategy amplified post-pandemic vulnerability.
Caste-Based Mobility Patterns
- OBC and SC households witnessed sharp rise in downward mobility between 2014–19, with roughly 25% or more worse-off by 2025 relative to 2014.
- SC upward mobility remains muted, indicating constrained ascent pathways despite welfare rhetoric; reflects structural barriers in assets, education, and labour markets.
- Scheduled Tribes show comparatively lower downward mobility, possibly reflecting targeted interventions and region-specific development programmes.
- Findings reaffirm persistence of caste-based economic segmentation, consistent with long-standing evidence on unequal access to education and productive assets.
Religious Group Patterns
- Downward mobility increased across all religious groups, more pronounced among Hindu and Muslim households over time.
- Muslim upward mobility weaker than Hindu households, suggesting discrimination affects ascent opportunities more than descent risk.
- Sikh and Christian households exhibited stronger upward mobility early in the decade, but momentum weakened post-2019.
Structural Interpretation
- Higher district-level inequality correlates with greater downward mobility, implying that inequality reinforces immobility rather than stimulating competitive upward shifts.
- Education, urban location, and larger household size associated with better upward prospects, confirming human capital as key mobility determinant.
- Post-2019 turning point coincides with COVID-19 pandemic shock, exposing informal sector fragility and amplifying downward mobility, particularly rural.
Constitutional and Governance Dimensions
- Article 38(2) mandates minimising inequalities in income and status; rising downward mobility questions effectiveness of redistributive policies.
- Directive Principles (Articles 39, 41, 43) emphasise livelihood security; mobility stagnation indicates implementation gaps in employment-intensive growth.
- Pandemic management and informal sector recovery strategy significantly shape distributional outcomes beyond headline GDP growth.
Challenges
- Downward mobility at 26.8% (2025) exceeds upward mobility (23.5%), indicating systemic vulnerability rather than transitional churn.
- Rural downward mobility nearing 29% highlights agrarian and informal sector distress despite welfare transfers.
- Roughly 25% or more OBC and SC households worse-off than 2014 position, signalling entrenched caste-linked economic fragility.
- District-level inequality statistically linked to downward shifts, implying that rising income dispersion worsens mobility prospects.
Way Forward
- Strengthen Employment-Intensive Sectors: Prioritise MSMEs and agriculture revival; MSMEs contribute ~30% to GDP and 45% to exports, yet remain credit-constrained post-pandemic.
- Human Capital Investment Surge: Increase public expenditure on health (~2% of GDP currently) and education (~3% of GDP) toward recommended 6% education benchmark to enhance upward mobility.
- District-Level Inequality Monitoring: Integrate mobility indicators alongside Gini in NITI Aayog dashboards to track dynamic vulnerability beyond poverty ratios.
- Anti-Discrimination Enforcement: Strengthen equal opportunity frameworks in credit, employment, and housing markets to address mobility constraints.
- Social Protection Deepening: Expand portability and adequacy of social security (MGNREGA, food security) to cushion income shocks, particularly in high downward-mobility districts.
Prelims Pointers
- Income mobility differs from poverty rate and Gini coefficient by measuring movement across income ranks over time.
- Study period divided into 2014–19 and 2019–24, anchored around general elections.
- Data source: CMIE Consumer Pyramids Household Survey (2014–2025) using balanced household panel.
The shift of critical minerals to India’s strategic centre
Why in News?
- Union Budget 2026 mainstreamed critical minerals as a core pillar of India’s industrial, energy and geopolitical strategy, shifting from policy formulation to execution phase.
- In August 2023, minerals like lithium, beryllium, tantalum and niobium were removed from the atomic minerals list, enabling private exploration and commercial participation.
- Launch of the National Critical Mineral Mission (NCMM) in January 2025 with an outlay of ₹16,300 crore marked India’s first comprehensive execution-oriented mineral security framework.
Relevance
GS Paper III – Economy & Industry
- Mineral security and industrial policy (NCMM – ₹16,300 crore).
- 30 critical minerals identified; 1,200 exploration projects targeted.
- Link with EVs, semiconductors, renewables (500 GW non-fossil by 2030).
GS Paper III – Environment & Energy
- Net Zero 2070 and clean-energy supply chains.
- Environmental risks in rare earth and monazite extraction.
Practice Question
- Critical minerals have moved from a policy issue to a strategic imperative in India. Discuss their economic and geopolitical significance and examine challenges in building domestic processing capacity.(250 Words)
Strategic Importance of Critical Minerals
- Critical minerals such as lithium, cobalt, rare earth elements, graphite, nickel are essential for EV batteries, solar modules, wind turbines, semiconductors and defence systems.
- Global processing dominance is highly concentrated; China controls up to 90% of processing capacity for several rare earths, creating supply-chain vulnerabilities.
- Mineral security directly linked to Net Zero 2070 commitments, energy transition targets (500 GW non-fossil capacity by 2030) and Atmanirbhar Bharat industrial strategy.
Policy Evolution and Institutional Architecture
- India identified 30 critical minerals, rationalised royalty rates and opened exploration to junior miners, improving investment attractiveness.
- Exploration expenditure for nine critical minerals now eligible for tax deduction, lowering risk in early-stage mining investments.
- NCMM targets 1,200 exploration projects by FY2031, signalling scale and speed in domestic resource mapping.
- Removal of import duties on capital goods for mineral processing reduces capex burden for upcoming refineries.
India’s Processing Capabilities: Current Status
- Indian industries already produce 99.9%+ purity copper, graphite, rare earth oxides, tin and titanium, indicating base-level technological capacity.
- However, production remains limited in scale and tailored to conventional uses; clean-tech applications require deeper refining and quality standard upgrades.
- Established sectors such as chemicals and pharmaceuticals provide transferable technical expertise for high-purity mineral processing expansion.
Geopolitical and Strategic Dimension
- Weaponisation of rare earth magnets and battery supply chains (2025) exposed fragility of global clean-energy supply chains.
- Government announced rare earth corridors in coastal states and reduced import duties on monazite sands, leveraging India’s thorium-bearing beach sand reserves.
- Partnerships with Australia, EU, Japan, UK and US critical for technology transfer and supply-chain diversification under emerging China+1 strategies.
Challenges
- Processing Dependence Risk: China’s up to 90% control over mineral processing limits India’s ability to secure upstream supply without midstream capacity scaling.
- Exploration Time Lag: Mining projects globally take 10–15 years from discovery to production; NCMM’s 1,200 project target by FY2031 faces gestation constraints.
- Demand Uncertainty: Midstream processors lack assured domestic demand despite EV and renewable targets; backward integration delays weaken investor confidence.
- Technology Transfer Hesitation: Advanced processing nations remain cautious in sharing refining technologies, constraining domestic value-addition depth.
- Environmental Sensitivity: Rare earth and monazite extraction involves radioactive residues; compliance with environmental and Atomic Energy regulations raises operational complexity.
Way Forward
- Demand-Led Industrial Policy: Accelerate domestic EV, battery, solar and wind deployment; achieving 500 GW non-fossil capacity by 2030 will anchor assured mineral processing demand.
- AI-First Exploration Mandate: Integrate IndiaAI Mission, National Geospatial Policy, and Mission Anveshan with National Geoscience Data Repository to enhance predictive prospectivity modelling.
- Midstream Manufacturing Clusters: Operationalise rare earth corridors in coastal states with plug-and-play processing hubs linked to ports for export competitiveness.
- Strategic FTA Leverage: Use India–EU FTA (2026) and bilateral agreements to secure market access and incentivise foreign firms to establish refining facilities in India.
- Regulatory Certainty Framework: Establish stable royalty regime, environmental clearance timelines, and production-linked incentives like the ₹7,280 crore rare earth magnet scheme to attract global capital.
Constitutional and Governance Lens
- Linked to Article 39(b): equitable distribution of material resources for common good; mineral wealth must balance strategic autonomy with environmental justice.
- Cooperative federalism crucial as minerals fall under State List (Entry 23) but regulation under Union powers via MMDR Act amendments.
Prelims Pointers
- 30 critical minerals identified by India.
- NCMM launched January 2025, outlay ₹16,300 crore.
- 1,200 exploration projects targeted by FY2031.
- China controls up to 90% processing capacity for several rare earth minerals.
