CURRENT-AFFAIRS

Context

India has long been striving to establish itself as a 'global arbitration hub'. Significant amendments were made to the original Act of 1996 in 2015 and 2019, aimed at reducing judicial intervention and ensuring swift resolution of disputes. Currently, the draft of the 'Arbitration and Conciliation (Amendment) Bill, 2024' released by the government in October 2024 and the response sought by the Supreme Court from the Centre in January 2025 regarding the constitution of the 'Arbitration Council of India' (ACI) are the latest developments in this direction.

Arbitration and Conciliation (Amendment) Bill, 2024

This draft Bill seeks to improve the 1996 Act to make India a 'pro-arbitration' jurisdiction. Its main proposals are as follows:

• Clarity in Terminology: Eliminating legal ambiguity by using terms like 'Seat' and 'Venue' instead of 'Place of Arbitration'.
• Reduction in Judicial Intervention: Emphasizing the use of Section 17 (Tribunal) instead of Section 9 (Court) for interim relief once the tribunal is constituted.
• Emergency Arbitration: Providing legal recognition to the orders of foreign and domestic emergency arbitrators.
• Independent Conciliation Act: Developing 'Conciliation' as an independent framework by separating it from this Act.

Why is it in News?

• Pending Constitution of ACI: Despite being proposed in the 2019 amendment, the 'Arbitration Council of India' (ACI) has not yet been constituted. On January 23, 2025, the Supreme Court sought an explanation from the Central Government regarding this delay.
• Institutional Impartiality: An urgent need is being felt for a regulatory body (ACI) to make the arbitration process more transparent and fair.

What is the Arbitration Council of India (ACI)?

It is a proposed autonomous statutory body, whose main functions and points are as follows:

• Regulatory Role: Grading arbitral institutions and establishing professional standards and accreditation for arbitrators.
• Archival Function: Preparing a national database of all arbitral awards delivered in India.
• Training: Promoting training and research in the field of arbitration and Alternative Dispute Resolution (ADR).

Why is this Important?

• Reducing the Burden on Courts: A robust ADR mechanism is mandatory to resolve the crores of cases pending in Indian courts.
• Ease of Doing Business: A reliable and swift dispute resolution mechanism is necessary to increase investment in India for foreign investors.
• Standardization: Having uniform guidelines for arbitrators increases the quality and credibility of the process.

Structure and Concerns

• Structure: The ACI will be headed by a former judge of the Supreme Court, a former Chief Justice of a High Court, or an eminent expert. It will include ex-officio members and experts appointed by the Central Government.
• Concerns:
  • Government Control: The presence of members of the executive in the Council raises questions about its independence and 'institutional impartiality'.
  • Government as a Party in Disputes: The Government of India is often a party itself in arbitration cases. In such a situation, the regulation of arbitrators by a government-controlled body may give rise to a 'conflict of interest'.
  • Dependence on Retired Judges: The appointment of arbitrators is still dominated by retired judges, who sometimes bring judicial-style delays into arbitration as well.

Analysis

India’s arbitration framework still relies heavily on 'ad-hoc arbitration', which is often time-consuming and expensive. The 2024 Amendment Bill and the constitution of the ACI are attempts to move India towards 'institutional arbitration'. However, until a balance is struck between the government's regulatory role and the independence of arbitrators, India will not be able to compete with global hubs like Singapore or London.

Way Forward

• Swift Constitution of the Arbitration Council of India: According to the instructions of the Supreme Court, an impartial council should be constituted without any delay.
• Private Sector Participation: Arbitral institutions should be given more autonomy so that they can adopt international standards.
• Integration of Technology: Providing legal recognition and promotion to digital mediums such as Online Dispute Resolution (ODR) and video-conferencing.
• Specialization: Encouraging engineering, finance, and technical experts as arbitrators instead of only judges.

Conclusion

The constitution of the 'Arbitration Council of India' (ACI) and the proposed amendments of 2024 can bring a revolutionary change to India's dispute resolution ecosystem. This will not only reduce the burden on the judiciary but also establish India as a safe and reliable destination for global investment. The key to success lies in the 'verbatim' implementation of these reforms and ensuring the true autonomy of regulatory institutions.

General Studies Paper – II: Governance, Constitution, Polity, Social Justice, and International Relations

Context

Recently, the 5th edition of the 'States’ Startup Ecosystem Ranking' was released by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. In this ranking, Uttarakhand has been recognized in the 'Leader' category for developing a robust and innovation-driven startup ecosystem. On the occasion of 'National Startup Day' on January 16, 2026, a 'Certificate of Appreciation' was presented to the state’s Industries Department for this achievement.

Startup India

It is a flagship initiative of the Government of India, launched by Prime Minister Narendra Modi on January 16, 2016. Its primary objective is to create an ecosystem in India that fosters innovation and generates large-scale employment opportunities.

Startup

According to the government, any company is called a 'Startup' when:

• It is not older than 10 years.
• Its annual turnover does not exceed ₹100 crore.
• It has not been formed by splitting up an existing company.
• It is working toward innovation, improvement, or scalability.

Startup Ranking: Structure and Standards

This ranking, released by DPIIT, divides states into different categories based on the policy support, institutional framework, and ease of investment provided by them:

• Categories: Best Performers, Top Performers, Leaders, Aspiring Leaders, and Emerging Startup Ecosystems.
• Key Pillars: Institutional Support, Fostering Innovation, Access to Market, Funding Support, and Capacity Building.

Key Factors for Uttarakhand’s Success

Uttarakhand achieved the status of a 'Leader' by turning its geographical challenges into opportunities. The following efforts have been significant behind this:

• Favorable Policy Framework: The state government has prioritized a simple registration process and 'Ease of Doing Business' for startups.
• Youth-Centric Approach: According to Chief Minister Pushkar Singh Dhami, the government has conducted special programs to recognize the innovation potential of local youth and provide them with mentorship at every level.
• Accessibility of Resources: Establishment of incubation centers, availability of startup funds, and giving preference to startups in government procurement.
• Innovation Beyond Metropolitan Centers: The Uttarakhand model proves that startup culture is not limited to Tier-1 cities but can flourish in small states and hilly regions as well.

Strategic and Economic Impact

• Self-Employment and Reverse Migration: The development of the startup ecosystem is creating new employment opportunities for the youth in the state, which helps in solving the serious problem of 'migration' (Palayan).
• Attracting Investment: Attaining 'Leader' status will increase the confidence of national and international investors in Uttarakhand, which will boost the state’s economy.
• Diversification: Beyond tourism, the emergence of startups in sectors like Agri-tech, Health, and Education is broadening the state’s economic base.

Challenges

Despite achieving the 'Leader' status, certain challenges still exist:

• Geographical Barriers: Problems of logistics and connectivity in hilly areas.
• Technical Infrastructure: Lack of high-speed internet and digital literacy in remote areas.
• Lack of Capital: Ensuring the availability of adequate private investment for early-stage startups.

Analysis

This achievement of Uttarakhand is an excellent example of 'Cooperative Federalism' toward India’s goal of 'Viksit Bharat @2047.' It demonstrates that if states align central schemes like 'Startup India' with their local requirements (such as startups based on local herbs or handicrafts), they can achieve inclusive development.

Way Forward

• District-Level Focus: Developing specific 'Startup Hubs' in every district.
• Academic Collaboration: Connecting universities and technical institutes with the startup ecosystem so that research can be converted into business.
• Continuous Monitoring: Strengthening transparency and feedback mechanisms in the implementation of government schemes.

Conclusion

Uttarakhand’s emergence as a 'Leader' is a milestone in the state’s entrepreneurial journey. This achievement is not just a ranking but a national seal of approval on the innovation power of Uttarakhand's youth. If the state continues to work with this consistency and resolve, it will prove to be a role model for the country by securing a place in the 'Best Performer' category in the future.

Context

Historically, India's economy has been led by the 'service sector', leaving the manufacturing sector's contribution to the Gross Domestic Product (GDP) stagnant at around 15-16%. To address this imbalance and make India an integral part of the global supply chain, the foundation of the Production Linked Incentive (PLI) scheme was laid under 'Make in India'. Currently, the government is poised to launch a new PLI scheme worth ₹15,000 crore for the manufacturing of small aircraft, which is a major step toward 'Atmanirbhar Bharat' in defense and civil aviation.

What is the PLI Scheme?

Production Linked Incentive (PLI) is a 'performance-based' incentive model. Under this, cash incentives are provided to companies on the incremental sales of goods manufactured domestically. Its primary objective is to provide financial assistance to domestic companies to increase their production capacity, encourage exports, and attract Foreign Direct Investment (FDI).

• The PLI scheme was first started in March 2020.
• Initially, it was launched for only three specific sectors:
  • Large-scale electronics manufacturing.
  • Pharmaceutical components.
  • Medical devices.
• Given its success, in November 2020, the Union Cabinet approved the inclusion of 10 more sectors. Currently, it is implemented in a total of 14 strategic sectors.
• Monitoring and policy coordination of the scheme is conducted by the Ministry of Commerce and Industry (DPIIT).

Why in News?

• New Initiative in Aviation Sector: The government is promoting the manufacturing of small aircraft (less than 19 seats) with an outlay of ₹15,000 crore. Its objective is to strengthen regional connectivity under the UDAN scheme and reduce dependency on foreign aircraft like Cessna and Embraer.
• Success of Electronics: According to recent reports, production in electronics manufacturing (especially mobile phones) has risen from ₹2.13 lakh crore in FY 2021 to ₹5.45 lakh crore in FY 2025 (a 146% increase).

Major Initiatives by the Government of India

The government has adopted a multi-dimensional approach to strengthen the manufacturing ecosystem:

• Sectoral Expansion: Starting initially with 3 sectors, PLI has now expanded to 14 strategic sectors (such as Pharma, Solar Modules, Automobiles, Drones, etc.).
• Preparation for Budget 2026: Dedicated funds for small aircraft and upgrading testing infrastructure (such as the National Flight Test Centre in Bangalore).
• PM Gati Shakti: Integration of infrastructure to reduce logistics costs.
• Maintenance, Repair, and Overhaul (MRO) Policy: Localizing services along with manufacturing in the aviation sector.

Importance of PLI

• Import Substitution: Reducing high import bills in sectors like electronics and aviation.
• Job Creation: An estimate of over 10,000 direct and millions of indirect jobs in aviation manufacturing.
• Attraction of FDI: $4 billion FDI investment in the electronics sector alone, 70% of which went to PLI beneficiaries.
• Technology Transfer: Arrival of advanced technology in India through joint ventures with global Original Equipment Manufacturers (OEMs).

Challenges

• Slow Pace of Disbursement: Out of the total budget of ₹1.97 lakh crore, only 12% (₹23,946 crore) has been disbursed until September 2025.
• Low Value Addition: Production has increased, but the emphasis is more on assembly. Actual 'component manufacturing' and indigenous Research and Development (R&D) are still in their infancy.
• Skill Shortage: Lack of a skilled workforce in specialized fields like aerospace engineering.
• Regulatory Hurdles: Compliance with global safety standards (FAA/EASA) and complex certification processes in sectors like aviation.

Analysis

The PLI scheme has shifted India's manufacturing image from 'low-tech' to 'high-tech'. The 146% growth in electronics is evidence that fiscal incentives can catalyze private investment. However, for success in the aviation sector, financial assistance alone will not suffice; it requires a complete aerospace ecosystem (from metallurgy to software). This will also be a test of India's cost competitiveness against competitors like China and Vietnam.

Way Forward

• Empowerment of MSMEs: Passing the benefits of PLI to the lower levels of the supply chain so that micro and small industries can also connect with large industries.
• Focus on R&D: The government should also consider 'Innovation Linked Incentives' (ILI) so that not just production, but the Intellectual Property (IP) also belongs to India.
• Simplification of Certification: Reducing the time taken for certification by increasing cooperation between DGCA and international bodies.
• Local Value Addition: Giving more focus to the local manufacturing of critical components like chip manufacturing and aircraft engines.

Conclusion

The ₹15,000 crore aviation PLI scheme is an essential part of India’s vision of 'Viksit Bharat @2047'. It not only secures our strategic autonomy but also establishes India as a serious player in the global export market. If the implementation hurdles are removed, India has the potential to become a net exporter in both the aviation and electronics sectors by 2030.

Context

The Artificial Intelligence (AI) revolution has opened new doors for the global economy and productivity, but parallel to this, a serious crisis has emerged in the form of 'soaring energy consumption.' Currently, datacentres account for approximately 2% of global electricity consumption, which is estimated to increase manifold by 2030 due to the impact of AI. To tackle this challenge, Google’s 'Project Suncatcher' and the study being conducted by ISRO on space-based datacentre technology are being considered epoch-making steps.

AI and Datacentres: Why the Energy Crisis?

Training and deploying AI models, especially Large Language Models (such as GPT-4), require dense clusters of Graphics Processing Units (GPUs).

• Extreme Heat Emission: These servers generate a massive amount of heat while operating.
• Cooling Costs: On Earth, millions of liters of water and vast amounts of electricity are spent to keep datacentres cool.
• Investment Pressure: By 2030, investments in this sector are estimated to reach approximately $3 trillion, which will put unprecedented pressure on Earth's resources.

Concept of In-Orbit (Space) Datacentres

Under this technology, datacentre servers are placed on satellites established in Low Earth Orbit (LEO).

• Infinite Solar Energy: Due to the absence of an atmosphere in space, solar panels can generate 8 to 10 times more energy compared to Earth.
• Natural Cooling: The extremely low temperatures of space assist in effectively managing server heat through radiation.
• Google’s Project Suncatcher: This project aims to ensure a 24x7 power supply by using a 'Dawn-Dusk Orbit' that receives continuous sunlight.

ISRO’s Perspective and Indian Efforts

India’s space agency, ISRO, is also focusing on 'Edge Computing' in this direction.

• Data Processing: ISRO’s goal is to process data collected by satellites in space itself, reducing the bandwidth cost of sending data back to Earth.
• Technical Development: India is developing 'Radiation-Hardened' electronics (radiation-resistant), which can keep data secure in the harsh environment of space.

Strategic and Environmental Importance

• Reduction in Carbon Footprint: Traditional datacentres rely on fossil fuels; space datacentres will be entirely based on 'Green Energy.'
• Resource Conservation: Limited resources like land and fresh water on Earth will be saved.
• Soft Power: By leading in this technology, India and other major nations will be able to control the global AI infrastructure.

Major Challenges

• Space Debris: The launch of thousands of data-satellites will increase orbital crowding and the risk of 'Kessler Syndrome' (risk of collision).
• Latency: The delay in data signals traveling between space and Earth could be a barrier for real-time AI applications.
• Maintenance and Repair: Unlike Earth, replacing or fixing faulty hardware in space is currently extremely expensive and complex.
• Cybersecurity: Protecting data located in space from hacking or electronic warfare will be a new challenge.

Analysis

Space-based datacentres are not just a technical innovation but a strategic necessity toward achieving the 'Sustainable Development Goals' (SDGs). While on one hand, it will satiate AI’s hunger for energy, on the other, it will accelerate the commercialization of the 'Space Economy.' However, its success will depend on the reduction of launch costs and effective radiation protection technologies.

Way Forward

• Reusable Rockets: To reduce the cost of launching datacentre satellites, the development of vehicles like ISRO’s RLV and SpaceX’s Starship is essential.
• International Regulation: A global 'Space Data Governance' framework should be prepared for space debris and cybersecurity.
• Hybrid Model: Critical and sensitive data should remain on Earth, while AI tasks involving heavy computation should be shifted to space.

Conclusion

Space-based datacentres could become the backbone of the future digital economy. This technology will prove to be a boon for balancing AI’s energy demands and environmental sustainability. If global stakeholders like India and Google solve these challenges, we will enter an era where there is no conflict between technology and nature.