Current Affairs for 29 December 2025

Digitalization of the Indian Economy

Digitalization has emerged as a key driver of India’s structural economic transformation. The rapid spread of digital technologies is not only enhancing productivity and efficiency but is also playing a decisive role in governance, financial inclusion, and employment generation. It is estimated that by 2030, the digital economy will contribute around 20% of India’s Gross Value Added (GVA).

Current Status and Trends

(a) Overall Contribution of the Digital Economy

• India is regarded as the third most digitized economy in the world.
• In FY 2023, the digital economy contributed 11.74% of GDP.
• By FY 2030, its share is projected to rise to about 20% of GVA, surpassing both agriculture and manufacturing.

(b) Impact on Employment

• In FY 2022–23, about 14.67 million people were employed in the digital economy (2.55% of the total workforce).
• 58.07% of these jobs were created in digitally enabled sectors such as:
  • E-commerce
  • IT and IT-enabled services
  • Logistics
  • Gig economy platforms

(c) Financial Inclusion

• The JAM Trinity (Jan Dhan–Aadhaar–Mobile) has significantly expanded access to formal banking.
• The Financial Inclusion Index of the Reserve Bank of India reached 64.2 in FY 2023–24.
• By May 2025, Direct Benefit Transfers (DBT) exceeded ₹44 lakh crore, reducing leakages and ensuring targeted welfare delivery.

Role of Digital Public Infrastructure (DPI)

(a) India Stack

• Platforms such as Aadhaar, UPI, DigiLocker, and e-KYC have created a low-cost, scalable, and inclusive digital ecosystem.
• DPI has enabled platform-based development, benefiting both governance and private innovation.

(b) UPI Revolution

• UPI has made India the world’s leading real-time digital payments ecosystem.
• In 2024, monthly transactions crossed 1,300 crore, indicating a decisive shift toward a cashless economy.

UPI (Unified Payments Interface)

UPI is a real-time digital payment system in India that allows instant money transfers by linking bank accounts through a mobile app. It was developed by the National Payments Corporation of India (NPCI).

(c) Aadhaar and DBT

• Aadhaar simplified large-scale digital identity verification.
• DBT improved the efficiency and transparency of subsidy and welfare schemes.

Broad Benefits of Digitalization

• Productivity enhancement: MSMEs and start-ups gain access to national and global digital markets.
• Transparent governance: E-governance, faceless services, and real-time monitoring.
• Inclusive growth: Potential to bridge the rural–urban divide.
• Innovation ecosystem: Expansion of fintech, health-tech, and ed-tech sectors.

Key Challenges

(a) Digital Divide

• Significant gaps in internet access, speed, and quality between urban and rural areas.
• Limited fiber and mobile connectivity in remote regions.

(b) Low Digital and Financial Literacy

• Nearly 75% of Indian adults lack basic financial knowledge.
• Over 80% of women are financially illiterate, restricting effective use of digital services.

(c) Cybersecurity and Fraud

• Rising risks of data breaches, cyberattacks, and online fraud.
• Concerns over consumer protection and data privacy.

(d) Technology Infrastructure

• Challenges related to service reliability, frequent upgrades, and weak connectivity.

(e) Regulatory Issues

• Complex and evolving regulation in fintech and cryptocurrencies.
• Need to balance innovation with risk management. 

Way Forward

• Investment in digital infrastructure: Rural broadband, 5G/6G, and satellite internet.
• Digital and financial literacy missions: Focus on women and MSMEs.
• Robust cybersecurity framework: Strong data protection laws and expanded CERT capacity.
• Smart regulation: Sandbox-based, fintech-friendly regulatory approach.
• Globalization of DPI: UPI-linked cross-border payments and promotion of Global Digital Public Goods.

Digitalization of the Indian Economy

Digitalization has emerged as a key driver of India’s structural economic transformation. The rapid spread of digital technologies is not only enhancing productivity and efficiency but is also playing a decisive role in governance, financial inclusion, and employment generation. It is estimated that by 2030, the digital economy will contribute around 20% of India’s Gross Value Added (GVA).

Current Status and Trends

(a) Overall Contribution of the Digital Economy

• India is regarded as the third most digitized economy in the world.
• In FY 2023, the digital economy contributed 11.74% of GDP.
• By FY 2030, its share is projected to rise to about 20% of GVA, surpassing both agriculture and manufacturing.

(b) Impact on Employment

• In FY 2022–23, about 14.67 million people were employed in the digital economy (2.55% of the total workforce).
• 58.07% of these jobs were created in digitally enabled sectors such as:
  • E-commerce
  • IT and IT-enabled services
  • Logistics
  • Gig economy platforms

(c) Financial Inclusion

• The JAM Trinity (Jan Dhan–Aadhaar–Mobile) has significantly expanded access to formal banking.
• The Financial Inclusion Index of the Reserve Bank of India reached 64.2 in FY 2023–24.
• By May 2025, Direct Benefit Transfers (DBT) exceeded ₹44 lakh crore, reducing leakages and ensuring targeted welfare delivery.

Role of Digital Public Infrastructure (DPI)

(a) India Stack

• Platforms such as Aadhaar, UPI, DigiLocker, and e-KYC have created a low-cost, scalable, and inclusive digital ecosystem.
• DPI has enabled platform-based development, benefiting both governance and private innovation.

(b) UPI Revolution

• UPI has made India the world’s leading real-time digital payments ecosystem.
• In 2024, monthly transactions crossed 1,300 crore, indicating a decisive shift toward a cashless economy.

UPI (Unified Payments Interface)

UPI is a real-time digital payment system in India that allows instant money transfers by linking bank accounts through a mobile app. It was developed by the National Payments Corporation of India (NPCI).

(c) Aadhaar and DBT

• Aadhaar simplified large-scale digital identity verification.
• DBT improved the efficiency and transparency of subsidy and welfare schemes.

Broad Benefits of Digitalization

• Productivity enhancement: MSMEs and start-ups gain access to national and global digital markets.
• Transparent governance: E-governance, faceless services, and real-time monitoring.
• Inclusive growth: Potential to bridge the rural–urban divide.
• Innovation ecosystem: Expansion of fintech, health-tech, and ed-tech sectors.

Key Challenges

(a) Digital Divide

• Significant gaps in internet access, speed, and quality between urban and rural areas.
• Limited fiber and mobile connectivity in remote regions.

(b) Low Digital and Financial Literacy

• Nearly 75% of Indian adults lack basic financial knowledge.
• Over 80% of women are financially illiterate, restricting effective use of digital services.

(c) Cybersecurity and Fraud

• Rising risks of data breaches, cyberattacks, and online fraud.
• Concerns over consumer protection and data privacy.

(d) Technology Infrastructure

• Challenges related to service reliability, frequent upgrades, and weak connectivity.

(e) Regulatory Issues

• Complex and evolving regulation in fintech and cryptocurrencies.
• Need to balance innovation with risk management. 

Way Forward

• Investment in digital infrastructure: Rural broadband, 5G/6G, and satellite internet.
• Digital and financial literacy missions: Focus on women and MSMEs.
• Robust cybersecurity framework: Strong data protection laws and expanded CERT capacity.
• Smart regulation: Sandbox-based, fintech-friendly regulatory approach.
• Globalization of DPI: UPI-linked cross-border payments and promotion of Global Digital Public Goods.

Electronics Sector and Semiconductor Mission in India

India’s electronics manufacturing sector has emerged as a high-growth strategic sector.

• A multi-fold increase in the value of domestic production has enabled India to move beyond being merely an electronics assembly hub toward greater value addition.
• India’s participation has expanded across mobile phones, consumer electronics, IT hardware, and automotive electronics.

Today, India is no longer just an import-dependent consumer; rather—

• It is emerging as a manufacturing and export hub within the Global Value Chain (GVC) for electronics.
• Under the China+1 strategy, India has positioned itself as an alternative destination for multinational companies.

Central Importance of Semiconductors

Semiconductors are the backbone of the modern digital economy:

• Consumer sector: Smartphones, computers, televisions, smart home devices
• Digital infrastructure: Data centers, cloud computing, 5G/6G networks
• Strategic sectors: Automobiles, electric vehicles (EVs), defence equipment, space and satellite systems

Without semiconductors, the vision of Digital India, Industry 4.0, and Atmanirbhar Bharat (Self-Reliant India) cannot be realized.

Importance of the Indigenous Semiconductor Industry

(a) Economic Sovereignty

• Reduced dependence on imported chips leads to significant savings in foreign exchange.
• Protection from global supply-chain disruptions (such as pandemics or geopolitical tensions).
• Ensures a stable supply of critical inputs for domestic MSMEs and large electronics manufacturers.

This provides India with Strategic Autonomy.

(b) Technological Foundation

• Semiconductors are the core enabling technology of the modern digital society.
• Technologies such as AI, ML, IoT, robotics, automation, big data, and digitalization are built on semiconductors.
• Smartphones, computers, automobile ECUs, industrial machinery, and smart factories all depend on them.

Indigenous semiconductors mean control over technology, not mere consumption.

(c) Cross-Sectoral Impact

Healthcare

• Medical imaging (MRI, CT scans)
• Real-time patient monitoring and telemedicine

Logistics and Transportation

• Smart tracking and GPS-based fleet management
• Energy-efficient shipping and warehouse automation

Defence and Security

• Radar systems and missile guidance
• Secure communication, cyber and electronic warfare

The semiconductor industry strengthens Comprehensive National Power.

(d) Green Energy and Global Standing

• Electric vehicles (EVs), charging infrastructure, and battery management systems
• Advanced vehicle safety systems such as ADAS
• Renewable energy grids, smart meters, and energy-efficiency solutions

Through these, India:

• Moves closer to its Net Zero climate goals
• Establishes itself as a reliable and responsible technology power on the global stage

Major Government Initiatives

(a) PLI – Large-Scale Electronics Manufacturing

Production Linked Incentive (PLI) Scheme

The PLI scheme has been the most significant policy for expanding electronics manufacturing in India. Its objective is not limited to assembly, but to promote value addition and export-oriented production.

Key Features

• Direct financial incentives based on production/sales
• Attraction of multinational companies to set up manufacturing units in India
• Support for domestic companies to become globally competitive

Impact and Achievements

• India has emerged among the leading countries in mobile phone manufacturing
• Significant growth in electronics exports
• Development of a component ecosystem (PCBs, camera modules, chargers, display parts)
• Large-scale job creation, especially for youth and women
• The PLI scheme has helped India move beyond an “assembly hub” towards becoming a “manufacturing + export hub”.

(b) India Semiconductor Mission (ISM)

• Launched: 2021
• Total Outlay: ₹76,000 crore

Objectives

• To develop a comprehensive ecosystem for semiconductor and display manufacturing in India
• To integrate fabs, display units, ATMP/OSAT, design, and R&D
• To provide up to 50% financial support of project cost, reducing the barrier of high capital investment

Strategic Importance

• Protection against situations like global chip shortages
• Secure supply for defence, space, and digital infrastructure
• Positioning India as a reliable partner in the global semiconductor value chain
• ISM forms the foundation of India’s strategic autonomy and technological sovereignty.

Recent Approvals (2024)

(a) India’s First Commercial Semiconductor Fab

• India’s first commercial semiconductor fabrication plant in Gujarat
• Lead: Tata Group
• A historic milestone for India, as the country did not previously have full-scale fab capability

Significance

• Formal entry of India into high-value semiconductor manufacturing
• Domestic supply of chips for automobiles, EVs, power electronics, and industrial applications
• Boost to skill development, research, and advanced engineering

(b) ATMP / OSAT Units

• Approval granted to two additional units

Functions

• Assembly
• Testing
• Marking and Packaging

Significance

• A critical stage of the semiconductor value chain
• Large-scale employment generation in a short time
• Moves India toward end-to-end capability: Chip Design → Fab → Packaging
• This marks India’s transition from being merely a chip consumer to moving toward becoming a full-fledged semiconductor manufacturing nation.

Schemes under the Semicon India Programme

The objective of the Semicon India Programme is to develop an end-to-end semiconductor value chain in India—from design to fabrication, packaging, and display manufacturing. The programme is implemented under the India Semiconductor Mission.

(1) Semiconductor Fab Establishment Scheme

Key Features

• Silicon CMOS (Complementary Metal-Oxide-Semiconductor)–based fabs
• Focus on manufacturing logic chips, memory, power, and automotive semiconductors
• Direct financial support up to 50% of project cost

Significance

• Fab construction is highly capital-intensive; government support reduces investment risk
• Enables India’s entry into high-end manufacturing and advanced engineering
• Ensures domestic chip supply for automobiles, EVs, defence, and industrial electronics
• This scheme is decisive in transforming India from a fab-less design hub into a fab-enabled manufacturing nation.

(2) Display Fab Establishment Scheme

Covered Technologies

• TFT-LCD
• AMOLED (advanced displays for mobiles, TVs, and wearables)

Incentive Structure

• Financial support of up to 50% of project cost

Significance

• Displays are the most expensive and import-dependent component of electronics
• Enhances domestic value addition in mobile phones, TVs, and laptops
• Reduces import bills and improves export competitiveness
• Display fabs move India toward a complete electronics ecosystem, beyond just final assembly.

(3) Compound Semiconductor and ATMP/OSAT Scheme

Covered Areas

• Compound Semiconductors (GaN, SiC, etc.)
• Silicon Photonics
• Sensors and Discrete Semiconductors
• ATMP / OSAT: Assembly, Testing, Marking & Packaging

Incentives

• Financial support of up to 50% of capital expenditure (CapEx)

Strategic Importance

• Compound semiconductors:
  • Essential for EVs, 5G/6G, renewable energy, and power electronics
• ATMP/OSAT:
  • The largest employment-generating stage of the semiconductor value chain
  • Can become operational in a relatively short time
• This scheme strengthens India as a hub for design, packaging, and advanced applications.

(4) Design-Linked Incentive (DLI) Scheme

This scheme focuses on strengthening India’s chip design capabilities, enabling leadership not only in manufacturing but also in intellectual property (IP) creation.

(a) Product Design–Linked Incentive

• Incentive of up to 50% of eligible design expenditure
• Maximum cap: ₹15 crore per application

Benefits

• Encourages startups, MSMEs, and domestic companies
• Promotes indigenous design of ASICs, SoCs, AI, and IoT chips

(b) Production-Linked Incentive

• 6% to 4% of net sales over 5 years
• Maximum cap: ₹30 crore per application

Significance

• Supports the journey from design to market
• Practical implementation of Design in India → Make in India
• The DLI scheme has the potential to establish India as a global chip design hub.

Major Challenges 

• Excessive Dependence on Imports: Despite progress in electronics assembly, India still relies heavily on foreign countries for high-value components—especially semiconductor chips—where China plays a dominant role in supply.
• Capital- and Resource-Intensive Nature: Setting up semiconductor fabrication (fab) units requires massive investment. It also demands critical resources such as ultra-pure water and uninterrupted, high-quality power supply.
• Weak Supporting Ecosystem: Industries that support chip manufacturing—such as specialty gases, chemicals, precision tools, and advanced machinery—are not yet sufficiently developed in India, leaving the overall supply chain fragile.
• Skill and Experience Gap: Although India has a strong base of semiconductor design engineers, there is a significant shortage of practical experience in actual chip manufacturing and highly specialized technical roles.
• Infrastructure Constraints: High investment requirements, lack of ancillary industries, and shortage of skilled human resources together limit the pace of growth of India’s semiconductor manufacturing sector.