Descriptive Prep: Brajesh Mohan

#Infographic comparing criteria of horizontal devolution of 15th FC and 16th FC Key points: 1.No change in vertical devolution - same as 15th FC 41% 2. Major Changes in Criteria of Horizontal Devolution: ▶️ The State’s per capita GSDP difference — has the highest weightage of 42.5%, down from 45% earlier. ▶️ A State’s population now accounts for 17.5% of the weightage up from the previous 15%. ▶️ Demographic performance — how successfully it has managed to contain population growth — has a lower weightage of 10% from the previous 12.5% ▶️ The area of the State has been granted a 10% weightage by the 16th FC as compared to 15% previously. ▶️ A State’s forest cover now receives a 10% weightage, the same as earlier ▶️The 16th FC has replaced the previous ‘tax and fiscal efforts’ category, which had a weightage of 2.5%, with a ‘contribution to GDP’ that carries a 10% weight. Some other minor changes are also there which are highlighted in the PDF.

Here are the 10 key highlights from the perspective of the common man, middle class, MSMEs, startups, and emerging sectors: 1. Record ₹12.2 Lakh Crore Capex Push — Massive infrastructure investment to drive jobs, demand, and opportunities for MSMEs, startups, and everyday citizens. 2. ₹10,000 Crore SME Growth Fund — Equity support + performance incentives to transform high-potential MSMEs into global “Champions” — a game-changer for small businesses and job creation. 3. Self-Reliant India Fund Top-up — Additional ₹2,000–4,000 crore infusion to provide equity/risk capital, especially for micro enterprises and early-stage startups facing funding challenges. 4. TReDS Platform Reforms — Made mandatory for CPSE purchases from MSMEs; receivables to be securitized for better liquidity; enhanced credit guarantees via CGTMSE — faster payments and easier financing for small businesses. 5. Revival of 200 Legacy Industrial Clusters — Targeted modernization to revive struggling clusters, boost local manufacturing, employment, and regional economies. 6. Corporate Mitras Initiative — Affordable cadre of trained professionals in Tier-II/III towns to assist MSMEs with compliance, governance, HR, legal, and growth planning. 7. New Income Tax Act, 2025 — Effective April 1, 2026 — simpler language, fewer sections, redesigned forms — making tax filing and compliance much easier for individuals and businesses. 8. TCS Rationalization — Reduced to 2% on overseas tour packages, education, and medical remittances under LRS — big relief for students, families, and young professionals. 9. One-Time Foreign Asset Disclosure Scheme — 6-month window offering immunity from penalties/prosecution for NRIs, young professionals, and tech employees — with low fees/tax for undisclosed assets. 10. Focus on Emerging Sectors & Youth — Semiconductor Mission 2.0, Biopharma Shakti, AVGC labs in schools/colleges, AI skilling push — creating massive opportunities in tech, deep-tech, content creation, and green jobs for Gen Z and startups.

I had recommended Carbon Capture, Utilization and Storage (CCUS) for this year's exam and also UPSC asked question on it on GS-III in 2025. However CCUS and Orange Economy now becomes more important than last year.

Algorithm Trading Topic is Very Important in Current Context.

Fully Accessible Route Norms: Under the FAR channel, FPIs and other eligible non-resident investors can freely invest in specified Indian government securities, which offer competitive yields, full repatriation, and fewer restrictions. The FAR category, as defined by the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI), refers to Indian government securities that foreign investors can purchase without investment caps or many restrictions. In October alone, inflows into FAR stood at about Rs 15,144 crore, even as equity markets continued to see net foreign outflows. Article link 🔗 https://indianexpress.com/article/business/foreign-debt-inflows-trail-expectations-despite-easier-fully-accessible-route-norms-10342133/

The Securities and Exchange Board of India (SEBI) has issued a strong advisory cautioning investors against investing in unregulated digital gold/e-gold products, highlighting their high risks and lack of investor protection. Digital gold is not classified or regulated as a security or commodity derivative and lacks the investor protection mechanisms available for SEBI-approved products. What is Digital Gold??? It refers to buying gold electronically without physical possession, with its price linked to physical gold. Created using blockchain technology, it allows investors to buy, sell, and store gold online. SEBI advises investors to use regulated gold investment options such as Sovereign Gold Bonds (SGBs), Gold exchange-traded fund (ETF), Electronic Gold Receipts (EGRs), and commodity derivatives. Article link 🔗 https://indianexpress.com/article/business/sebi-warns-against-digital-gold-risks-involved-10358517/lite/

Key Reforms by SEBI 1. Relaxation in IPO dilution norms — Minimum dilution requirement for large companies has been reduced. — Companies with market cap above ₹5 trillion now need to offer shares worth only ₹15,000 crore and at least 1% of mcap, with a minimum dilution of 2.5% prescribed. — For companies with market cap between ₹1–5 trillion, dilution norms are adjusted accordingly. 2. Extended timelines for Minimum Public Shareholding (MPS) — Firms listing with 15% public shareholding get 5 years to meet 15% MPS and 10 years for 25% MPS. 3. Eases compliance burden for large firms. — Anchor Investor Framework Changes — Reservation for domestic mutual funds, life insurers, and pension funds increased from 33.33% to 40%. 4. Foreign Portfolio Investors (FPIs) Onboarding — New platform SWAGAT-FI introduced for easier onboarding of low-risk FPIs (like sovereign wealth funds, insurance cos., govt-related investors). — One-time KYC introduced with $2,500 fee for a 10-year block. — FPIs exempted from 50% aggregate contribution cap (NRIs & overseas citizens). 5. Strategic Investor Scope Expanded — In REITs and InvITs, strategic investors can now include provident funds, public financial institutions, AIFs, and state industrial corporations. 6. Mutual Fund Reforms — Exit load capped at 3% (down from 5%). — Incentives for distributors reintroduced for new inflows from beyond top 30 cities.

The Securities and Exchange Board of India (SEBI) introduced new entity-level caps on intraday positions in equity index options starting 1 October 2025 Two Types of Limits — Gross Exposure Cap: ₹10,000 crore per side (buy/sell separately). Applies separately to long and short positions. — Net Exposure Cap: ₹5,000 crore (after offsetting buy and sell positions). Exchanges will capture at least 4 random snapshots of trader positions between 2:45 PM to 3:30 PM every day. Any breaches on expiry days may invite surveillance measures. Additional surveillance will begin from 6 December 2025. Weekly Expiry Changes — NSE has shifted weekly expiry for index options from Thursday to Tuesday (from August 2025). — BSE will also follow suit to reduce concentration of risks on Thursdays. Moving expiry to Tuesday spreads the trading volume and volatility more evenly across the week.

Mint Primer: SEBI ESOP Guidlines

Key Proposed Norms Minimum Constituents: — Each non-benchmark index must include at least 14 stocks. Current metrics: - Bank Nifty has 12 - BSE Bankex has just 10 Top Stock Weight Cap: No single stock should have more than 20% weightage in the index. Top Three Stocks Cap: Combined, they shouldn’t exceed 45% of the index. Current scenario: - HDFC Bank ≈ 29% - ICICI Bank ≈ 26% → Combined ≈ 55%, over the threshold Descending Weight Structure: The weight of constituent stocks must follow a descending order—ensuring smoother index performance and mitigation of shocks. Staggered Implementation (“Glide Path”) — Instead of enforcing all changes overnight, SEBI proposes a phased approach especially for heavily funded indices like Bank Nifty: Nifty Bank (~₹34,251 Cr in ETF AUM): Rollout over four monthly tranches to lower concentrated weights gradually. Nifty Financial Services (~₹511 Cr AUM): May be rebalanced in a single tranche if liquidity and market impacts are manageable.

SEBI Two New Initiatives

What are Fractional Shares? Investors can own or trade a portion of a single share, instead of buying the whole unit. Example: If 1 share of a company costs ₹10,000, a small investor can buy 0.1 share for ₹1,000. There are many shares in Indian which are very good but costs more than 5,000 or 10,000 per share, which out of reach for many retail investors. For example: MRF, Elcid Investment, Page Industries etc) What is SEBI’s Innovation Sandbox? — A testing environment where fintech firms can experiment with new ideas (like fractional shares) under SEBI’s supervision. — The company Xaults has been allowed to test its model in the sandbox.

Algorithmic trading, at its core, means writing a code that tells a computer when to buy or sell securities such as stock, futures or options. Recently SEBI claimed Jane Street used algorithmic trading strategies to influence stock prices, particularly on the Bank Nifty index, to benefit from options trading. This led to a ban on Jane Street from participating in the Indian securities market. They have been allowed again with wider monitoring.