Why in news?

Recently, the Union Cabinet cleared the second phase of the India Semiconductor Mission (ISM), along with the Mobile Phone Manufacturing Scheme (MPMS), with outlays of ₹1.27 lakh crore and ₹62,500 crore respectively.

Together, the schemes aim to expand semiconductor fabrication, assembly, and packaging facilities in India, while boosting phone assembly and component manufacturing.

What’s in Today’s Article?

• Targets Under the New Scheme
• How Is This Different from Phase 1?
• What Has Phase 1 Achieved So Far?
• Why Is India Focusing on Semiconductor Manufacturing?
• How Advanced Are the Targeted Chips?
• Why the Mobile Phone Manufacturing Scheme (MPMS)?

Targets Under the New Scheme

• Over its five-year tenure, the government expects the scheme to draw:
  • ₹4 lakh crore in investment
  • ₹2 lakh crore in production
  • ₹1 lakh crore in exports

How Is This Different from Phase 1?

• ISM's first phase was approved in December 2021 with an outlay of ₹76,000 crore.
• A 2022 amendment allowed it to offer up to 50% capital subsidy for large projects, such as Micron's memory chip packaging facility in Sanand, Gujarat.
• Funds were also channelled into the Electronics Component Manufacturing Scheme, aimed at incentivising smaller component manufacturing.
• Key changes in Phase 2 (Semicon 2.0)
  • Broader scope: Covers a larger part of the electronics ecosystem, including chip design talent, capital machinery (equipment used in chip-making), semiconductor-grade chemicals and gases, and R&D efforts.
  • Lower subsidies: Capital subsidies have been trimmed to 30-40%, as officials believe India's semiconductor industry is becoming attractive even with reduced incentives.
  • Reduced land support: The Union government is less likely to offer land assistance, as State governments have increasingly stepped in with land at token prices and their own additional incentives.
• The precise details of Phase 2 will be laid out in a Gazette notification expected next month.

What Has Phase 1 Achieved So Far?

• 12 manufacturing and packaging units were approved, with a total committed investment of ₹1.64 lakh crore.
• Most of these are semiconductor packaging units, spread across Gujarat, Uttar Pradesh, Punjab, Assam, Odisha, and Andhra Pradesh.
• The list also includes one silicon fabrication unit and one gallium-nitride Micro LED display fabrication unit.
• The Tata Electronics fab is set to begin commercial production in 2028.
• A design-linked incentive programme approved 24 projects.
• The government secured licences for costly semiconductor design software and provided them free to universities and startups.
• The Semiconductor Lab, Mohali, is being revamped to help students and researchers "tape out" (finalise for manufacturing) their chip designs.

Why Is India Focusing on Semiconductor Manufacturing?

• The push stems from lessons learned through recent global disruptions:
  • COVID-19-era supply chain breakdowns exposed India's vulnerabilities.
  • U.S. export controls during its trade tensions with China highlighted the risks of weak integration into global electronics value chains.
• The government maintains that building domestic capacities is essential, even if it takes decades to match countries like the Netherlands and Taiwan, whose companies remain critical to global chipmaking.

How Advanced Are the Targeted Chips?

• While the most powerful phones use "frontier" grade chips with a process node of 7 nanometres or smaller, India's current focus is on 28nm chips, made using what are called "legacy" process nodes.
  • IT Minister Ashwini Vaishnaw noted there is a massive market for these chips, since everyday electronics, where size and computing power are not critical constraints, rely heavily on them.
• As ISM 2.0 progresses, the government hopes to move the ecosystem toward frontier nodes, particularly by strengthening domestically-owned intellectual property and research.
• Currently, while India has many semiconductor designers, most work for foreign firms or on their behalf, meaning royalties and expertise largely stay outside the domestic industry.

Why the Mobile Phone Manufacturing Scheme (MPMS)?

• Although a growing share of global iPhone sales come from India-assembled handsets, most components remain imported, and Indian-designed handsets are virtually absent from the market.
• The MPMS seeks to:
  • Expand domestic phone assembly to grow the ancillary component market.
  • Incentivise domestic design and R&D.
• The scheme offers incentives ranging from 2.25% to 5%, depending on the extent of local design involved in the handsets.

Conclusion

Semicon 2.0 marks India's shift from simply attracting chip packaging units to building a deeper, more self-reliant electronics ecosystem, spanning design, machinery, and R&D.

Its success will hinge on whether India can move beyond legacy-node manufacturing toward owning the intellectual property and expertise that define frontier chipmaking.

Why in news?

The government released three inflation measures for June, the Consumer Price Index (CPI),Wholesale Price Index (WPI), and Producer Price Index (PPI). All three showed prices rising faster in June compared to May, driven by higher food inflation and elevated fuel prices due to weak rains and the West Asia war.

However, a deeper look at the data reveals a more complex picture of subdued consumption, profit pressures, and India's growing dependence on China.

What’s in Today’s Article?

• The Headline Numbers
• Core Inflation Tells a Different Story
• Why Has Core Inflation Fallen Despite Strong Growth?
• The China Factor: Importing Deflation
• Dining Out Gets Costlier
• Profit Margin Pressures in Manufacturing
• What This Means for Monetary Policy?

The Headline Numbers

• CPI inflation (relevant for households) rose to 4.38% in June from 3.93% in May.
• WPI inflation (year-on-year change in wholesale prices) increased to 9.87% from 9.68%.
• Output PPI inflation edged up to 9.57% from 9.38%.
• Notably, headline CPI crossed the RBI's 4% target for the first time in 17 months.

Core Inflation Tells a Different Story

• Despite the rise in headline CPI, core inflation remained unchanged at 3.9%.
  • Core inflation measures price changes for items excluding food and fuel, both of which tend to be volatile and don't reflect changes in real consumption since households cannot easily cut back on eating or essential travel.
• The most widely-used core inflation measure rose only 20 basis points over six months, from 3.7% in January.
• A narrower measure, excluding gold and silver jewellery as well, edged up to just 2.5%, sharply down from as high as 6% in early 2023.
• Economists interpret this subdued core inflation as a sign that consumption remains weak.

Why Has Core Inflation Fallen Despite Strong Growth?

• This presents a puzzle: core inflation fell between 2023 and 2026 even as India recorded growth exceeding 7%.
• According to economists, the explanation lies in the nature of India's growth:
  • Over the last four fiscal years, Gross Fixed Capital Formation (GFCF) growth, driven by investment, has consistently outpaced private consumption growth.
  • This means the economy's productive capacity has expanded faster than actual consumer demand.
  • Indicators like vehicle sales, and credit card and durable goods loans, point to moderating discretionary demand following the GST rate cuts of September 2025.

The China Factor: Importing Deflation

• A major driver of India's narrow core inflation is falling prices of Chinese goods:
  • China's Producer Price Index (PPI) has stayed in negative territory from October 2022 to February 2026, meaning India has effectively been "importing deflation" from China.
  • India's goods imports from China now exceed $130 billion annually, representing close to 3.5% of India's GDP.
• India's increased supply chain dependence on China means price spillovers are becoming stronger.
• The GST rate cuts and their resulting price reductions have also kept core inflation subdued over the past year, though this low base effect will fade in the coming months.

Dining Out Gets Costlier

• One segment of core inflation that has risen sharply is restaurant and cafe pricing:
  • Restaurant and cafe inflation rose from 2.73% in February to 6.94% in June, driven by higher commercial LPG prices linked to the West Asia war.
  • This reflects the second-round impact of LPG price hikes, though a recent cut in cylinder prices may moderate this trend going forward.

Profit Margin Pressures in Manufacturing

• While restaurants have passed on rising costs to consumers, the manufacturing sector appears to have absorbed higher input costs instead, likely due to weak consumer demand:
  • The manufacturing sector's output PPI declined 0.3% in June from May.
  • Meanwhile, its input PPI (an experimental new metric) jumped 2.1% month-on-month in June.
• This gap indicates that manufacturers' selling prices remained largely stable even as their costs rose.
• More broadly, the all-commodity WPI rose 6.9% from February to June, while CPI rose just 2.3% in the same period, a significant divergence.
• Economists notes that price pressures in CPI remain "relatively moderate" despite rising input costs for producers, though the effects of May's ₹7.5/litre hike in petrol and diesel prices will likely be felt over the next 12 months.

What This Means for Monetary Policy?

• Inflation remains "the cleanest indicator of the underlying strength of consumption."
• The current data suggests that consumption still requires support from monetary policy.
• With the India-US inflation differential near historical lows, analysts argue there remains room for a more accommodative interest rate environment in India.

Conclusion

India's June inflation data paints a layered picture: rising headline numbers mask subdued core inflation, weak consumption, and growing reliance on cheaper Chinese imports.

With manufacturers absorbing cost pressures rather than passing them on, and consumption needing continued monetary support, policymakers face a delicate balancing act between growth, prices, and India's deepening trade dependence on China.

Why in News?

• India achieved a historic milestone as Hyderabad­-based Skyroot Aerospace's Vikram-1 became the country's first privately built rocket to successfully place payloads into Low Earth Orbit (LEO).
• The Mission Aagaman marks India's emergence as the third country (after US and China) where a private company has independently demonstrated orbital launch
• So far, all orbital rockets India has launched have been state funded and led by the ISRO, but Skyroot Aerospace changed this, reflecting the growing maturity of India's commercial space ecosystem following space-sector reforms.

What’s in Today’s Article?

• Mission Aagaman - Key Highlights
• Payloads and Technological Demonstrations
• Evolution of Skyroot Aerospace
• Significance for India's Space Programme
• Challenges Before Skyroot
• India's Competitive Advantages
• Big Picture
• Way Forward

Mission Aagaman - Key Highlights:

• Historic achievement:
  • Vikram-1, a 22-metre, three-stage orbital launch vehicle, was successfully launched from Satish Dhawan Space Centre, Sriharikota.
  • The mission, titled 'Aagaman' (Arrival), validated the rocket's ability to achieve full orbital flight.
  • India joins a select group of nations where private enterprises possess orbital launch capability.
• Technical features:
  • Payload capacity: Up to 350 kg to Low Earth Orbit (450 km).
  • Rocket built using: All-carbon composite structure, 3D-printed engines, high-thrust solid-fuel boosters, and indigenous propulsion systems.
  • Successfully validated: Propulsion; stage separation; Guidance, Navigation and Control (GNC); avionics; telemetry; and overall vehicle performance.

Payloads and Technological Demonstrations:

• Besides validating the launch vehicle, Vikram-1 carried several experimental payloads, including -
  • Technology demonstration payloads from Grahaa Space, Cosmoserve and DCubed.
  • A lab-grown diamond.
  • A miniature 18-carat gold sculpture celebrating India's space programme.
  • A micro-art tribute to Vikram Sarabhai, Dr. A.P.J. Abdul Kalam and C.V. Raman.
  • Letters from well-wishers, including the Prime Minister.
• The rocket is also equipped with robotic arms capable of assisting future space-debris removal missions, highlighting India's growing focus on sustainable space operations.

Evolution of Skyroot Aerospace:

• Founded in 2018, Skyroot emerged after the liberalisation of India's space sector.
• It became India's first unicorn in the space sector (valuation exceeding $1 billion).
• Earlier launched Vikram-S (2022), a suborbital mission that demonstrated launch capability but did not achieve orbit.
• Vikram-1 represents the transition from demonstration to operational orbital launch capability.
• The company’s future plans: Additional test launches; commercial launch services; and manufacturing capacity of one Vikram-1 rocket per month (12 annually).

Significance for India's Space Programme:

• Strengthening the commercial space ecosystem: The success demonstrates that India's private sector can now complement ISRO in launch services, satellite deployment and commercial missions.
• Boost to space reforms: The mission validates policy reforms initiated after 2020, including -
  • Opening the space sector to private participation.
  • Establishment of IN-SPACe for authorisation and promotion.
  • Commercialisation through NewSpace India Limited (NSIL).
  • Growing startup ecosystem in launch vehicles, satellites and downstream applications.
• Strategic importance:
  • Enhances India's self-reliance in critical space technologies.
  • Strengthens India's position in the rapidly expanding global space economy.
  • Encourages innovation, entrepreneurship and high-technology manufacturing.

Challenges Before Skyroot:

• While the technological achievement is significant, commercial success remains uncertain.
• Challenges are -
  • Challenging global market: The small-satellite launch market has become highly competitive. Several startups in the US, Europe, China, Japan and Australia have struggled or exited due to limited launch demand.
  • Competition from rideshare launches:
    • Small satellites increasingly use rideshare missions aboard larger rockets such as SpaceX's Falcon 9, significantly reducing launch costs.
    • Dedicated launch vehicles like Vikram-1 offer orbital flexibility but often at a higher price.
  • Competition from ISRO: Vikram-1 will also compete with ISRO's Small Satellite Launch Vehicle (SSLV) and the well-established Polar Satellite Launch Vehicle (PSLV).
  • Limited domestic demand:
    • India's current demand for dedicated small-satellite launches remains modest.
    • To fully utilise its proposed production capacity, Skyroot must secure international commercial customers.
  • Low-margin industry: Launch services are capital-intensive; comparatively low-margin; and subject to increasing compliance costs, including space debris mitigation and regulatory obligations.

India's Competitive Advantages:

• Despite market challenges, India enjoys several structural strengths -
  • Lower manufacturing and labour costs.
  • Access to ISRO's launch infrastructure and expertise.
  • Strong engineering talent.
  • Expanding satellite manufacturing ecosystem.
  • Government emphasis on advanced manufacturing and innovation.
• India's emerging commercial ecosystem includes startups such as - Pixxel, Bellatrix Aerospace, and Dhruva Space.
• Together, they can build integrated capabilities spanning launch vehicles, satellites and downstream space services.

Big Picture:

• The Skyroot factory is capable of producing 12 Vikram­1 rockets every year. This will be an asset if there is such demand every year.
• But even ISRO does not launch 12 small satellites a year today. In other words, Skyroot will have to find and secure international customers.

Way Forward:

• For sustained success, Skyroot must move beyond a single successful launch by -
  • Demonstrating consistent launch reliability.
  • Reducing launch costs.
  • Expanding into higher-value segments such as satellite manufacturing, space applications and data services.
  • Leveraging India's growing reputation as a trusted, cost-effective space partner.
• The successful launch of Vikram-1 marks a watershed moment for India's private space industry and validates years of policy reforms encouraging private participation.
• For India, the mission represents another major step towards becoming a leading player in the global space economy and advancing the vision of Atmanirbhar Bharat in strategic technologies.

Why in the News?

• A ransomware group named World Leaks has allegedly leaked documents related to the Kudankulam Nuclear Power Plant (KKNPP), reigniting concerns over cybersecurity vulnerabilities in India's critical infrastructure.

What’s in Today’s Article?

• Data Breach (Background, 2019 Kudankulam Attack, About Air-Gapped Networks, Significance, etc.)

Background of the Data Breach

• The Kudankulam Nuclear Power Plant (KKNPP), located in the Tirunelveli district of Tamil Nadu, is India's largest nuclear power generation facility and a flagship Indo-Russian civil nuclear project.
• Recently, a ransomware group known as World Leaks allegedly published several internal documents relating to the plant on the dark web.
• The leaked material reportedly included:
  • Engineering drawings
  • Inspection records
  • Minutes of meetings
  • Technical reports
  • Official correspondence
• Responding to the reports, the Nuclear Power Corporation of India Limited (NPCIL) clarified that the leaked documents pertained only to non-critical facilities located outside the "reactor island" and did not compromise nuclear safety or reactor operations.
• The reactor island is the highly secured section of a nuclear power plant that houses the nuclear reactor and associated safety systems.
• Although the NPCIL maintained that there was no threat to reactor safety, the incident has raised concerns regarding the cybersecurity preparedness of India's strategic infrastructure, particularly at a time when the government is seeking greater private sector participation in the civil nuclear sector.
• The breach has also revived memories of the 2019 cyberattack on the Kudankulam Nuclear Power Plant, which remains one of the most significant cybersecurity incidents involving India's nuclear establishment.

The 2019 Kudankulam Cyberattack

• The 2019 incident came to light after malware-related data associated with the plant appeared on Virus Total, an online malware scanning platform.
• Subsequent investigations by cybersecurity agencies attributed the intrusion to DTrack malware, which has been linked to the Lazarus Group, a North Korea-backed hacking organisation known for conducting cyber espionage and financial cyberattacks.
• According to cybersecurity experts, DTrack belonged to the same malware family that was responsible for the 2016 cyberattack on an Indian private bank's ATM network, which resulted in the replacement of nearly three million debit and credit cards.
• The malware reportedly targeted the domain controller of Kudankulam's administrative network.
  • A domain controller is the central server responsible for authenticating users and managing access across a computer network.
  • By compromising this server, attackers could potentially obtain sensitive credentials such as usernames and passwords.
• Cybersecurity researchers further suggested that the attackers were interested in obtaining information related to India's thorium-based nuclear programme, an area in which India has invested significant long-term research owing to its abundant thorium reserves.
• According to reports, the attack was initiated through malware-laced links sent to senior nuclear scientists, including retired scientists who continued to use official institutional email accounts.
• Once these links were opened on systems connected to the plant's administrative network, the malware spread across the network.
• Initially, plant officials denied any cyberattack. However, the NPCIL later acknowledged that CERT-In (Indian Computer Emergency Response Team) had alerted it about the malware infection in September 2019.
• The organisation clarified that the infected computer belonged to the internet-connected administrative network, while the critical reactor control systems remained unaffected because they operated on a separate network.

About Air-Gapped Networks

• High-security facilities such as nuclear power plants generally operate using air-gapped networks.
• An air-gapped network is a computer network that is physically isolated from unsecured external networks, including the public internet. This physical separation significantly reduces the risk of remote cyber intrusions into critical operational systems.
• Typically, nuclear facilities maintain two separate networks:
  • Operational Technology (OT) Network: Controls reactors, turbines, and other critical plant operations.
  • Information Technology (IT) Network: Supports administrative functions such as communication, documentation, procurement, and personnel management.
• While air-gapping provides an important layer of protection, it is not completely foolproof.
• Malware can still enter through infected USB devices, compromised maintenance equipment, insider threats, or phishing attacks targeting users connected to the administrative network.
• Globally, even air-gapped systems have been compromised in incidents such as the Stuxnet attack on Iran's nuclear programme, the Davis-Besse Nuclear Power Station breach (USA), and cyber intrusions into classified military networks.

Significance of Cybersecurity for Nuclear Infrastructure

• Nuclear facilities form part of a country's Critical Information Infrastructure (CII), whose disruption could have severe implications for:
  • National security
  • Public safety
  • Energy security
  • Environmental protection
  • Economic stability
• Unlike conventional cyberattacks that primarily target financial losses or data theft, attacks on nuclear infrastructure may attempt to:
  • Steal sensitive scientific and engineering information
  • Conduct strategic espionage
  • Disrupt operational systems
  • Undermine public confidence in nuclear safety
  • Target critical national infrastructure during geopolitical conflicts
• Given the increasing sophistication of ransomware groups and state-sponsored cyber actors, securing both operational and administrative networks has become an essential component of national security.

Measures Taken to Strengthen Cybersecurity

• India has undertaken several initiatives to strengthen the cybersecurity of critical infrastructure, including:
  • Indian Computer Emergency Response Team (CERT-In): The national agency responsible for responding to cybersecurity incidents.
  • National Critical Information Infrastructure Protection Centre (NCIIPC): Established under the Information Technology Act, 2000, to protect critical information infrastructure across sectors such as power, banking, telecommunications, transport, and strategic facilities.
  • National Cyber Security Policy, 2013: Provides the framework for securing cyberspace and strengthening cyber resilience.
  • Regular cybersecurity audits, penetration testing, and network monitoring by strategic organisations.
  • Adoption of air-gapped operational networks and enhanced access control mechanisms in sensitive installations.

About Amrit Bharat Station Scheme:

• It was launched in 2022 by the Ministry of Railways which aims at development and upgradation of railway stations over the Indian Railways (IR) network.
• The scheme envisaged development of stations with a long term vision.
• The policy is based on Master Planning for long term and implementation of the same as per needs and demand of the station to station.
• The ABSS has a long-term vision that involves creating master plans, promoting multimodal connectivity, better station accessibility for passengers, etc.
• The goal is to make stations cleaner, more comfortable, and easier to use.
• Features of Amrit Bharat Station Scheme
• Amenities: It includes proving entry and exit points, waiting halls, toilets, platforms, and roofing. Facilities like lifts, escalators, and free Wi-Fi are added wherever needed.
• Local Economy Support: Local products will be sold at kiosks under the ‘One Station One Product’ scheme, and efforts will be made to make stations look greener and more attractive.

About Manasbal Lake:

• Location: It is located in the Ganderbal district of Jammu and Kashmir, India.
• The lake lies at an altitude of about 1,585-1,600 metres in the Jhelum Valley.
• It is considered the deepest freshwater lake in India with a depth of about 13 metres (43 ft).
• The name is derived from Lake Manasarovar.
• Surroundings: It is surrounded by Baladar mountains, Karewa plateau in the north and Ahtung hills in the south used for limestone extraction.
• Water Source: It is being fed mainly by precipitation and over 1,200 springs, with outflow regulated into the Jhelum River.
• Physical Characteristics: The lake is monomictic with thermal stratification from March to November, thermocline depth of 9 metres and surface water temperature ranging from 6°C in winter to 27.5°C in summer.
• History: The Mughal garden Jaroka Bagh built by Nur Jahan overlooks the lake, while nearby ruins of a 17th century fort and an ancient temple (800-900 AD).
• Flora: The lake hosts macrophytes (emerged, submerged, floating) and phytoplankton, with plankton biomass.
• Fauna: It supports zooplankton, benthos and fish species such as Schizothorax niger, S. esocinus, Cyprinus carpio and Neomacheilus latius, contributing to local fisheries and economy.

About BIMSTEC:

• The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is a grouping of seven Member States lying in the littoral and adjacent areas of the Bay of Bengal.
• The organization came into existence on 6 June 1997 through the 'Bangkok Declaration'.
• Members: It is a unique link connecting South Asia with South-East Asia - five Members from South Asia (Bangladesh, Bhutan, India, Nepal and Sri Lanka) and two from South-East Asia (Myanmar and Thailand).
• Historical Background:
• It was formed as BIST-EC (Bangladesh, India, Sri Lanka, Thailand Economic Cooperation) in 1997.
• It was renamed to BIMST-EC with the addition of Myanmar in 1998.
• It was fully transformed into BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) in 2004.
• The BIMSTEC Objectives are to strengthen technical and economic cooperation among its seven member nations situated around the Bay of Bengal.
• BIMSTEC Working Mechanism: It organizes intergovernmental interactions through Summits, Ministerial Meetings (Convened annually), Senior Officials Meetings (held twice a year).
• BIMSTEC has identified 14 priority areas of cooperation where a member country takes the lead.
• India is the lead country for Transport & Communication, Tourism, Environment & Disaster Management, and Counter Terrorism & Transnational Crime.
• Secretariat: Dhaka, Bangladesh.