UPSC CARE Mains Practice 16th December 2025
Mains Practice Questions for the Day
- Discuss the significance of energy conservation in India’s transition towards sustainable and low-carbon development, with reference to recent initiatives.
- The rising dominance of domestic household savings in India’s capital markets has reduced external vulnerabilities but has also exposed new structural risks for retail investors. Discuss how this shift reshapes India’s financial landscape and examine the challenges and reforms needed to ensure inclusive and stable market growth.
1Q.Discuss the significance of energy conservation in India’s transition towards sustainable and low-carbon development, with reference to recent initiatives.
Introduction:
Energy conservation is a cornerstone of India’s strategy for sustainable development, climate mitigation, and energy security. Unlike energy generation, conservation represents the cleanest, cheapest, and most reliable source of energy, as highlighted during the National Energy Conservation Awards 2025.
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At the institutional level, the Bureau of Energy Efficiency (BEE), established under the Energy Conservation Act, 2001, has played a pivotal role through mechanisms such as Standards and Labelling, Demand Side Management programmes, and market-based instruments like the transition from the Perform, Achieve and Trade (PAT) scheme to the Carbon Credit Trading Scheme (CCTS), 2023. These tools incentivise efficiency without hindering economic growth.
Energy conservation also has strong climate and environmental co-benefits. India’s energy efficiency efforts during 2023–24 resulted in savings of 53.60 million tonnes of oil equivalent, leading to substantial reductions in CO₂ emissions, air pollution, and pressure on natural resources. This directly supports India’s commitments under the Paris Agreement and the Sustainable Development Goals.
Equally important is the behavioural dimension. As emphasised by the President of India, conservation is not merely about using less energy, but about using energy wisely and responsibly. Initiatives such as the Lifestyle for Environment (LiFE) movement seek to embed sustainable consumption patterns within society, especially among youth.
Furthermore, energy conservation enhances inclusive development by reducing energy costs, empowering communities, and supporting clean energy transitions through schemes like PM Surya Ghar Muft Bijli Yojana and the National Green Hydrogen Mission.
Conclusion:
Thus, energy conservation in India is not only a technical intervention but a holistic strategy combining institutions, technology, policy, and behavioural change to ensure a resilient and low-carbon future.
Q. The rising dominance of domestic household savings in India’s capital markets has reduced external vulnerabilities but has also exposed new structural risks for retail investors. Discuss how this shift reshapes India’s financial landscape and examine the challenges and reforms needed to ensure inclusive and stable market growth.
Introduction:
India’s capital markets are undergoing a profound structural shift. Domestic household savings—channeled through mutual funds, SIPs, and direct equity participation—are increasingly replacing foreign institutional money. While this enhances stability and monetary policy autonomy, it simultaneously exposes new investors to heightened risks, uneven participation, and governance vulnerabilities.
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1. How Domestic Savings Are Reshaping India’s Markets
a) Shift in Market Ownership and Influence
- FPI ownership has fallen to 16.9%, while domestic individual and MF ownership has risen to ~19%, the highest in two decades.
- This reduces dependence on volatile global capital and enhances market resilience.
b) Improved Market Stability
- Domestic inflows provide a “flight-to-stability” buffer, reducing sharp corrections caused by sudden FPI sell-offs.
- The NIFTY 50’s surge despite weak global cues illustrates this stabilizing effect.
c) Greater Monetary Policy Autonomy
- With less reliance on external capital, the RBI can prioritize credit growth and inflation management rather than defending the rupee.
- This autonomy, however, depends on sustained household confidence.
d) Rise of Primary Markets
- 71 listings raising ₹1 lakh crore highlights strong domestic capital formation.
- Private-sector investment announcements have surged 39% year-on-year.
2. Emerging Challenges in India’s Retail Investor Boom
a) Limited Investor Preparedness and Financial Literacy
- Millions of novice investors are entering markets without adequate understanding of risk, leading to speculative behavior.
b) Overvaluation Risks & IPO Exuberance
- New-age tech companies show inflated valuations (e.g., Lenskart, Mamaearth).
- Retail investors face risk of buying into hype rather than fundamentals.
c) The “Performance Problem”
- A majority of active fund managers fail to beat the market after adjusting for fees.
- High expense ratios erode returns for small investors.
d) Uneven Wealth Distribution
- MF participation is concentrated in urban/formal-access regions.
- Recent ₹2.6 lakh crore decline in household equity wealth disproportionately affects vulnerable new investors.
e) Corporate Governance Gaps
- Declining promoter holdings (23-year low) may reflect opportunistic exits.
- Weak governance and insider asymmetries pose long-term risks to domestic savers.
3. Reforms Needed for Inclusive and Stable Market Growth
a) Reducing Access and Information Asymmetry
- Shift from mere disclosure to proactive investor protection.
- Strengthen SEBI’s surveillance, grievance redressal, and market misconduct penalties.
b) Promote Low-Cost Passive Investing
- Active funds hold 9% of the market vs. only 1% by passive funds.
- India needs a push for:
- Index funds
- Lower expense ratios
- Transparent benchmarking
This reduces the “performance penalty” retail investors face.
c) Strengthen Financial Literacy & Behavioral Awareness
- Targeted programs for first-time investors, women, and rural participants.
- Public campaigns on risk, diversification, and long-term investing.
d) Improve Corporate Governance
- Stricter norms for:
- Related-party transactions
- Board independence
- Audit quality
This ensures the confidence of domestic savers.
e) Data-Driven Inclusion Strategies
- Gender- and geography-specific analytics to identify participation gaps.
- Incentives to bring underserved groups into formal investing channels.
Conclusion:
The rise of domestic household savings is transforming India’s capital markets, offering resilience and reducing external dependence. However, without strong regulatory safeguards, financial literacy, low-cost investment options, and governance reforms, the shift may amplify inequalities and expose new investors to significant risks. For India to achieve “Viksit Bharat 2047,” stability in markets must be matched with inclusivity, transparency, and institutional integrity.
