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GS Paper: GS3-12.Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

  • What is the Samsung worker’s strike in Chennai about?

    Why in the News?

    Approximately two-thirds of workers at Samsung’s flagship factory in Chennai have been on strike for a month, demanding higher wages, an eight-hour workday, improved conditions, and union recognition.

    What are the main demands of the striking workers?

    • Higher Wages: Workers are demanding increased salaries to improve their financial conditions.
    • Eight-Hour Work Day: The employees seek the implementation of an eight-hour workday to ensure better work-life balance.
    • Better Working Conditions: Strikers are advocating for improved health and safety standards in the workplace.
    • Recognition of Labour Union: The workers want formal acknowledgment of their recently formed union, the Samsung India Workers Union (SIWU).

    What is Samsung’s union policy?

    • Historically, Samsung has maintained a strict no-union policy for over 80 years, resisting any collective bargaining efforts by employees.
    • In July 2021, the company began to recognize unions after successful negotiations at Samsung Display and Samsung Electronics, allowing for some degree of collective bargaining.
    • Samsung now has various unions representing its workforce globally, with significant representation in South Korea.

    Why was SIWU unrecognised? 

    • Registration Challenges: SIWU’s registration has been opposed by Samsung management, citing trademark violations due to the use of the name “Samsung” in the union’s title.
    • Legal Precedents: SIWU argues that trademark issues should not apply, as their activities do not involve commercial undertakings that could infringe on the trademark.
    • Pending Legal Review: The case regarding SIWU’s registration is pending further court hearings, with the government examining objections raised by the management.

    What has been the govt.’s response?

    • Indifferent Stance: SIWU and the Centre of Indian Trade Unions (CITU) have accused the Tamil Nadu government of being indifferent and supportive of Samsung management, which the government denies.
    • Support for Workers’ Rights: The government claims it considers the registration application in light of Samsung’s objections and aims to ensure fair treatment of both workers and management.
    • CITU’s Position: Union leaders assert that government intervention in favor of management undermines the rights of workers and can deter unionization efforts, despite evidence showing that unions can benefit both employees and companies.

    Present Legislation in India:

    • Notice Period and Conditions for Strikes: Under the Industrial Relations Code, 2020, workers must provide a 14-day notice before striking, which cannot exceed a maximum of 60 days.
    • Strike definition: The definition of a strike now includes “mass casual leave,” where over 50% of employees taking leave can be classified as a strike.
    • Increased Flexibility for Employers: The code has increased the threshold for layoffs from 100 to 300 workers, allowing companies to lay off employees without government approval.
    • This change aims to give employers greater flexibility in managing their workforce, which has raised concerns among labor unions about job security and workers’ rights.

    Way forward: 

    • Facilitate Dialogue and Mediation: Establish a formal dialogue between the workers, Samsung management, and government representatives to address grievances, negotiate demands, and work towards a mutually beneficial agreement.
    • Strengthen Legal Framework for Union Recognition: Amend or clarify existing labor laws to ensure timely and transparent registration processes for unions, protecting their rights and enabling effective collective bargaining.

  • Fairwork India report highlights the absence of local living wage for gig workers, aggregators turning their back to collectivization

    Why in the News?

    The ‘Fairwork India Ratings 2024’ highlights that platform aggregators in India fail to ensure local living wages and resist recognizing the collective rights of workers.

    Who are the Gig Workers?

    • Gig workers are individuals who take up short-term, flexible work assignments, typically managed via digital platforms. In the Indian context, gig workers operate in various sectors such as food delivery, ride-hailing, logistics, and personal/domestic care services. 
    • These workers are not considered employees in the traditional sense and often lack the benefits associated with full-time employment, such as job security, healthcare, and social protection.
    • Examples of platforms using gig workers include Swiggy, Zomato (food delivery) Uber, Ola (transportation), etc.

    Key highlights as per the report: 

    • No Platform Scored Perfectly: No digital labor platform scored more than 6 out of 10 points, and none met all criteria across the five principles — Fair Pay, Fair Conditions, Fair Contracts, Fair Management, and Fair Representation.
    • Fair Pay: Only BigBasket and Urban Company ensured a minimum wage, but no platform met the criteria for guaranteeing a living wage after work-related costs.
    • Fair Conditions: Several platforms (e.g., Amazon Flex, Swiggy, Zepto) provided safety equipment and training, but only a few offered comprehensive accident insurance and income loss compensation.
    • Fair Contracts: BigBasket, Swiggy, and others made contracts accessible and comprehensible, and provided data protection for workers.
    • Fair Management: Platforms like BluSmart and Zomato implemented processes for addressing grievances and preventing discrimination.

    Present Status of Gig Economy  in India:

    • Growth of the Gig Economy: India is witnessing rapid growth in the gig economy, with millions of workers depending on digital platforms for their livelihoods.
      • The rise of app-based platforms such as Uber, Zomato, and Urban Company has driven the expansion of gig work across urban areas.
    • Government Focus: Recent years have seen increasing political and legislative attention to gig worker welfare. Karnataka and Jharkhand are examples of states that have proposed new legislation to regulate platform work and protect gig workers’ rights.
    • Worker Conditions: Despite the expansion of gig work, platforms in India still lag in ensuring fair pay, safety, and management of gig workers.
      • The Fairwork India Ratings 2024 reveal that no platform scored above 6 out of 10, signaling considerable gaps in adhering to key labor standards.

    Challenges faced by the Gig Economy

    • Low Wages and Unstable Earnings: Many platforms fail to ensure a local living wage for workers after accounting for work-related costs. Only a few platforms like Bigbasket and Urban Company guarantee the local minimum wage, but none meet the standard of ensuring a living wage.
    • Lack of Social Security and Benefits: Most gig workers lack access to benefits such as healthcare, insurance, and paid leave. While a few platforms provide accident insurance, broader social security protections remain elusive.
    • Poor Working Conditions: Platforms often do not ensure adequate safety training or measures. While some like Swiggy, Zomato, and Zepto offer basic safety equipment and training, broader protections, especially in terms of income loss and sick leave, are limited.
    • Inflexible Contracts: Contracts on platforms are frequently unclear, lengthy, and not always comprehensible for workers, making it difficult for them to fully understand their rights and obligations.
    • Management Issues and Bias: Workers face arbitrary decisions and discipline without proper recourse. Though some platforms have mechanisms for workers to appeal decisions, few have adopted policies to ensure fairness in work allocation.
    • Collectivization Challenges: Platforms resist recognizing gig workers’ right to form unions or collective bodies. Despite the growing movement for gig worker collectivization, no platform showed evidence of supporting or acknowledging these efforts.

    Way forward: 

    • Strengthen Legal Protections and Social Security: Introduce comprehensive legislation ensuring gig workers receive fair wages, social security benefits like healthcare and insurance, and clear, comprehensible contracts.
    • Promote Worker Representation and Fair Management: Encourage platforms to recognize collective bodies of gig workers, ensuring their right to unionize. Implement transparent and bias-free management practices, along with grievance redressal mechanisms, to improve working conditions and fairness.

  • Why is the textile industry struggling to perform better?

    Why in the News?

    Union Minister announced the Indian textile sector’s $350 billion business target by 2030, aiming to generate 3.5 crore jobs, despite recent challenges affecting the projected 10% CAGR.

    Present Status:

    • The Indian textile and apparel industry is currently valued at $153 billion (2021), contributing significantly to India’s GDP (2.3%) and manufacturing GVA (10.6%).
    • The industry employs around 105 million people and is highly dependent on global markets, with 80% of its capacity in MSMEs.
    • India was the third largest textile exporter in FY22, but faced a slowdown in FY23 and FY24, with significant drops in exports and domestic demand.

    What caused the slump in the Indian textile sector in the last two financial years?

    • Geopolitical Tensions: Global geopolitical issues reduced demand in key export markets.
    • High Raw Material Prices: Cotton and Man-Made Fibre (MMF) prices surged, hurting competitiveness.
    • Import Duties: A 10% import duty on cotton made Indian cotton more expensive than global prices.
    • Supply Chain Disruptions: Quality control measures affected the availability and price stability of MMF, further straining production.

    What are the other challenges?

    • Evolving Business Models: The rise of e-commerce and direct-to-consumer retailing is reshaping traditional business systems in the textile industry.
    • Sustainability Standards: Global brands are increasingly focusing on ESG (Environmental, Social, and Governance) criteria, forcing Indian manufacturers to adopt sustainable practices.
    • Changing Consumer Preferences: Growing demand for comfort wear, athleisure, and multi-brand outlets is shifting consumer behavior, impacting smaller or less-known brands.
    • Labour Costs and Productivity: Labour constitutes 10% of production costs, and the industry faces pressure to improve productivity through technology adoption and workforce skilling.

    Way forward: 

    • Enhance Global Competitiveness: The government should consider reducing import duties on key raw materials like cotton and stabilize supply chains by aligning domestic prices with international markets, ensuring competitiveness in global exports.
    • Invest in Technology and Sustainability: The industry should focus on adopting advanced technologies to improve productivity and meet global ESG sustainability standards, while simultaneously upskilling the workforce to handle these technological advancements effectively.

  • F&O: How will Sebi’s new rules affect traders and brokers?

    Why in the News?

    SEBI has introduced a six-step framework to protect investors and curb speculative trading, specifically targeting futures and options (F&O) trading by reducing volumes on expiry days and limiting retail participation.

    What are the Future and Options (F&O)?

    • Futures are contracts to buy or sell an asset (like stocks, indexes, or commodities) at a predetermined price on a future date.
    • Options give the right, but not the obligation, to buy or sell an asset at a set price before a certain date.

    SEBI’s Six-Step F&O Framework (Effective November 2024 – April 2025):

    In response to concerns about rising speculative trading, SEBI has outlined six key measures aimed at reducing retail interest in F&O trading:

    1. Upfront collection of options premiums
    2. Intraday monitoring of position limits
    3. Removing calendar spread benefits on expiry day
    4. Increasing the contract size for index derivatives
    5. Rationalizing weekly index derivatives to one benchmark per exchange
    6. Enhancing margin requirements on options expiry days

    Key Changes for Retail Investors:

    • Upfront Collection of Options Premiums: Retail investors must now pay the full premium upfront, limiting their ability to use high leverage in options trading.
    • Increased Contract Size: The minimum contract size for index derivatives is raised to ₹15 lakhs, reducing speculative retail participation by making it costlier to enter.
    • Rationalization of Weekly Expiries: Only one benchmark index per exchange can have weekly expiries, lowering speculative trading opportunities and intraday volatility.
    • Removal of Calendar Spread Benefits: Calendar spreads are no longer allowed on expiry days, discouraging aggressive trading strategies.

    Impact on Brokers and Revenue:

    • Decline in Trading Volumes: Brokers reliant on F&O trading will see reduced volumes due to fewer retail participants and higher barriers to entry.
    • Revenue Drop in Options Trading: Firms like Zerodha may face a 30-50% revenue drop as retail participation in options decreases.
    • Shift to Equity Trading: Retail investors may move towards equity trading, causing brokers to adapt their offerings.
    • Adaptation for Brokers: Brokers with a balanced mix of cash and derivatives will be less impacted, while those focused on F&O need to shift strategies.

    PYQ:

    [2021] With reference to India, consider the following statements:​

    1. Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in primary market.​

    2. The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India. ​

    3. The ‘Central Depository Services Ltd.’ Is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange. ​

    Which of the statements given above is/are correct?​

    (a) 1 only ​

    (b) 1 and 2 only ​

    (c) 3 only ​

    (d) 2 and 3 only ​

  • Surat’s diamond industry struggles to sparkle amid geopolitical tensions

    Why in the News?

    Over the past 8-9 months, more than 50,000 workers in Surat have lost their jobs, and over 70 people have tragically taken their own lives in the past year, unable to bear the strain of unemployment and family responsibilities.

    Economic Impact of Geopolitical Tensions

    • Global Supply Chain Disruptions: The Russia-Ukraine war and Israel-Gaza conflict have disrupted the supply chain of raw diamonds. Russia, a major supplier of rough diamonds to Surat, faces Western sanctions, which have restricted the flow of diamonds into India.
    • Sanctions on Russian Diamonds: U.S. and European Union sanctions on Russian-origin diamonds, including polished diamonds processed in India, have significantly affected exports, particularly to Western markets like the U.S., EU, and Hong Kong.
    • Falling Demand: Global demand for polished diamonds has decreased in key markets such as the U.S., China, and Europe. This reduction in demand has led to a sharp decline in India’s diamond exports, plummeting from $23 billion in 2022 to a projected $12 billion by the end of 2024.
    • Price Drops: Polished diamond prices have fallen by 5-27% due to oversupply and lower demand, further worsening the industry’s financial outlook.

    Employment Challenges

    • Job Losses: Over 50,000 diamond workers have lost their jobs in Surat over the past eight to nine months due to factory closures and layoffs.
    • Wage Reduction: Workers who remain employed have experienced significant wage cuts. For instance, wages have dropped from ₹45,000-₹55,000 per month in 2021 to ₹25,000-₹30,000 now.
    • Suicides and Financial Distress: Financial strain has led to over 70 suicides among diamond workers in Surat, as they struggle with job losses, school fees, rent, and medical expenses for their families.
    • Lack of Government Support: Despite repeated appeals, there has been little substantial government assistance for unemployed diamond workers, leaving them with minimal social security or institutional support.

    Future Prospects and Support Measures

    • Shift to Alternative Employment: Many workers have shifted to other forms of employment, such as driving cabs, street vending, or returning to agriculture in their native regions, to make ends meet.
    • Welfare Demands: The Diamond Workers’ Union (DWU) has called for a special welfare package for workers, including financial support for their children’s education and healthcare expenses.
    • Appeals for Government Intervention: The industry, represented by groups like the DWU, is urging both the state and central governments to intervene. However, so far, industry associations have not formally sought government intervention for relief measures.

    Way forward: 

    • Government Support Package: The state and central governments should introduce targeted financial relief measures for affected diamond workers, including unemployment benefits, healthcare assistance, and educational support for children.
    • Diversification and Skill Development: Encourage skill development programs to help workers transition to alternative employment sectors, such as textiles, agriculture, or services, ensuring long-term economic resilience and reduced dependency on the diamond industry.

  • [pib] WAVES Anime & Manga Contest

    Why in the News?

    In an effort to promote anime and manga culture in India, the Ministry of Information & Broadcasting has launched the WAVES Anime & Manga Contest (WAM!).

    About the WAVES Anime & Manga Contest

    • The WAM! is an innovative initiative launched by the Ministry of Information & Broadcasting in collaboration with the Media & Entertainment Association of India (MEAI).
    • The contest is part of Create in India Challenge and is aimed at nurturing local creative talent in anime and manga production.
    • It provides a unique platform for Indian creators to produce localized versions of Japanese art styles, targeting both domestic and global audiences.
    • The contest offers marketing support and opportunities for global recognition, helping creators showcase their talent in manga, webtoon, and anime.

    WAM! features 3 key categories:

    1. Manga (Japanese style comics): Individual participation for both students and professionals.
    2. Webtoon (Vertical comics for digital mediums): Individual participation for students and professionals.
    3. Anime (Japanese style animation): Team participation (up to 4 members) for students and professionals.

     

    About the Create in India Challenge

    • The Create in India Challenge aligns with Prime Ministers vision of “Design in India, Design for the World”, emphasizing the development of creative industries in India.
    • It is part of the broader effort to make India a global hub for design, innovation, and creative production.
    • It is a precursor to the WAVES Summit, a large-scale event aimed at promoting creativity and technology in media and entertainment.

    PYQ:

    [2014] Though 100 percent FDI is already allowed in non-news media like a trade publication and general entertainment channel, the government is mulling over the proposal for increased FDI in news media for quite some time. What difference would an increase in FDI make? Critically evaluate the pros and cons.

  • [pib] BHASKAR Platform for India’s Startup Ecosystem

    Why in the News?

    The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, has launched the BHASKAR platform.

    About BHASKAR Platform

    Details
    Platform Name Bharat Startup Knowledge Access Registry (BHASKAR)
    Launched By Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
    Objective To strengthen India’s startup ecosystem by centralizing resources and facilitating collaboration
    Target Audience Startups, investors, mentors, service providers, and government bodies
    Key Features
    • Networking and Collaboration: Connects startups, investors, and mentors, enabling interaction across sectors.
    • Centralized Access to Resources: Provides instant access to critical tools, knowledge, and resources for startups, enhancing decision-making and growth.
    • Personalized BHASKAR IDs: Each stakeholder (startup, investor, mentor) receives a unique ID for tailored interactions and services.
    • Enhanced Discoverability: Users can easily search and find relevant resources, collaborators, and opportunities using powerful search features.
    • Access to Funding Opportunities: Facilitates connections between startups and potential investors for funding.
    • Global Outreach: Supports cross-border collaborations and fosters India’s global presence in the innovation ecosystem.
    Impact
    • Promotes innovation, entrepreneurship, and job creation
    • Enhances India’s status as a global leader in startups

    Growth of the Startup Ecosystem

    • As of May 2023, India boasts over 99,000 officially recognized startups, making it the third-largest startup ecosystem globally. This growth reflects an increase from 84,012 startups in 2022 and a notable rise from just 452 in 2016.
    • The ecosystem has also produced 108 unicorns, startups valued at over $1 billion, collectively worth approximately $340.80 billion

    PYQ:

    [2015] “Success of ‘Make in India’ program depends on the success of ‘Skill India’ programme and radical labour reforms.” Discuss with logical arguments.

  • A human touch to India’s mineral ecosystem

    Why in the News?

    The Indian government’s Mines and Minerals Act of 2015, which mandated auctions and established the District Mineral Foundation (DMF), continues to ensure local communities benefit from natural resource-led development.

    • DMF after entering its 10th year has amassed almost ₹1 lakh crore, transforming mineral wealth into a development lifeline for these regions.

    How did the District Mineral Foundation (DMF) work in India?

    • The DMF mandates mining licensees and leaseholders to contribute a portion of their royalty payments to the DMF. The ‘National DMF Portal’ has been introduced to enhance transparency and efficiency.
    • It aims to promote sustainable development and welfare for mining-affected communities.
    • A District Collector leads the DMF, ensuring that funds are allocated to areas with the greatest need.
      • Funds are used for decentralized, community-centric development projects in mining districts.
    • As of 2024, around 3 lakh projects have been sanctioned across 645 districts in 23 states. These initiatives focus on improving socio-economic and human development indicators.

    About Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY):

    • Objective: Launched under the DMF, PMKKKY focuses on implementing developmental and welfare projects in mining-affected regions.
      • It aims to minimise the negative impacts of mining on local communities and ensure sustainable livelihoods.
    • Complementary Approach: PMKKKY works alongside existing state and central government schemes, reinforcing district development goals.
    • PMKKKY projects cover healthcare, education, skill development, sanitation, water supply, and sustainable livelihoods.
      • It has also empowered women through self-help groups and supported youth skill development initiatives like drone technology training.

    Significance and Scope of DMF in India:

    • Community Welfare: DMFs provide direct financial resources for the welfare of communities affected by mining activities, transforming mineral wealth into tangible social benefits.
    • Inclusive Development: DMFs empower local communities, with focus on social inclusivity by involving elected representatives and non-elected gram sabha members in governance structures.
    • Cooperative Federalism: DMFs are a model of cooperative federalism, converging national, state, and local governance to address mining impacts and foster regional development.
    • Innovation and Planning: Various DMFs innovate to maximise project impact, adopting three-year plans for goal-oriented development, establishing dedicated engineering departments, and employing Public Works Department personnel for efficient project execution.
    • Sustainability: DMFs aim to align with the Sustainable Development Goals (SDGs), focusing on forest dwellers’ livelihoods, sports infrastructure, and health. They contribute to long-term environmental and socio-economic sustainability.

    Way Forward:

    • Standardisation and Best Practices: Establish uniform guidelines to standardise successful practices across DMFs while retaining local knowledge, ensuring efficient implementation of long-term, goal-oriented projects.
    • Enhanced Integration with National Schemes: Strengthen the integration of DMF activities with ongoing central and state schemes, particularly in aspirational districts, to amplify the socio-economic and environmental benefits in mining-affected regions.

  • PM E-Drive Scheme

    Why in the News?

    The Union Cabinet approved the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-Drive) Scheme with an outlay of ₹10,900 crore over two years.

    About PM E-DRIVE Scheme:

    Details
    Name PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme
    Total Outlay ₹10,900 crore for two years
    Goal
    • Promote electric mobility, reduce pollution, and enhance fuel security
    • Reduce range anxiety by providing charging infrastructure in cities and highways.
    Incentives Direct subsidies for e-2Ws, e-3Ws, e-buses, e-ambulances, and e-trucks
    Key Components
    • ₹3,679 crore for demand incentives for e-2Ws, e-3Ws, e-ambulances, and e-trucks.
    • ₹500 crore for e-ambulances.
    • ₹4,391 crore for e-buses.

    Other components:
    E-Vouchers
    • Aadhaar-authenticated e-voucher for EV buyers;
    • Signed by both buyer and dealer for claiming incentives.
    E-Bus Procurement ₹4,391 crore for 14,028 e-buses in 9 major cities (Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Surat, Bangalore, Pune, Hyderabad)
    Charging Infrastructure ₹2,000 crore for 72,300 public EV charging stations, including fast chargers for e-4Ws, e-buses, e-2Ws, and e-3Ws
    Incentivizing E-Trucks ₹500 crore tied to scrapping certificates from MoRTH-approved scrapping centres
    Testing and Upgradation ₹780 crore for upgradation of MHI’s test agencies for green mobility technologies

     

    PYQ:

    [2019] How is efficient and affordable urban mass transport key to the rapid economic development in India?
  • [9th September 2024] The Hindu Op-ed: With or without Chinese companies is the question

    [9th September 2024] The Hindu Op-ed: With or without Chinese companies is the question

    PYQ Relevance:

    Q Can the strategy of regional-resource-based manufacturing help in promoting employment in India?(UPSC IAS/2019)

    Q “Success of the ‘Make in India’ program depends on the success of the ‘Skill India’ programme and radical labour reforms.” Discuss with logical arguments. (UPSC IAS/2015)

    Q  “While we flaunt India’s demographic dividend, we ignore the dropping rates of employability.” What are we missing while doing so? Where will the jobs that India desperately needs come from? Explain (UPSC IAS/2014)

    Prelims: Priority Sector Lending by banks in India constitutes the lending to: (UPSC IAS/2013)
    (a) Agriculture
    (b) Micro and small enterprises
    (c) Weaker sections
    (d) All of the above

    Mentor comment: Chinese smartphone companies dominate the Indian market, holding over 50% share by 2023. Now, the Indian government aims to balance local manufacturing and Chinese investments. However, there are challenges which include the lack of a robust supply chain and ancillary industries in India. To solve this issue at this point in the geopolitical situation, complete self-reliance on smartphones is difficult in the short term period for India. On the same note, today’s editorial discusses the complex relationship between India and Chinese companies, particularly in the context of the “Make in India” initiative.

    _

    Let’s learn!

    Why in the News?

    The Indian government is considering allowing certain Chinese investments in high-tech electronics on a case-by-case basis, especially in areas like compressors, display panels, and semiconductors.

    • According to the International Data Corporation’s Worldwide Quarterly Mobile Phone Tracker, four of the top five best-selling smartphone brands were Chinese at the end of 2023.

    The dilemma between ‘Make in India’ and China’s presence:

    About ‘Make in India’ Initiative:
    ◉ The Make in India initiative was launched in 2014 to promote India as a global manufacturing destination. 
    ◉ The initiative aims to increase India’s manufacturing sector’s contribution to GDP to 25% by 2025.
    • The ‘Make in India’ aimed to represent India’s strength in manufacturing and National pride, but the Chinese smartphone companies have emerged as significant beneficiaries of this initiative, becoming dominant players over the past decade.
    • The widespread use of Android smartphones in India, with a market share of about 70%, has favored Chinese brands, increasing their consumer base.
    • Chinese companies have navigated fluctuations in India-China relations, maintaining their market presence until the Galwan Valley incident in 2020.

    Initiatives Taken for Indianization in the Economy:

    • By Private Players: As a contract manufacturer, Tata Electronics has emerged as a key player in the Indian smartphone manufacturing landscape by replacing Wistron (Taiwanese suppliers for Apple).
      • The company also aims to develop local capabilities and reduce dependency on imports by creating high-precision machinery for smartphone components.
    • Adaptation of Chinese Companies: Chinese smartphone companies are adapting by complying with Indian government regulations, introducing Indian distributors, and streamlining their operations.
      • They are teaming up with domestic manufacturers to benefit from the Production Linked Incentive (PLI) scheme and increasingly seeking equity partners to strengthen their presence in India.
    Production Linked Incentive Scheme: 

    ◉ It is a form of performance-linked incentive to give companies incentives on incremental sales from products manufactured in domestic units. It is aimed at boosting the manufacturing sector and to reduce imports.
    ◉ In 2021, the Government announced the PLI scheme for 13 key sectors: Auto components, Automobile, Aviation, Chemicals, Electronic systems, Food processing, Medical devices, Metals & mining, Pharmaceuticals, Renewable energy, Telecom, Textiles & apparel, and white goods.
    ◉ In Budget 2024-25, these incentives were extended to more sectors, such as the small and medium-sized enterprise (SME) sector to participate in the global market.
    A portion of incentives could be allocated for skill training and capacity building.

    Challenges for complete Indianisation:

    • Need for Infrastructure Development: Manufacturing all smartphone components in India requires a robust supplier network, technological knowledge-sharing clusters, and improvements in power supply and workforce conditions.
    • Current Limitations: India currently lacks the necessary infrastructure at scale to support complete local manufacturing of smartphone components.
    • Technology Sharing Reluctance: Chinese companies are hesitant to share technology without clear equity arrangements, complicating the Indianisation efforts.

    Way Forward:

    • Address Skill Gaps: Collaborate with educational institutions to ensure that the workforce is equipped with relevant skills in engineering, electronics, and automation.
    • Streamline Regulatory Processes: Provide clear regulatory guidelines to create a business-friendly environment that encourages investment.
    • Enhance Local Manufacturing Capabilities: Foster innovation and support startups in the electronics sector to create a diverse manufacturing ecosystem and reduce dependency on imports and enhance value addition in smartphone manufacturing.
    • Attract Foreign Investments: Continue offering incentives, subsidies, and tax breaks to attract foreign smartphone manufacturers to set up operations in India.

    https://www.thehindu.com/opinion/op-ed/with-or-without-chinese-companies-is-the-question/article68619220.ece