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Why Indian manufacturing’s productivity growth is plummeting and what can be done?
What is the news?
- According to a recent study Productivity growth in Indian manufacturing has been slowing since the 1990s, with a more pronounced decline in the years leading up to the Covid-19 pandemic. Exploring the causes behind this decline is crucial to develop effective strategies for revitalizing the sector.
Central idea
- India’s manufacturing sector has long been a matter of concern for policymakers and the subject of extensive academic research. The government has consistently aimed to increase the share of manufacturing in the country’s GDP. However, despite efforts to promote manufacturing, the sector’s contribution and overall employment has remained stagnant.
Key Facts about Manufacturing Productivity in India
- Slowing Growth: Productivity growth in India’s manufacturing sector has been declining since the 1990s, with a significant acceleration in the mid-2010s and leading up to the Covid-19 pandemic.
- Gap with the United States: India’s manufacturing productivity per worker is considerably lower compared to the United States. In 2020, it was only around a fifth of the productivity level in the US.
- Regional Disparities: There are wide variations in manufacturing productivity across Indian states. Western and Central Indian states tend to have higher average productivity, while Southern and Eastern states have lower productivity levels. This contrasts with the GDP per capita rankings, where Southern states generally have higher incomes than their Western and Central counterparts.
Potential reasons behind the decline in manufacturing productivity
- Slow Manufacturing Sector Growth: The overall growth rate of India’s manufacturing sector has been decreasing, particularly since around 2015. This sluggish growth can limit the opportunities for productivity improvement and hinder overall sector performance.
- Insufficient Investments: Inadequate investments in technology, infrastructure, and research and development (R&D) can hamper productivity growth. Limited capital expenditure by firms may result in outdated machinery, inefficient processes, and lower productivity levels.
- Skill Mismatch: The manufacturing sector requires a specific skill set, and a mismatch between the skills possessed by the labor force and the skills demanded by the industry can impede productivity. The lack of trained and skilled workers in areas such as advanced manufacturing techniques, automation, and specialized operations may contribute to lower productivity levels.
- Informality and Informal Labor Market: The prevalence of informal employment in the manufacturing sector can hinder productivity growth. Informal workers often lack access to training, social security benefits, and stable employment conditions, which can lead to lower productivity levels compared to formal employment arrangements.
- Regulatory Challenges: Cumbersome regulatory processes, including complex labor laws, bureaucratic red tape, and regulatory compliance burdens, can hamper productivity growth. These challenges may discourage investment and hinder the adoption of efficient production practices.
- Infrastructure Deficiencies: Inadequate infrastructure, such as poor transportation networks, unreliable power supply, and limited access to technology and connectivity, can negatively impact manufacturing productivity. Insufficient infrastructure can increase costs, disrupt supply chains, and hinder efficiency in production processes.
- Inefficient Supply Chains: Weak linkages and coordination within supply chains can contribute to lower productivity in manufacturing. Challenges such as fragmented value chains, inefficient logistics, and inadequate coordination between suppliers, manufacturers, and distributors can result in delays, increased costs, and reduced overall productivity.
- Lack of Innovation and Technology Adoption: Limited emphasis on innovation, research, and development, as well as a slower adoption of advanced technologies, can constrain productivity growth in the manufacturing sector. Insufficient investment in technological upgrades and a reluctance to adopt new manufacturing techniques can lead to lower productivity compared to global standards.
Implications of Declining manufacturing productivity
- Economic Growth: Declining manufacturing productivity can hinder overall economic growth.
- Reduced Competitiveness: Declining productivity in manufacturing can erode a country’s competitiveness in the global market. This can lead to a decline in exports and an increase in imports, negatively impacting the trade balance and potentially affecting the overall economic stability of a nation.
- Employment and Labor Market Challenges: Lower productivity can result in reduced job creation within the manufacturing sector, leading to unemployment or underemployment.
- Technological Progression: When productivity declines, the incentives for firms to invest in research and development or adopt new technologies may diminish, leading to a slower pace of technological advancement within the manufacturing sector.
- Industrial Development and Diversification: A decline in productivity can hinder the growth and diversification of the manufacturing sector, limiting its ability to contribute to overall industrial development.
- Investment and Innovation: Declining productivity in manufacturing can discourage investment and innovation within the sector.
- Sectoral Shifts: Declining manufacturing productivity may result in a shift towards other sectors of the economy. If manufacturing becomes less competitive and less productive, resources and investments may be redirected to other sectors such as services.
What can be done?
- Boost Investments: Encouraging both domestic and foreign investments in the manufacturing sector can help upgrade infrastructure, improve technology adoption, and enhance productivity. This can be achieved through attractive investment policies, tax incentives, and easing of regulatory procedures.
- Skill Development and Training: Focusing on skill development programs tailored to the manufacturing sector can address the skill mismatch and enhance the capabilities of the workforce. Collaborating with educational institutions and industry associations to design training programs and apprenticeships can ensure a skilled labor force.
- Infrastructure Development: Prioritizing infrastructure development, including transportation networks, power supply, logistics, and digital connectivity, is essential for improving productivity. Investment in infrastructure projects can create an enabling environment for manufacturing activities and reduce operational inefficiencies.
- Regulatory Reforms: Streamlining regulatory processes, reducing bureaucratic complexities, and simplifying labor laws can create a business-friendly environment. Establishing a favorable regulatory framework can attract investments, foster innovation, and enhance productivity in the manufacturing sector.
- Research and Development (R&D): Encouraging R&D activities and innovation in the manufacturing sector can lead to technological advancements and productivity gains. Collaborations between industry, research institutions, and academia can facilitate knowledge transfer and promote innovation-driven manufacturing.
- Entrepreneurship and Start-up Ecosystem: Supporting entrepreneurship and nurturing a vibrant start-up ecosystem in manufacturing can bring fresh ideas, innovation, and competitiveness. Providing access to finance, mentorship programs, and incubation support can encourage entrepreneurial growth and drive productivity.
- International Collaborations: Strengthening international collaborations and partnerships can facilitate knowledge exchange, technology transfer, and best practice sharing. Engaging with global manufacturing networks can help Indian manufacturers learn from successful models and adapt to global standards.
Conclusion
- The findings of this study underscore the urgent need for policy interventions to address the challenges faced by India’s manufacturing sector. Encouraging investments in workers, improving labor market conditions, and promoting a conducive business environment are crucial steps that can help revitalize India’s manufacturing sector, enhance productivity, and lift millions out of poverty.
Also read:
Revisiting India’s Manufacturing Dilemma: A Call for Comprehensive Ecosystem Development
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Women’s reproductive autonomy as the new catchword
Why is this news?
- India’s progress in family planning initiatives and achievements in areas such as life expectancy, maternal health, and gender empowerment. Instead of ensuring reproductive autonomy for each woman, society has obsessed with total fertility rates and the ideal population size of a family.
Central Idea
- The theme of this year’s World Population Day, Unleashing the power of gender equality: Uplifting the voices of women and girls to unlock our world’s infinite possibilities, holds significant relevance for India. In order to foster women-led development across various sectors in India, it is imperative to prioritize reproductive autonomy as a core component.
What is mean by reproductive autonomy?
- Reproductive autonomy refers to an individual’s right and ability to make informed decisions regarding their reproductive health and choices without interference, coercion, or discrimination.
- It encompasses the freedom to decide whether or when to have children, the number of children to have, and the spacing between pregnancies.
- Reproductive autonomy includes access to comprehensive reproductive healthcare services, including family planning methods, contraceptives, sexual education, prenatal care, safe abortion services, and support for reproductive health decisions.
India’s progress in family planning
- Family planning initiatives: India has been commended for its family planning initiatives, aiming to provide comprehensive reproductive health services to every potential beneficiary.
- Reproductive health services: Efforts have been made to expand the contraceptive basket and provide a range of modern short and long-acting reversible contraceptives, permanent methods, information, counseling, and services, including emergency contraception.
- Maternal health improvements: India has made impressive strides in maternal health, as reflected in the significant reduction in maternal mortality rates. The current rate stands at 97 per 100,000 live births, down from 254 in 2004.
- Gender empowerment: India has achieved progress in empowering women and girls. The number of child marriages has been cut in half since the early 2000s, and teen pregnancies have significantly decreased.
- Access to vital services: India has witnessed improved access to crucial services, including health, education, and nutrition.
- Longer life expectancy: Life expectancy at birth has significantly increased in India over the years, with Indians now living a decade longer compared to the 1990s.
What are the Challenges?
- Lack of physical autonomy: Despite the progress made, many women in India continue to lack physical autonomy.
- Limited decision-making power: According to the National Family Health Survey, only 10% of women in India are independently able to make decisions about their own health.
- Acceptance of marital violence: The survey also reveals that 11% of women believe that marital violence is acceptable if a woman refuses to have sex with her husband.
- Unplanned pregnancies: Nearly half of all pregnancies in India are unplanned, highlighting a challenge in ensuring effective family planning services and education.
- Ongoing gender disparities: While progress has been made, there are persistent gender disparities and inequalities that need to be addressed to achieve true gender equality.
- Societal attitudes: Attitudes and societal norms that perpetuate gender-based discrimination and violence continue to pose challenges to women’s empowerment.
Opportunities for India
- Advancing gender equality: India has a significant opportunity to advance gender equality, which can have far-reaching positive effects on various aspects of society, including economic growth, social progress, and inclusive development.
- Economic growth potential: By increasing women’s labor force participation by 10 percentage points, India could unlock significant economic growth potential. It is estimated that this could contribute to more than 70% of the potential GDP growth, amounting to an additional $770 billion by 2025.
- Human capital development: Empowering women through education and family planning can lead to the accumulation of human capital, which is crucial for sustainable development and economic progress.
- Harnessing women’s potential: By enabling women to participate fully in various sectors, including science, technology, agriculture, education, and healthcare, India can tap into the immense talent, ideas, and innovation that women bring to the table.
- Rights-based legislation and policies: India has the opportunity to formulate and implement legislation and policies that empower women, girls, and marginalized individuals, enabling them to assert their rights and make life-changing personal decisions.
- Inclusive economic development: Promoting gender equality and empowering women can contribute to inclusive economic development by ensuring equal opportunities and participation for all segments of society.
- Shifting population dynamics: By focusing on reproductive choices and ensuring reproductive autonomy for individuals, India can shape its population dynamics in a way that respects individual rights and choices, while also addressing demographic challenges.
Way forward
- Investments in women’s lives: Ensuring gender equality and empowering women requires making investments in every stage of a woman’s life, from childbirth to adolescence to maturity. This includes providing access to quality education, healthcare, and support systems that enable women to make informed choices and assert their rights.
- Legislation and policies: Formulating and implementing rights-based legislation and policies that empower women, girls, and marginalized individuals is crucial. This involves engaging with these groups, understanding their needs, and creating an enabling environment that supports their rights and decision-making.
- Comprehensive reproductive health services: Continued efforts should be made to provide comprehensive reproductive health services that are accessible, affordable, and of high quality. This includes expanding the contraceptive basket, ensuring access to family planning methods, information, counseling, and emergency contraception.
- Gender-just approaches: Adopting gender-just approaches and solutions is essential for building a prosperous and inclusive India. This involves challenging societal norms and attitudes that perpetuate gender discrimination and violence, and promoting gender equality as a fundamental value.
- Population and development discourse: Reaffirming the commitment to placing individual rights, particularly women’s rights and well-being, at the center of the population and development discourse is crucial. Shifting the focus from population stabilization to respecting reproductive choices and promoting reproductive autonomy is essential.
Conclusion
- On this World Population Day, let us reiterate our commitment to placing individual rights, particularly women’s rights and well-being, at the forefront of population and development discourse. Embracing gender-just approaches and solutions is essential for building a prosperous India and a better world for all.
Also read:
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Quantum Supercomputer using Majorana Zero Modes
Central Idea
- Microsoft researchers have made significant strides in the creation of Majorana zero modes, a type of particle that could revolutionize quantum computing.
- Majorana zero modes, which are their own antiparticles, possess unique properties that could make quantum computers more robust and computationally superior.
Majorana Fermions: A conceptual backgrounder
- Fermions and Antiparticles: All subatomic particles that constitute matter are known as fermions, with each fermion having an associated antiparticle that annihilates upon interaction.
- Majorana Fermions: In 1937, Italian physicist Ettore Majorana discovered that certain particles, known as Majorana fermions, can satisfy specific conditions and be their own antiparticles.
- Neutrinos as Potential Majorana Fermions: Neutrinos are one type of subatomic particle that scientists speculate may exhibit Majorana fermion behavior, although experimental confirmation is still pending.
Understanding Majorana Zero Modes
- Quantum Numbers and Spin: All particles have four quantum numbers, with one called the quantum spin having half-integer values for fermions. This property allows any fermion, even a large entity like an atom, to be classified as a fermion.
- Bound States and Fermions: Bound states composed of two particles can also be classified as fermions if their total quantum spin possesses a half-integer value.
- Majorana Zero Modes: When these bound states are their own antiparticles and do not readily de-cohere, they are known as Majorana zero modes, which have been sought after by physicists for many years.
Easy explained: Majorana Zero Modes
In the world of physics, particles can have interesting properties and behave in strange ways. One type of particle that scientists have been studying is called a Majorana particle.
Majorana particles have a special property called “non-Abelian statistics.” Without getting too technical, this property means that when two Majorana particles come close together, something interesting happens. Instead of behaving like normal particles, they can combine in a special way to form a new kind of particle called a Majorana zero mode.
A Majorana zero mode is a very peculiar particle because it is its own antiparticle. Normally, particles have antiparticles with opposite properties, like an electron and a positron. But Majorana zero modes are special because they don’t have separate antiparticles. They are their own antiparticles!
Potential Benefits for Computing
- Enhanced Stability: Majorana zero modes offer increased stability for qubits, the fundamental units of information in quantum computing. Even if one entity within the bound state is disturbed, the qubit as a whole can remain protected and retain encoded information.
- Topological Quantum Computing: Majorana zero modes can enable topological quantum computing, which takes advantage of non-Abelian statistics. These statistics introduce an additional degree of freedom, allowing algorithms to produce different outcomes based on the order in which steps are performed.
Challenges and Future Prospects
- Creating Majorana Zero Modes: Scientists have been exploring various setups, such as topological superconductors, to generate Majorana zero modes. However, confirming their existence remains a challenge, as their effects on surrounding materials must be inferred indirectly.
- Recent Advances by Microsoft Researchers: Microsoft researchers recently engineered a topological superconductor using an aluminium superconductor and an indium arsenide semiconductor. Their device passed a stringent protocol, suggesting a high probability of hosting Majorana zero modes.
Future prospects
- While this achievement is significant, the existence of Majorana fermions and their potential for topological quantum computing still need independent confirmation.
- Continued improvements in simulation, growth, fabrication, and measurement capabilities are necessary to achieve the desired topological gap for coherent operations.
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PM Modi to host SCO 2023 Summit
Central Idea
- The upcoming virtual summit of the Shanghai Cooperation Organisation (SCO) hosted by Prime Minister Narendra Modi, holds significant importance in the current geopolitical context.
- Ashok Sajjanhar, a former Indian Foreign Service (IFS) officer and ambassador to several countries, shares his insights on the event and its potential outcomes.
What is SCO?
- SCO is an international organization founded in 2001.
- It is primarily focused on promoting cooperation and regional stability among its member states.
- The SCO originated from the Shanghai Five mechanism, which was established in 1996 to resolve border disputes and promote mutual trust among China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan.
- Uzbekistan joined the organization in 2001, leading to its formation as the SCO.
Member States China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India, Pakistan Objectives Promote regional security, stability, economic cooperation Cooperation Areas Political, security, economic, cultural Security Cooperation Joint military exercises, counter-terrorism operations, intelligence sharing Economic Cooperation Trade facilitation, investment, infrastructure development Key Bodies SCO Summit, SCO Business Council, Interbank Consortium of the SCO Regional Anti-Terrorist Structure (RATS) Coordination of anti-terrorism efforts Dialogue Partners Afghanistan, Belarus, Iran, Mongolia, among others Observer States Armenia, Azerbaijan, Cambodia, Nepal, among others Outreach and Engagement United Nations, ASEAN, CIS, and other regional/international organizations Significance of the Meeting during the Russia-Ukraine War
- Major participants: The summit is expected to see the participation of key leaders such as Russian President Vladimir Putin, Chinese President Xi Jinping, and Pakistan PM Shehbaz Sharif.
- Declining Influence of Russia: The meeting provides an opportunity for President Putin to gauge the declining influence and relevance of Russia, particularly in the Central Asian countries.
- Message for Resolution: The decreased importance of Russia’s role in the region may convey the need for a prompt resolution to the ongoing Russia-Ukraine conflict.
India’s Strategic Autonomy and Self-Assuredness
- Successful India-US Relations: Prime Minister Modi’s recent successful visit to the United States highlights the growth of India-US relations.
- India’s Role in SCO: India’s participation in the SCO while maintaining strong relations with the United States underscores its strategic autonomy and self-assuredness.
Impact of PM Modi’s Statement to Mr. Putin
- Asserting India’s Voice: PM Modi’s statement, “this is not the era of war,” showcased India’s capacity to communicate with President Putin.
- Influencing Diplomatic Outcomes: The statement helped in securing the Bali G20 summit declaration and demonstrated India’s voice as a mediator between Russia and the West.
Implications for India-China Relations
- Unlikely Impact on Border Standoff: The virtual summit is unlikely to have any immediate impact on the India-China border standoff.
- Ongoing Talks and Stalemate: Multiple rounds of talks between India and China have taken place, but there has been limited progress in de-escalation and disengagement at key points.
- Snub to Pakistan: India’s strong stance on cross-border terrorism, as demonstrated in the past, is likely to be reiterated during the discussions.
India’s Opportunities at SCO
- Central Asian outreach: India has historical and cultural ties with Central Asian countries and aims to expand partnerships in the region.
- Neglected Engagement: Post-Soviet independence, India’s engagement with these countries was hindered by its lack of direct access through Pakistan’s territory.
- SCO as a Platform: India’s SCO membership allows for interaction at various levels and offers opportunities to strengthen ties with Central Asian countries.
Conclusion
- The SCO virtual summit presents a significant opportunity for India to engage with key regional players and enhance its profile and stature in Central Asia.
- The summit’s outcomes, including the adoption of documents on various issues, will contribute to advancing India’s interests, strengthening trade ties, and promoting investments in the region.
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SC seeks Data on action taken against Lynchings
Central Idea
- The Supreme Court has decided to assess the actions taken by the Union and States to address incidents of lynchings since its July 2018 judgment condemning these acts as mobocracy.
- The court has directed State governments to provide year-wise data on complaints filed, FIRs registered, and court proceedings related to incidents of mob violence and lynchings.
Mob Lynching: A Backgrounder
- Concerns over Vigilantism: The 2018 Supreme Court bench, addressed the growing issues of vigilantism, mob lynching, communal violence, and hate crimes.
- State Responsibility: The court emphasized that states have the duty to prevent individuals or core groups from taking the law into their own hands, stressing that every citizen has the right to report law infractions to the police rather than resorting to vigilantism.
- Affront to the Rule of Law: The court declared that lynching undermines the rule of law and the constitutional values, leading to anarchy and violence in society.
Supreme Court’s Observations
- Prevention and Vigilance: The court stressed that authorities responsible for maintaining law and order must prevent vigilantism, including cow vigilantism, from occurring. Vigilante actions erode the legal institutions of the state and disrupt the constitutional order.
- Rising Intolerance: The court expressed concern over rising intolerance and growing polarization, fueled by incidents of mob violence, emphasizing that such acts should not become the normal state of law and order in the country.
- Creeping Threats: The court highlighted the dangers posed by lynching and mob violence, which could escalate into widespread incidents influenced by intolerance, misinformation, and the circulation of fake news.
Directive for Preventive and Remedial Measures
- Designation of Nodal Officers: State governments must appoint senior police officers as Nodal Officers in each district to prevent incidents of mob violence and lynching.
- Identification of High-Incidence Areas: State governments should identify areas where mob violence and lynching have been reported.
- Police Actions and FIR Registration: Police officers must disperse mobs using their authority under Section 129 of the CrPC, and FIRs must be promptly registered under Section 153A of the IPC.
- Monitoring of Investigations: Nodal Officers have the responsibility to personally monitor the investigation of such offenses and ensure effective implementation.
- Compensation Scheme: State governments should establish a victim compensation scheme for lynching and mob violence victims in line with Section 357A of the CrPC.
- Designated Courts: Special designated courts or fast-track courts should handle cases related to lynching and mob violence in each district.
Directive to State Governments
- Information Gathering: A Bench comprising Justices Sanjeev Khanna and Bela M. Trivedi has instructed State governments to compile comprehensive data on incidents of mob violence and lynchings.
- Year-wise Data: The data should include information on complaints filed, FIRs registered, and challans submitted to the courts, highlighting the progress made each year.
- Coordination with State Departments: The court suggested that the Ministry of Home Affairs hold meetings with relevant department heads of the State governments to obtain updates on the measures taken in response to the court’s 2018 judgment in the Tehseen Poonawala case.
- Compliance with Court’s Directions: The court had previously directed the formation of Special Task Forces by the States to gather intelligence on hate speeches, mob violence, and lynchings.
Conclusion
- The Supreme Court’s monitoring of preventive and remedial measures for mob lynching demonstrates the commitment to address this issue.
- By directing the consolidation of data and urging compliance with the 2018 judgment, the court aims to hold the Union and State governments accountable for their actions.
- These measures seek to curb vigilantism, protect the rule of law, and ensure justice for victims of mob violence and lynchings.
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Foxconn withdraws Chip Manufacturing Deal
Central Idea
- Taiwan-based Hon Hai Technology Group, commonly known as Foxconn, has announced its withdrawal from a $19.5 billion semiconductor joint venture with the Vedanta Group.
- The decision comes as Foxconn aims to explore alternative development opportunities.
Background and JV Details
- The joint venture aimed to establish a semiconductor fabrication plant in Gujarat, India.
- The plant was intended to produce 28 nanometer semiconductors.
- The partnership was expected to boost India’s semiconductor manufacturing capabilities.
Foxconn’s Decision to Withdraw
- Fulfilling Technology Transfer and Investment Requirements: Reports suggested that the firms were unable to meet the government’s demands for increased technology transfer and investment from European firm STMicroelectronics.
- Financial Constraints: Vedanta’s heavy debt burden and its ability to finance the acquisition of chipmaking technology are believed to have played a significant role in Foxconn’s decision to pull out of the joint venture.
- Differences and Lack of Progress: Senior government officials confirm that the joint venture encountered difficulties and differences, leading to the realization several months ago that Foxconn would withdraw.
- Diverse Development Opportunities: Foxconn cited the need to explore a wider range of development opportunities as the reason for its withdrawal from the joint venture.
Vedanta’s response
- Commitment from Vedanta: Vedanta stated that it will continue to pursue other partnerships and highlighted its possession of a license for production-grade technology for 40nm chips from a prominent Integrated Device Manufacturer (IDM).
- Importance of India in Semiconductor Supply Chains: Vedanta reiterated the significance of India in global semiconductor supply chain repositioning efforts.
- Independence and New Partners: Vedanta intends to remove the Foxconn name from the fully-owned entity and pursue partnerships with other companies to establish India’s first foundry.
- Production Licenses: Vedanta highlights its possession of a license for production-grade technology for 40 nm chips and the forthcoming acquisition of a license for production-grade 28 nm chips.
- Government Evaluation: The government will evaluate Vedanta’s proposal, but the absence of Foxconn may affect the progress of the application.
Government’s position
- Commitment to India’s Semiconductor Mission: Electronics and Information Technology Minister assured that both Foxconn and Vedanta remain dedicated to India’s semiconductor mission and the Make in India program.
- Continuation of Semiconductor Growth: The government aims to continue developing India’s semiconductor industry and attract further investments.
Uncertainty Surrounding Other Proposals
- ISMC Proposal: ISMC, backed by Next Orbit and Tower Semiconductor, has requested that its proposal not be considered due to the pending merger between Intel and Tower Semiconductor. The proposal for a $3 billion semiconductor fab in Karnataka is expected to remain on hold until the merger is finalized.
- IGSS Venture Proposal: The proposal by Singapore-based IGSS Venture did not meet the standards set by the government’s advisory committee and is currently on hold.
Importance of Chipmaking for India
- Strategic Sector: India has identified electronics manufacturing, including chipmaking, as a critical sector for domestic production and export growth.
- Domestic Supply Chain: Chip manufacturing plays a crucial role in developing a domestic electronics supply chain, reducing reliance on imports, particularly from China.
- Opportunity for India: As companies seek to diversify their manufacturing bases away from China, India has the potential to emerge as a reliable destination for semiconductor manufacturing.
- Global Context: The US has passed the CHIPS Act, providing significant subsidies for chip manufacturing domestically, while imposing restrictions and sanctions on China’s semiconductor industry.
Conclusion
- Foxconn’s withdrawal and uncertainties surrounding other proposals highlight challenges in India’s semiconductor manufacturing plans.
- Financial constraints faced by Vedanta and the need for technology acquisition pose hurdles to realizing India’s chipmaking ambitions.
- Nonetheless, India’s focus on chip manufacturing remains a strategic priority to develop a domestic electronics supply chain and reduce dependence on imports.
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Global South: Origins and Significance
Central Idea
- The unwillingness of many leading countries in Africa, Asia and Latin America to stand with NATO over the war in Ukraine has brought to the fore once again the term “Global South.”
What is Global South?
- The term “Global South” refers to countries that are often described as ‘developing’, ‘less developed’, or ‘underdeveloped’.
- It encompasses countries in Africa, Asia, and Latin America, which are characterized by higher levels of poverty, income inequality, and harsh living conditions compared to the “Global North”.
Historical Background
- Emergence of the Term: The term ‘Global South’ was first used in 1969 by political activist Carl Oglesby, who argued that the war in Vietnam represented a history of northern “dominance over the global south”.
- Transition from Third World: Prior to the fall of the Soviet Union in 1991, these countries were commonly referred to as the ‘Third World’.
- Momentum and Context: The term gained momentum following the end of the Cold War and the rise of the non-aligned movement.
Features of the Global South
- Lower-income Countries: The Global South primarily consists of lower-income countries located in Africa, Asia, and South America.
- Geopolitical Background: Geopolitically, these nations have a history of imperialism and colonial rule.
- Newly Industrialized Status: Many of these countries are in the process of industrialization and have been described as newly industrialized.
- Prominent Countries: Prominent countries within the Global South include Brazil, China, India, Indonesia, and Mexico, known for their large populations and economies.
Need for Classification
- Critique of Earlier Terms: The East/West binary and the categorization of countries as developed/developing were criticized for perpetuating stereotypes and favoring Western ideals.
- Cold War Context: The First World, Second World, and Third World classifications were associated with Cold War alliances.
- Broad and Inclusive Classification: The term ‘Global South’ provides a broader classification based on shared history of colonization and similar socioeconomic indicators.
Global South amid Ukrainian War
- South-South Cooperation: South-South cooperation has emerged as countries like India and China challenge the dominant global order led by the US.
- Questioning the North as the Ideal: The rise of Asian countries questions the notion of the North as the ideal.
- Criticism of Classification: The classification of the Global South has been criticized for its broadness and concerns about resource accumulation, as well as the neglect of Africa.
Significance of the Global South
- India’s Role: India aims to unite Global South countries to adopt an action-oriented approach.
- Potential for Progress: Cooperation within the Global South can unlock significant potential for progress, including technical and ideas exchanges, sharing of manufacturing best practices, and more.
- Common Concerns: Energy security, justice, and sustainable energy transition are common concerns for the Global South, which India aims to highlight.
Challenges for Consolidation
- Debate over Climate Reparations: The ongoing debate over climate reparations has triggered controversy, as some argue that China and India should contribute given their increasing industrialization and historical carbon emissions.
- Impact of Russia-Ukraine War: The ongoing Russia-Ukraine war has impacted the least developed countries (LDCs) and prompted them to align more closely with China’s Belt and Road Initiative.
- Dominance of the US: Despite the shift to a multipolar world, the US still dominates international affairs, posing challenges for the consolidation of the Global South.
Way Forward
- Active Engagement: India must actively engage with regional politics within the developing world to champion the Global South.
- Tailored Policy Approach: It is crucial to recognize the diversity within the Global South and develop a policy vision that addresses the varying needs and capabilities of its member countries.
Conclusion
- Collaboration between the Global South and India can lead to significant advancements in various fields.
- India’s development partnerships prioritize consultation, outcome orientation, people-centric approaches, and respect for the sovereignty of partner countries.
- Distinguishing India’s approach from that of China can help avoid debt traps and financially unsound undertakings, promoting sustainable development within the Global South.
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AI’s disruptive economic impact, an India check
What is the news?
- The rise of Artificial Intelligence (AI) and generative AI models and its impact on productivity, growth, and employment is explored, with a focus on the positive effects, potential job displacement, and opportunities for India, while dispelling fears of a robot-dominated future.
Central Idea
- The rapid advancements in AI, particularly in the form of Large Language Models and Generative AI, have revolutionized various aspects of our lives. From automated factories to self-driving cars and chatbots, AI has extended its influence beyond our expectations.
What is Artificial Intelligence?
- AI is a constellation of technologies that enable machines to act with higher levels of intelligence and emulate the human capabilities of sense, comprehend and act.
- An AI system can also take action through technologies such as expert systems and inference engines or undertake actions in the physical world.
- These human-like capabilities are augmented by the ability to learn from experience and keep adapting over time.
What is generative AI?
- Like other forms of artificial intelligence, generative AI learns how to take actions from past data.
- It creates brand new content – a text, an image, even computer code – based on that training, instead of simply categorizing or identifying data like other AI.
- The most famous generative AI application is ChatGPT, a chatbot that Microsoft-backed OpenAI released late last year.
- The AI powering it is known as a large language model because it takes in a text prompt and from that writes a human-like response.
Potential positive economic impact of AI
- PwC Report: The PwC report predicted an increase in global GDP by 14% or $15.7 trillion by 2030 due to ongoing technological advancements in AI. It also suggests that the greatest economic gains from AI will come from China, with a projected 26% boost to GDP by 2030.
- Goldman Sachs Research: According to the Goldman Sachs Research report, generative AI alone could raise global GDP by 7% or almost $7 trillion over a 10-year period.
- Forum for the Kent A. Clark Center for Global Markets Survey: The survey conducted among economic experts revealed that 44% of U.S. experts expected a substantial increase in GDP per capita due to AI, while 34% of European experts expected the same.
Positive effects of AI adoption
- Increased productivity: A study conducted by economists from the Massachusetts Institute of Technology (MIT) called Generative AI at Work revealed that AI tools improved worker productivity by 14% and enhanced consumer satisfaction among customer service agents.
- Improved consumer satisfaction: AI tools have contributed to better treatment of customer service agents, leading to improved consumer satisfaction.
- Employee retention: The use of AI tools in the workplace has been associated with increased employee retention rates, possibly due to the enhanced productivity and job satisfaction resulting from AI support.
- Faster and smarter work: A recent survey among employees of LinkedIn’s top 50 companies in the United States shows that almost 70% of them found AI helping them to be faster, smarter, and more productive
- Potential for significant GDP growth: Research by PwC suggests that ongoing advancements in AI could lead to a projected increase in global GDP by 14% or $15.7 trillion by 2030.
- Creation of human-like output: Generative AI has the potential to generate human-like output, which can have positive macroeconomic effects by facilitating better communication and interaction between humans and machines.
Employment challenges
- Labor replacement: AI technologies have the capability to automate both repetitive and creative tasks, potentially leading to the displacement of certain jobs.
- Negative impact on wages and employment: Studies indicate that the adoption of robots and automation can have a negative effect on wages, employment, and the labor share. This impact is particularly observed among blue-collar workers and those with lower levels of education.
- Wage inequality: Automation and AI contribute to wage inequality by affecting worker groups specializing in routine tasks. Changes in the wage structure over the last few decades can be attributed to the decline in wages for workers engaged in routine tasks in industries undergoing automation.
- Intensified competition and winner-takes-all scenario: The adoption of AI may intensify competition among firms, potentially leading to a winner-takes-all scenario where early adopters gain significant advantages.
- Displacement of middle-class jobs: AI technologies, especially in white-collar industries, may displace middle-class jobs, posing challenges for those in such occupations. The impact of AI on middle-class employment remains uncertain, potentially leading to job losses in these sectors.
Opportunities for India
- Embracing the demographic dividend: India’s large population presents an opportunity to leverage the demographic dividend. By investing in AI education and training, India can harness the potential of its workforce and utilize AI to drive economic growth and create employment opportunities.
- Focus on online education: The pandemic has increased acceptance and reliance on online education. India can take advantage of this trend and utilize online platforms to offer AI education and reach a wider audience, further accelerating the adoption of AI skills across the country.
- Potential economic gains: The PwC report suggests that China is projected to experience the greatest economic gains from AI. However, India can still benefit by focusing on AI education, innovation, and creating an ecosystem that fosters AI-driven growth. By doing so, India can tap into the economic benefits associated with AI and boost its own GDP.
Way forward
- Collaborative approach: Governments, industry, academia, and civil society should collaborate to shape the future of AI in a manner that benefits society as a whole. Open dialogues, partnerships, and knowledge sharing can drive responsible AI development.
- Lifelong learning: Promoting a culture of lifelong learning and continuous skill development is crucial. This includes investing in education and training programs that cater to the changing demands of the AI-driven job market.
- Regulatory frameworks: Governments need to develop agile regulatory frameworks that strike a balance between innovation and accountability. These frameworks should be adaptable to evolving technologies and address potential risks associated with AI.
- Research and innovation: Continued research and investment in AI can drive innovation, especially in areas such as explainable AI, ethics, and responsible AI practices. Encouraging interdisciplinary collaboration and supporting AI research can lead to breakthroughs in addressing challenges and maximizing benefits.
- Inclusive approach: Ensuring inclusivity in AI development and deployment is vital. Diversity in AI teams and the inclusion of diverse perspectives can help mitigate biases and ensure AI systems serve the needs of all individuals and communities.
Conclusion
- Artificial Intelligence has permeated various sectors of the global economy, offering substantial benefits in terms of productivity and growth. While concerns regarding job displacement persist, the full extent of AI’s impact on employment remains uncertain. Governments should proactively address the challenges posed by AI while promoting education and training in AI-related fields.
Also read:
Artificial Intelligence (AI) in Healthcare: Applications, Concerns and regulations
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11th Jul 23 | Prelims Daily with Previous Year Questions
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