Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

MSMEs have not been defined well — and micro enterprises pay the price for this

Note4Students

From UPSC perspective, the following things are important :

Prelims level: MSMEs;

Mains level: Reviewing the Category of Micro-Enterprises

Why in the News?

A parliamentary panel suggested separating micro-enterprises from the broader MSME category and recommended revising definitions every five years.

  • A government order for timely MSME payments has exposed knowledge gaps and unintentionally marginalized smaller enterprises, highlighting issues in understanding their structure and operations.

Present Status:

  • According to the National Sample Survey Organisations (NSSO) Unorganised Enterprise Survey 2016, 95% of the enterprises surveyed reported revenues under Rs 50 lakh per annum. Of them, 89% reported an annual revenue of under Rs 12 lakh.
  • In the Annual Survey of Industries (ASI), more than 66% of the enterprises reported an annual revenue of less than Rs 50 lakh, and of them, 45% reported annual revenues of Rs 12 lakh.

What are the Categories of Micro-Enterprises?

  • Category 1 – Micro: More than 98% of the MSMEs are within this category, with reporting annual revenue of Rs 50 lakh and less.
  • Category 2 – Small: The MSMEs that are reporting annual revenue of Rs 50 lakh to Rs 5 crore.

Present Ambiguity and structural Gap in defining MSMEs

  • Lack of Clarity and Consistency in defination: In India, the MSMED Act of 2006 categorized MSMEs based on investment in plants and machinery, which led to industries keeping their plants small to maintain MSME advantages.
    • However, the MSMED Amendment Bill, 2018 proposed defining MSMEs solely based on yearly turnover, which has been criticized for under-reporting of qualifying enterprises.
  • Quantitative vs. Qualitative Approaches: There are two main techniques for defining MSMEs: quantitative and qualitative, with MSMEs typically defined using a quantitative approach. Quantitative criteria like number of employees, total assets, and yearly revenue have limitations as they vary by industry and sector.
  • Impact on Micro Enterprises: The ambiguity in defining MSMEs negatively impacts micro-enterprises, leading to issues like delayed payments and limited access to benefits and support schemes.
    • Moreover, the unregistered micro-enterprises have been worse hit by the COVID-19 pandemic than small and medium enterprises, with micro-enterprises accounting for more than two-thirds of all MSMEs and having a higher rate of informality.

Way forward:

  • Enhanced Data Collection: Conduct regular and comprehensive surveys to gather detailed data on MSMEs, particularly focusing on micro-enterprises.
  • Further Classification within Micro-Enterprises: Establish sub-categories within the micro-enterprise category based on revenue thresholds (e.g., below Rs 10 lakh, Rs 10-25 lakh, Rs 25-50 lakh).
  • Revenue Diversity: Significant variation in revenue among micro-enterprises necessitates further classification.
  • Targeted Policies: Addressing classification gaps can enhance policy effectiveness, supporting micro-enterprise growth and sustainability.

BACK2BASICS

Program and Policies Explanation
MSME Development Act, 2006 Provides the legal framework for defining MSMEs and their classification into micro, small, and medium enterprises.
Credit Guarantee Fund Scheme for Micro and Small Enterprises Provides credit guarantee cover of up to 75% of the credit to micro and small enterprises.
Udyog Aadhaar A simple online process for MSME registration, requiring only the Aadhaar number and a self-declaration.
MSME Samadhaan Mechanism to facilitate the promotion and development of MSMEs, including Khadi, Village, and Coir Industries.
Mudra Yojana Provides loans up to 10 lakh to non-corporate, non-farm small/micro enterprises.
ZED Scheme Aims to enhance the manufacturing capabilities and competitiveness of MSMEs through Zero Defect Zero Effect (ZED) certification.
Stand-Up India Facilitates bank loans between 10 lakh and 1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch

 

Make in India: Focuses on making India a global manufacturing hub, with MSMEs playing a crucial role.

Stand-Up India: Facilitates bank loans between 10 lakh and 1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch

Mains PYQ:

Q Account for the failure of manufacturing sector in achieving the goal of labour-intensive exports. Suggest measures for more labour-intensive rather than capital-intensive exports. (UPSC IAS/2017)

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Indian manufacturing needs more sophistication: Finance Minister

Note4Students

From UPSC perspective, the following things are important :

Prelims level: What is the dependency ratio?

Mains level: What are the opportunities for India?

Why in the News?

In a recent statement, the Finance Minister highlighted the pressing need for sophistication in India’s manufacturing sector to drive economic growth and competitiveness.

  • The sophisticated manufacturing sector provides a conducive environment to enhance the efficiency of producing goods and services.

What is the current state of Indian Manufacturing?

  • India’s manufacturing sector’s Gross Value Added (GVA) as a percentage of GDP has shown an upward trend (since 2014), currently hovering around 18%. There is a consensus that to compete on a global scale, Indian manufacturing needs to evolve and embrace sophistication in its processes, technologies, and products.
  • India’s Dependency Ratio: The dependency ratio is a measure that compares the number of dependents (people who are either too young or too old to work) to the working-age population.
    • According to the Economic Survey 2018-19, India’s Demographic Dividend will peak around 2041, when the share of working-age,i.e. 20-59 years, population is expected to hit 59%.

Importance of Sophistication in Manufacturing:

  • Leveraging the Demographic Dividend: India’s young population and low dependency ratio offer a significant advantage in terms of labor force and consumption. To capitalize on this demographic dividend, there is a strong focus on ramping up skills in the Indian workforce through initiatives like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY).
  • Enhancing Productivity and Quality: Embracing sophistication is crucial for enhancing productivity, quality, and competitiveness in the global market. By investing in technology, automation, and research and development, manufacturers can improve efficiency and deliver high-quality products.
  • Increasing Share in Global Value Chains: To increase India’s share in global manufacturing and value chains, the government is considering providing policy support. This will help reduce dependence on imports and make India more Self-reliant (Atmanirbhar).
  • Attracting Investments: Sophistication in manufacturing can attract significant investments from global companies looking to reduce their dependence on China. According to a Capgemini Research Institute report, 65% of senior executives in the U.S. and Europe plan to increase manufacturing investments significantly in India.
  • Unlocking Opportunities in Specific Sectors: Sophistication in manufacturing can help unlock opportunities in sectors such as food spending, financial services, and consumer markets. By 2031, India’s consumer market is projected to double, presenting a $2.9 trillion opportunity.

What are the Challenges hindering the growth of the Sophisticated Manufacturing sector?

  • Inadequate infrastructure: Lack of reliable power supply, poor connectivity, and limited access to advanced technologies. Difficulty in obtaining credit, especially for small and medium enterprises (SMEs), to invest in technology upgradation.
  • Skill gaps: Shortage of skilled workers trained in modern manufacturing techniques and technologies
  • Weak Intellectual Property Rights: Insufficient protection of patents, trademarks, and copyrights, discouraging innovation
  • Regulatory hurdles: Complex bureaucratic processes, lack of clarity in policies, and inconsistent implementation

 Government Initiatives and Support

  • Make in India Initiative: Launched in 2014, the program aims to transform India into a global manufacturing hub by facilitating investment, fostering innovation, building best-in-class infrastructure, and making doing business easier. It focuses on 25 sectors, including automobiles, aviation, chemicals, and pharmaceuticals.
  • National Manufacturing Policy: Introduced in 2011, it aims to increase the share of manufacturing in GDP to 25% and create 100 million jobs by 2022. It focuses on enhancing skill development, promoting innovation, and creating a favorable business environment.
  • Production Linked Incentive (PLI) Scheme: It provides financial incentives to boost domestic manufacturing and attract investments in key sectors such as electronics, pharmaceuticals, automobiles, and telecom. It has helped reduce import dependence and increase exports in sectors like telecom and mobile manufacturing

Way Forward:

  • Role of Financial Institutions: By providing access to capital, facilitating technology adoption, and offering financial expertise, they can empower manufacturers to invest in sophistication and drive growth.
  • Enhanced Strategies: Manufacturers need to prioritize investments in technology, automation, research and development, and skill development to enhance sophistication. Collaborating with financial institutions for tailored financial solutions can help accelerate this transformation.
  • Competitive Outlook: As Indian manufacturing embraces sophistication, it is poised to unlock new opportunities, improve competitiveness, and contribute significantly to the country’s economic growth. By aligning with the Finance Minister’s vision, the sector can chart a path towards sustainable success in the global market.

Conclusion: The Finance Minister’s call for sophistication in Indian manufacturing underscores the need for a strategic shift towards innovation, efficiency, and quality. With concerted efforts from stakeholders, including the government, financial institutions, and manufacturers, India can elevate its manufacturing sector to new heights of success and competitiveness.

Mains PYQ:

Q Demographic Dividend in India will remain only theoretical unless our manpower becomes more educated, aware, skilled and creative.” What measures have been taken by the government to enhance the capacity of our population to be more productive and employable? (UPSC IAS/2016)

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Implementing the Street Vendors Act

Note4Students

From UPSC perspective, the following things are important :

Prelims level: The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014

Mains level: Challenges related to Act implementation

Why in the News? 

The Street Vendors Act was celebrated as a progressive legislation, but the law now faces numerous challenges in its implementation.

The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014:

Details
Introduction and Objective
  • Introduced in Lok Sabha on 6 September 2012 by Kumari Selja, Union Minister of Housing and Urban Poverty Alleviation.
  • Objective: Regulate street vendors and protect their livelihoods.
Enactment and Implementation
  • Came into force on 1 May 2014.
  • Aims to legalize vending rights and establish mechanisms for protection and regulation.
  • State-level rules and schemes are developed for execution.
Roles and Responsibilities
  • Delineates roles of street vendors and government.
  • Commits to accommodating existing vendors in vending zones and issuing vending certificates.
Participatory Governance
  • Establishes Town Vending Committees (TVCs).
  • Representation: 40% of TVC members, with 33% for women SVs.
  • TVCs tasked with including all existing vendors in zones.
Grievance Redressal
  • Mechanisms for addressing grievances and
  • Establishes Grievance Redressal Committee chaired by civil judge or judicial magistrate.
Survey and Identification States/ULBs conduct surveys to identify vendors at least once every five years.
Certificate of Vending
  • Granted to vendors above 14 years.
  • Can be transferred to family members.
  • Can be cancelled

Significance of street vendors 

  • Role of Street Vendors: Street vendors constitute about 2.5% of any city’s population and play multifaceted roles in city life, providing essential services, modest income for migrants and the urban poor, and affordable goods for others.
  • Integral to Urban Life: Street vendors are essential for maintaining affordability and accessibility to food, nutrition, and goods distribution, and they are integral to the cultural fabric of cities like Mumbai and Chennai.

Challenges faced during the implementation:

  • Administrative Challenges: Increase in harassment and evictions of street vendors despite the Act’s emphasis on protection and regulation.Outdated bureaucratic mindset viewing vendors as illegal entities.
    • Lack of awareness and sensitization about the Act among state authorities, the public, and vendors.
    • Limited influence of street vendor representatives in Town Vending Committees (TVCs), often remaining under the control of local city authorities.Tokenistic representation of women vendors in TVCs.
  • Governance Challenges: Weak existing urban governance mechanisms.
    • Lack of integration of the Act with the framework established by the 74th Constitutional Amendment Act for urban governance.
    • Insufficient powers and capacities of ULBs.
    • Focus on top-down policies like the Smart Cities Mission on infrastructure development, ignoring provisions for the inclusion of street vendors in city planning.
  • Societal Challenges: The prevailing image of the ‘world-class city’ tends to be exclusionary.Marginalization and stigmatization of street vendors as obstacles to urban development rather than legitimate contributors to the urban economy.
    • Reflection of these challenges in city designs, urban policies, and public perceptions of neighborhoods.

Way forward 

  • Decentralization of Interventions: There’s a need to decentralize interventions and enhance the capacities of Urban Local Bodies (ULBs) to plan for street vending in cities.
  • Shift from Department-led Actions to Deliberative Processes: Moving away from high-handed department-led actions towards actual deliberative processes at the Town Vending Committee (TVC) level is crucial.
  • Amendments to Urban Schemes and Policies: Urban schemes, city planning guidelines, and policies need to be amended to include provisions for street vending.
  • Need-based Welfare Provisions: Broad welfare provisions of the Act should be used creatively to meet the emerging needs of street vendors, such as addressing the impact of climate change, competition from e-commerce, and reduced incomes.
  • Adaptation in National Urban Livelihood Mission: The sub-component of street vendors in the National Urban Livelihood Mission should acknowledge changed realities and facilitate innovative measures to address needs.

Mains PYQ

Q To what extent, in your opinion, has the decentralisation of power in India changed the governance landscape at the grassroots?

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[pib] Competition Commission of India (CCI)  

Note4Students

From UPSC perspective, the following things are important :

Prelims level: CCI and its key functions

Mains level: NA

Why in the news?

The Competition Commission of India (CCI) invites proposals for conducting a Market Study on Artificial Intelligence (AI) and its impact on competition.

About Competition Commission of India (CCI)

  • The CCI is a statutory body established under the Competition Act, 2002 by the Vajpayee government.
  • It aims to promote and sustain competition, protect consumer interests, and ensure freedom of trade.
  • The commission operates as a quasi-judicial body, providing opinions to statutory authorities and adjudicating cases.
  • Evolution of CCI:
    • Established in response to the need for promoting competition and private enterprise, especially after India’s economic liberalization in 1991.
    • Replaced the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) based on recommendations from the Raghavan Committee.

Key Features of the Competition Act:

  • Passed in 2002 and subsequently amended to align with modern competition laws.
  • Prohibits anti-competitive agreements, abuse of dominant position, and regulates combinations causing adverse effects on competition.
  • Established the Competition Commission of India and the Competition Appellate Tribunal.
  • The National Company Law Appellate Tribunal (NCLAT) replaced the Competition Appellate Tribunal (COMPAT) in 2017.

Composition of CCI:

  • CCI comprises a Chairperson and 6 Members appointed by the Central Government.
  • Members must possess significant expertise in various domains such as law, economics, finance, and management or qualified to be a judge of a High Court.

Key Functions of CCI:

  1. Regulating Mergers and Acquisitions:
  • Ensuring mergers and acquisitions do not harm competition in the market.
  • Preventing monopolistic practices and promoting fair competition.
  1. Investigating Anti-Competitive Practices:
  • Probing into cartels, collusive behavior, and abuse of dominant market positions.
  • Taking action against entities engaging in anti-competitive practices.
  1. Market Studies and Research:
  • Conducting studies to assess market dynamics and competition levels.
  • Identifying trends and issues affecting competition in various sectors.
  1. Handling Complaints:
  • Addressing complaints filed by individuals or businesses regarding anti-competitive behavior.
  • Initiating investigations based on credible complaints received.
  1. Adjudication and Penalty Imposition:
  • Adjudicating cases related to competition law violations.
  • Imposing penalties on entities found guilty of breaching competition regulations.

PYQ:

[2015] The Government of India has established NITI Aayog to replace the:

(a) Human Rights Commission

(b) Finance Commission

(c) Law Commission

(d) Planning Commission

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[pib] Index of Industrial Production (IIP) grows by 5.7% in February, 2024

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Index of Industrial Production (IIP), Core Industries etc.

Mains level: NA

Why in the news?

India’s Index of Industrial Production (IIP) increased by 5.7% in February, up from 3.8% in January, according to data from the Ministry of Statistics and Programme Implementation (MoSPI).

What is Index of Industrial Production (IIP)?

  • IIP as it is commonly called is an index that tracks overall manufacturing activity in different sectors of an economy.
  • It is currently calculated using 2011-2012 as the base year.
  • It is compiled and published by Central Statistical Organisation (CSO) every month.
  • CSO operates under the Ministry of Statistics and Programme Implementation (MoSPI).

Components of IIP:

  • Three broad sectors in IIP:
  1. Manufacturing (77.6%),
  2. Mining (14.4%)
  3. Electricity (8%).
  • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40 per cent of the weight of items included in the IIP.

Basket of products:

There are 6 sub-categories:

  1. Primary Goods (consisting of mining, electricity, fuels and fertilisers)
  2. Capital Goods (e.g. machinery items)
  3. Intermediate Goods (e.g. yarns, chemicals, semi-finished steel items, etc)
  4. Infrastructure Goods (e.g. paints, cement, cables, bricks and tiles, rail materials, etc)
  5. Consumer Durables (e.g. garments, telephones, passenger vehicles, etc)
  6. Consumer Non-durables (e.g. food items, medicines, toiletries, etc)

Who uses IIP data?

  • The factory production data (IIP) is used by various government agencies such as the Ministry of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for analytical purposes.
  • The data is also used to compile the Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.

IIP base year change:

  • The base year was changed to 2011-12 from 2004-05 in the year 2017.
  • The earlier base years were 1937, 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.

What are the Core Industries in India?

  • The main or the key industries constitute the core sectors of an economy.
  • In India, there are eight sectors that are considered the core sectors.
  • They are electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilizers.

About Index of Eight Core Industries (ICI)  

  • The monthly Index of Eight Core Industries (ICI) is a production volume index.
  • ICI measures collective and individual performance of production in selected eight core industries: Coal (10%), Crude Oil (8.98%), Natural Gas (6.88%), Refinery Products (28.04%), Fertilizers (2.63%), Steel (17.92%), Cement (5.37%), and Electricity (20.18%).
  • Prior to the 2004-05 series six core industries namely Coal, Cement, Finished Steel, Electricity, Crude petroleum and Refinery products constituted the index basket.
  • Two more industries i.e. Fertilizer and Natural Gas were added to the index basket in 2004-05 series. The ICI series with base 2011-12 will continue to have eight core industries.

Components covered in these eight industries for compilation of index are as follows:

  1. Coal – Coal Production excluding Coking coal.
  2. Crude Oil – Total Crude Oil Production.
  3. Natural Gas – Total Natural Gas Production.
  4. Refinery Products – Total Refinery Production (in terms of Crude Throughput).
  5. Fertilizer – Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).
  6. Steel – Production of Alloy and Non-Alloy Steel only.
  7. Cement – Production of Large Plants and Mini Plants.
  8. Electricity – Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.

How is IIP different from ICI?

  • IIP is compiled and published monthly by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends.
  • However, ICI is compiled and released by Office of the Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), and Ministry of Commerce & Industry.
  • The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP). These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.

PYQ:

[2015] In the Index of Eight Core Industries, which one of the following is given the highest weight?

(a) Coal Production

(b) Electricity generation

(c) Fertilizer Production

(d) Steel Production

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[pib] GRID-INDIA is now a Miniratna Company

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Central Public Sector Enterprise (CPSE) and their Categorization

Mains level: NA

What is the news-

  • Grid Controller of India Limited (GRID-INDIA) reached a significant milestone as it was honored with the prestigious status of Miniratna Category-I Central Public Sector Enterprise (CPSE) by the Ministry of Power.

About Grid Controller of India Limited (GRID-INDIA)

  • Founding: Established in 2009, GRID-INDIA plays a vital role in ensuring the smooth operation of the Indian Power System.
  • Mandate: GRID-INDIA is tasked with overseeing the seamless transfer of electric power within and across regions, facilitating transnational power exchanges, and ensuring reliability, economy, and sustainability in the power sector.
  • Regional Load Despatch Centres (RLDCs) and NLDC: GRID-INDIA comprises five RLDCs and the National Load Despatch Centre (NLDC), collectively managing the All India synchronous grid.
  • Functions: Managing one of the world’s largest and most intricate power systems, GRID-INDIA handles diverse challenges arising from the integration of power systems, rising energy demands, and the proliferation of Renewable Energy (RE) sources.

What are Central Public Sector Enterprises (CPSEs)?

  • CPSEs are companies in which the central government holds a majority stake (usually more than 51%).
  • These enterprises operate across various sectors, including manufacturing, infrastructure, energy, telecommunications, and financial services.
  • CPSEs are governed by the Department of Public Enterprises (DPE) under the Ministry of Heavy Industries and Public Enterprises.

Within the CPSEs, there are further classifications based on their financial performance, operational autonomy, and strategic importance:

Maharatna Companies Navratna Companies Miniratna Companies
Categories Single category Single category Two categories (Category-I and Category-II) based on the Autonomy
Eligibility Criteria Annual turnover of ₹25,000 crore, net worth of ₹15,000 crore, and net profit of ₹5,000 crore over the last three years A composite score of at least 60% based on various parameters such as net profit, net worth, total manpower cost, cost of production, PBDIT (Profit Before Depreciation, Interest, and Taxes) to turnover ratio, and other operational and financial parameters. Satisfactory operational and financial performance, as per government guidelines
Operational Autonomy High degree of operational autonomy and financial powers Moderate degree of operational autonomy and financial powers Limited operational autonomy and financial powers
Investment Authority Authority to make strategic investments, undertake mergers and acquisitions, and form joint ventures or collaborations without seeking government approval Authority to undertake investment decisions, execute projects, and form joint ventures or subsidiaries within prescribed limits without seeking government approval Authority to make certain investment decisions, incur capital expenditure and undertake expansion projects within prescribed limits without seeking government approval
Number of Companies Limited number of companies (currently 10 Maharatna companies) Limited number of companies (currently 14 Navratna companies) Larger number of companies (over 70 Miniratna companies)
Examples Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), NTPC Limited Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited (HAL), Bharat Petroleum Corporation Limited (BPCL) Container Corporation of India (CONCOR), National Aluminium Company Limited (NALCO), Power Grid Corporation of India Limited (POWERGRID)

 


PYQ:

2011: Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)?

  1. The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt.
  2. The Government no longer intends to retain the management control of the CPSEs.

Which of the statements given above is/ are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

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EU’s Digital Markets Act (DMA): Lessons for India

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Digital Markets Act , Gatekeepers

Mains level: Regulation of global tech giants

In the news

  • The Digital Markets Act (DMA) marks a significant milestone for the European Union (EU) as it reinforces its role as a global trendsetter in regulating the tech industry.
  • With its implementation, six tech giants designated as “gatekeepers” – Amazon, Apple, Google parent Alphabet, Meta, Microsoft, and TikTok owner ByteDance – are required to adhere to new regulations.

EU’s Leadership in Tech Regulation

  • Pioneering Regulations: The EU has a history of imposing significant fines on tech giants, enforcing strict antitrust rules, and pioneering norms to regulate social media and artificial intelligence.
  • Global Impact: The DMA sets a precedent for tech regulation worldwide, with countries like Japan, Britain, Mexico, South Korea, Australia, Brazil, and India drafting similar rules to prevent tech dominance in digital markets.

Key Provisions of the DMA

  • Regulated Services: The DMA targets 22 services, including operating systems, messenger apps, social media platforms, and search engines, offered by the designated tech gatekeepers.
  • Penalties for Non-Compliance: Tech companies face hefty fines of up to 20% of their annual global revenue for repeated violations or potential breakup for systematic infringements.

Implications for Tech Giants

  • Shift in Business Practices: Tech giants are compelled to adapt their business models to comply with the DMA, such as Apple’s decision to allow iPhone users to download apps from sources outside its App Store.
  • Reduced Monopolistic Practices: The DMA aims to curtail monopolistic practices by providing users with choices for default browsers, search engines, and app sources.

Challenges and Criticisms

  • Security Risks: While Apple’s decision to allow app downloads outside its App Store offers more freedom to users, it also raises concerns about potential security risks associated with third-party sources.
  • Market Fragmentation: Critics argue that additional fees imposed by tech giants for alternative app sources may deter developers, leading to market fragmentation and hindering competition.
  • Consumer Awareness: Despite offering choice screens for default services, smaller players like Ecosia raise concerns that users may stick with familiar options due to lack of awareness about alternatives.

EU’s Vigilance and Future Outlook

  • Regulatory Oversight: EU competition Chief Margrethe Vestager emphasizes close scrutiny to ensure tech firms comply with DMA regulations and prevent circumvention of rules.
  • Consumer Choice: The DMA prioritizes consumer choice by allowing users to select default services and promoting competition among tech companies.
  • Continuous Evaluation: The effectiveness of DMA regulations will be continuously evaluated to address emerging challenges and ensure a fair and competitive digital ecosystem.

Application in India: Unique Considerations

  • Market Dynamics: India’s digital market differs significantly from the EU, with distinct internet penetration levels, consumer preferences, and regulatory challenges.
  • Debate on Ex-Ante Regulation: The EU’s adoption of ex-ante regulations raises questions about its applicability in India and the need for tailored approaches to address local market dynamics.
  • Ground Realities: Legal experts emphasize the importance of aligning regulatory frameworks with ground realities and testing laws in local contexts to ensure effective implementation.

Way Forward: Tailored Solutions for India

  • Customized Regulation: India’s DMA should be crafted in consultation with businesses and consumers to address the country’s unique market dynamics and regulatory challenges.
  • Pragmatic Approach: Regulatory frameworks must be flexible and responsive to ground realities, ensuring that laws effectively address local needs and promote competition and innovation.

Conclusion

  • The DMA represents a significant step towards promoting fair competition and consumer empowerment in the digital landscape.
  • As the EU leads the way in tech regulation, the DMA’s implementation will have far-reaching implications globally, shaping the behavior of tech giants and safeguarding consumer interests in an increasingly digitized world.

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Why India needs deep industrialisation

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Disguised unemployment

Mains level: India's economic stagnation, particularly in terms of industrialization and employment generation,

 

Recipe to tackle India's economic slowdown - Rediff.com

Central Idea:

The article explores India’s economic stagnation, particularly in terms of industrialization and employment generation, and proposes a shift towards high-skill, services-driven growth as advocated by Raghuram Rajan and Rohit Lamba in their book “Breaking the Mould: Reimagining India’s Economic Future”. It argues that traditional approaches to industrialization have not been effective in India and suggests that focusing on high-skill services, particularly in the IT sector, could stimulate manufacturing and address socio-economic inequalities.

Key Highlights:

  • India’s historical struggle with industrialization despite various reform efforts.
  • Proposal for a shift towards high-skill services-led growth to stimulate manufacturing.
  • Critique of traditional industrial policy and its failure to address unemployment and trade deficits.
  • Challenges posed by poor employment elasticity of services-led growth and inequality in the service sector.
  • Impact of unequal access to education on labor market outcomes and economic disparities.
  • Cultural factors contributing to India’s industrial stagnation, including undervaluing certain occupations and skills.
  • Importance of mass education and collective absorptive capacity for innovation and economic development.

Key Challenges:

  • Poor employment elasticity of services-led growth.
  • Inequality in the service sector, particularly in terms of wages.
  • Unequal access to education and skills training, exacerbating socio-economic disparities.
  • Cultural attitudes towards certain occupations hindering innovation and industrial development.
  • Lack of mass education and collective absorptive capacity for technological progress.

Main Terms:

  • Industrialization
  • Services-driven growth
  • High-skill services
  • Information technology (IT)
  • Unemployment
  • Trade deficit
  • Inequality
  • Mass education
  • Absorptive capacity
  • Technological progress

Important Phrases:

  • “Premature deindustrialization”
  • “Disguised unemployment”
  • “Mass school education”
  • “High-skill services pitch”
  • “Cultural prerequisite for industrialization”
  • “Useful knowledge”
  • “Organic innovation in manufacturing”
  • “Collective absorptive capacity”
  • “Deep industrialization”

Quotes:

  • “Rural entrepreneurship was able to grow out of the traditional agricultural sector on a massive scale [in China]. The rural Indian, in contrast, hampered by a poor endowment of human capital, were not able to start entrepreneurial ventures remotely on the scale of the Chinese.” – Yasheng Huang
  • “India needs deep industrialization, not just the service sector, that has the power of changing the foundations of society.” – Authors (Rajan and Lamba)

Useful Statements:

  • “India’s historical struggle with industrialization despite various reform efforts.”
  • “Proposal for a shift towards high-skill services-led growth to stimulate manufacturing.”
  • “Impact of unequal access to education on labor market outcomes and economic disparities.”
  • “Importance of mass education and collective absorptive capacity for innovation and economic development.”

Examples and References:

  • Periodic Labour Force Survey, 2021-22.
  • Raghuram Rajan and Rohit Lamba’s book “Breaking the Mould: Reimagining India’s Economic Future”.
  • Economic historian Joel Mokyr’s insights on the role of useful knowledge in economic development.
  • Comparison between India and China’s approaches to rural entrepreneurship and industrialization.

Facts and Data:

  • India’s manufacturing share in output and employment has been stagnant and below 20%.
  • India’s trade deficit has been widening, largely driven by imported goods.
  • Inequality in the service sector is higher compared to manufacturing.
  • India is one of the world’s most unequal countries in terms of education.

Critical Analysis:

  • The article presents a critical examination of India’s historical industrialization efforts and their limitations.
  • It questions traditional approaches to industrial policy and offers a provocative alternative centered around high-skill services.
  • The critique of inequality in the service sector and its implications for socio-economic disparities adds depth to the analysis.
  • The cultural factors influencing India’s industrial stagnation provide valuable insights into the broader challenges faced by the country.

Way Forward:

  • Emphasize the need for a comprehensive approach to economic development that addresses both industrialization and service sector growth.
  • Invest in mass education and skills training to enhance collective absorptive capacity and promote innovation.
  • Reevaluate cultural attitudes towards certain occupations to foster organic innovation in manufacturing.
  • Ensure that economic policies prioritize reducing inequality and promoting inclusive growth.

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The truth about India’s booming toy exports

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Non-tariff barriers (NBTs). Quality control order (QCO)

Mains level: success of 'Make in India' policies in the toy industry

India's Toy Industry: Unravelling the Recent Export Surge - Civilsdaily

Central Idea:

The article discusses India’s toy industry’s recent shift to net exports, attributing the success to protectionist measures under the ‘Make in India’ initiative. It raises questions about the efficacy of these policies and calls for a public release of an officially sponsored research study by the Indian Institute of Management Lucknow (IIM-L) to facilitate a more informed policy discussion.

Key Highlights:

  • Between 2014-15 and 2022-23, India’s toy exports increased significantly, turning the country into a net exporter, while imports declined.
  • An unpublished IIM-L case study, sponsored by DPIIT, credits the export success to promotional efforts under ‘Make in India.’
  • The article questions the reported success and analyzes official statistics to understand the factors behind the industry’s turnaround.

Key Challenges:

  • Lack of transparency regarding the IIM-L case study, creating ambiguity about the actual impact of ‘Make in India’ on the toy industry.
  • Concerns about the sustainability of protectionist measures and the potential for “rent-seeking” behavior in the absence of complementary policies.
  • The decline in labor productivity and other indicators in the toy industry despite protectionist measures.

Key Terms:

  • ‘Make in India’ initiative.
  • Net exports (exports minus imports).
  • Protectionism.
  • Non-tariff barriers (NBTs).
  • Quality control order (QCO).
  • Annual Survey of Industries (ASI).
  • Fixed capital per worker.
  • Gross value of output.

Key Phrases:

  • “Turnaround in the labour-intensive industry.”
  • “Rising protectionism since 2020-21.”
  • “Infant industry argument.”
  • “Learning by doing.”
  • “Virtuous circle of expanding domestic capabilities.”

Key Quotes:

  • “India has turned into a net toys exporter since 2020-21. ‘Make in India’ policies made it possible.”
  • “Perhaps the IIM-L’s study uses different evidence to buttress its contention.”
  • “Rising tariff and non-tariff barriers have made it possible.”

Key Statements:

  • The article questions the correlation between ‘Make in India’ policies and the reported success in the toy industry.
  • Concerns are raised about the impact of protectionism on the industry’s long-term competitiveness.
  • Calls for transparency and public release of the IIM-L case study to facilitate informed policy discussions.

Key Examples and References:

  • Reference to the tripled customs duty on toys in February 2020 and the imposition of non-tariff barriers since January 2021.
  • Mention of the decline in labor productivity and other indicators in the toy industry despite protectionist measures.

Key Facts and Data:

  • Toy exports increased significantly between 2014-15 and 2022-23, making India a net exporter.
  • The trade balance for toys turned positive in 2020-21 after a gap of 23 years.
  • Customs duty on toys was raised to 70% in March 2023.

Critical Analysis:

  • The article critically examines the reported success of ‘Make in India’ policies in the toy industry, emphasizing the role of protectionism.
  • Concerns are raised about the sustainability of protectionist measures and the need for complementary policies to enhance domestic capabilities.
  • The decline in labor productivity challenges the notion that protectionism has led to improved industry competitiveness.

Way Forward:

  • Advocate for transparency by making the IIM-L case study public to inform meaningful policy discussions.
  • Emphasize the need for a comprehensive policy approach, combining protectionism with investment policies and infrastructure development.
  • Encourage a dialogue on the long-term impact of protectionist measures on the toy industry’s competitiveness and the potential for “rent-seeking” behavior.

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Analyzing the Slowdown in India’s Core Sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Core Sector

Mains level: Read the attached story

Central Idea

  • India’s eight core sectors experienced a significant slowdown, growing by 7.8% in November, down from 12% in October.

About Core Industries in India

  • The main or key industries constitute the core sectors of an economy.
  • In India, eight sectors are considered the core sectors.
  • These sectors are in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

About Index of Eight Core Industries

  • The monthly Index of Eight Core Industries (ICI) is a production volume index.
  • ICI measures the collective and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity.
  • Before the 2004-05 series six core industries namely Coal, Cement, Finished Steel, Electricity, Crude petroleum and Refinery products constituted the index basket.
  • Two more industries i.e. Fertilizer and Natural Gas were added to the index basket in the 2004-05 series. The ICI series with base 2011-12 will continue to have eight core industries.

The components covered in these eight industries for compilation of the index are as follows:

  1. Coal – Coal Production excluding Coking coal.
  2. Crude Oil – Total Crude Oil Production.
  3. Natural Gas – Total Natural Gas Production.
  4. Refinery Products – Total Refinery Production (in terms of Crude Throughput).
  5. Fertilizer – Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).
  6. Steel – Production of Alloy and Non-Alloy Steel only.
  7. Cement – Production of Large Plants and Mini Plants.
  8. Electricity – Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.

Recent data: Sector-Wise Growth Details

  • Decline in ICI: The ICI witnessed a 3.34% drop from October, marking its lowest since March 2023.
  • Sector-Specific Trends: Notably, only refinery products and coal showed month-on-month growth, with significant year-on-year increases.
  • Steel Production: Growth in steel production hit a 13-month low at 9.1%.
  • Crude Oil and Fertilizer: Crude oil saw a contraction, while fertilizer production growth decelerated.
  • Natural Gas and Electricity: Both natural gas output and electricity generation growth slowed down considerably in November.

Comparative Analysis with Previous Year

  • Year-on-Year Comparison: The core sectors had a 5.7% growth in November 2022.
  • Influence of Base Effects: Last year’s high growth in certain sectors like cement significantly influenced this year’s comparative figures.

Economic Insights and Projections

  • Bank of Baroda’s Perspective: The slowdown in fertilizer growth aligns with the end of the rabi sowing season, as per the bank’s chief economist.
  • IIP Forecast: The core sectors are expected to contribute to an IIP growth of 7%-8%.
  • Economists’ View: Experts predict a continued slowdown in core sector growth due to strong base effects from the previous fiscal year.

Future Expectations and Challenges

  • India Ratings and Research Predictions: A slowdown in core sector growth is anticipated in the coming months, influenced by the strong base effect.
  • Broader Economic Impact: This slowdown is indicative of larger economic challenges, potentially affecting future policy and market expectations.

Conclusion

  • Economic Resilience Test: The trends in India’s core sectors underscore the challenges in sustaining growth amid diverse economic conditions.
  • Need for Strategic Economic Planning: Addressing these slowdowns will require astute economic planning and possibly new strategies to boost growth in these key sectors.

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[pib] RAMP Programme

Note4Students

From UPSC perspective, the following things are important :

Prelims level: RAMP Programme

Mains level: NA

Central Idea

  • Union Minister for MSME launched three sub-schemes under the RAMP (Reforms and Acceleration in MSME Performance) programme.

About RAMP Programme

Details
About World Bank assisted Central Sector Scheme.
Launch FY 2022-23
Supported By Ministry of Micro, Small and Medium Enterprises (MoMSME), Government of India.
Primary Aim – Improve access to market and credit for MSMEs.

– Strengthen institutions and governance.

– Enhance Centre-State linkages and partnerships.

– Address delayed payments and promote greening of MSMEs.

Key Components – Preparation of Strategic Investment Plans (SIPs) by states/UTs.

– Apex National MSME Council for monitoring and policy overview.

Details of the Launched Schemes

MSME Green Investment and Financing for Transformation Scheme (MSME GIFT Scheme) MSE Scheme for Promotion and Investment in Circular Economy (MSE SPICE Scheme) MSE Scheme on Online Dispute Resolution for Delayed Payments
Objective To assist MSMEs in adopting green technology. The government’s first scheme to support circular economy projects in the MSME sector. Combines legal support with IT tools and Artificial Intelligence to address delayed payments issues.
Support Mechanisms Offers interest subvention and credit guarantee support. Aims to achieve zero emissions by 2070 through credit subsidy. Focused on aiding Micro and Small Enterprises.
Unique Features – Encourages eco-friendly practices in MSMEs.

– Financial incentives for green technology adoption.

– Promotes sustainable and eco-friendly business models.

– Supports long-term environmental goals.

– Innovative use of technology for dispute resolution.

– Aims to streamline payment processes and reduce conflicts.

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SC affirms “Group of Companies’ Doctrine

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Group of Companies Doctrine

Mains level: NA

Central Idea

  • The Supreme Court has issued a landmark ruling, expanding the scope of arbitration agreements to include non-signatories under specific conditions.
  • This ruling centers on the “group of companies” doctrine within the framework of arbitration agreements.

‘Group of Companies’ Doctrine

Details
Essence Non-signatory entities in a corporate group can be bound by an arbitration agreement if part of the same group as a signatory.
Basis on Mutual Intent Relies on the mutual intention to bind both signatories and non-signatory group members.
Arbitration as a Tool Offers an alternative to court litigation, with enforceable decisions by neutral arbitrators.
Root in International Jurisprudence Based more on international arbitration practices than domestic law.
Indian Legal Precedent Established by Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. case (2013).
Criteria for Application Set by the Indian Supreme Court, includes mutual intent, relationship between entities, common subject matter, transaction nature, and contract performance.
Objective Aims to prevent dispute fragmentation in complex, multi-party transactions.
Recent Supreme Court Ruling Clarified conditions under which non-signatories can be bound by arbitration agreements, focusing on legal relationships and demonstrated intentions.

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Leniency Plus Norms to curb Cartelisation

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Leniency Plus Norms

Mains level: NA

Central Idea

  • The Competition Commission of India (CCI) has unveiled a draft of revised lesser penalty regulations, introducing a groundbreaking “Leniency Plus” Norms and shedding light on its strategy for combating cartels.

About Competition Commission of India (CCI)

  • The CCI is the chief national competition regulator in India.
  • It is a statutory body within the Ministry of Corporate Affairs.
  • It is responsible for enforcing The Competition Act, 2002 in order to promote competition and prevent activities that have an appreciable adverse effect on competition in India.

Understanding “Leniency Plus”

  • Existing Leniency Program: Under the current Competition Act 2002, a leniency program allows companies to receive partial immunity from penalties if they provide substantial information about their involvement in a cartel. This aids competition authorities in uncovering secret cartels and obtaining insider evidence.
  • Additional Reduction in Penalty: In the “Leniency Plus” framework, a cartel member cooperating with CCI for leniency can disclose the existence of another unrelated cartel during the original leniency proceedings. In return, they receive an additional reduction in penalties.
  • Incentivizing Disclosure: “Leniency Plus” serves as a proactive antitrust enforcement strategy, encouraging companies already under investigation for one cartel to report other undisclosed cartels, thus promoting transparency.

Legal foundation

  • Legal basis: The “Leniency Plus” regime was incorporated into the Competition (Amendment) Act 2023, which received Presidential approval in April of the same year.
  • Global Adoption: The concept of “Leniency Plus” is not new, as it is already recognized and practised in jurisdictions like the UK, US, Singapore, and Brazil.
  • Encouraging Disclosure: One of the key aspects of these regulations is their encouragement for companies already under investigation for one cartel to report other undisclosed cartels to the competition regulator.

Tap to read more about Cartelization!

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Government must handhold semi-conductor industry

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Semi-conductors

Mains level: semi-conductor industry, potential, initiatives challenges and way forward

What’s the news?

  • Moody’s report has brought to light a critical factor that could disrupt India’s semiconductor aspirations: climate change.

Central idea

  • In December 2021, the Indian government launched the Semicon India Programme, allocating a substantial budget of Rs 76,000 crore for the development of a domestic semiconductor manufacturing ecosystem. While this initiative aimed to position India as a prominent player in the global semiconductor market, it faces multifaceted challenges, as highlighted in a recent report by Moody’s, a global rating firm.

Challenges highlighted in the Moody’s report

  • Climate Change Risks: The report points out that climate change can lead to damage to manufacturing facilities, disruptions in supply chains, and substantial financial losses in the semiconductor industry, potentially deterring investments.
  • Environmental Footprint: The semiconductor industry’s substantial environmental footprint is a challenge, with chip fabrication plants consuming large amounts of water, generating hazardous waste, and contributing significantly to greenhouse gas emissions.
  • Competitive Landscape: India’s emerging semiconductor sector faces competition from established global players who are already taking steps towards sustainability, making it essential for Indian semiconductor units to adopt sustainable practices to remain competitive.

The Significance of Semiconductors

  • Technological Advancement: Semiconductors are the bedrock of technological progress, enabling innovations across industries. They underpin the development of advanced electronic devices, leading to continuous improvements in efficiency, performance, and functionality.
  • Information Processing: Semiconductors power the microprocessors and memory chips found in computers, smartphones, and digital gadgets. This processing capacity drives data analysis, artificial intelligence, and complex computations.
  • Consumer Electronics: Nearly all consumer electronic devices, from televisions to household appliances, incorporate semiconductors. These components enhance functionality, making these devices more user-friendly and efficient.
  • Clean Energy: Semiconductors are vital for renewable energy sources. They enable efficient energy conversion and management in solar panels, wind turbines, and energy storage systems, promoting clean and sustainable energy solutions.
  • Healthcare Revolution: In the healthcare sector, semiconductors are crucial for medical imaging, diagnostic equipment, and wearable health monitoring devices. They empower healthcare professionals with accurate data for improved patient care.
  • National Security: Semiconductors are indispensable for defense and security applications, including radar systems, encryption technology, and surveillance equipment. They ensure the reliability and security of vital systems.
  • Space Exploration: Semiconductors are vital for space missions and satellite technology. They enable data collection, communication with Earth, and the operation of instruments, advancing humanity’s understanding of the cosmos.
  • Environmental Monitoring: Semiconductors are used in environmental monitoring systems, aiding efforts to assess and mitigate environmental issues such as air and water quality, climate change, and pollution.

Industry Initiatives Toward Sustainability

  • Taiwan’s Semiconductor Manufacturing Company (TSMC): TSMC, one of the world’s largest chip manufacturers and a key supplier to tech giants like Apple, has taken a significant step by pledging to achieve net-zero emissions by 2050. This commitment reflects a proactive approach to reducing the environmental impact of semiconductor manufacturing.
  • Samsung and Intel: The article also notes that companies like Samsung and Intel, along with several European semiconductor firms, have reportedly started conducting greenhouse gas (GHG) audits. These audits are essential for understanding and quantifying the industry’s carbon footprint, with the goal of identifying areas for improvement.

India’s Greenfield Advantage

  • Clean Slate: India’s semiconductor industry has the advantage of starting from a relatively clean slate. Unlike established semiconductor hubs that may have legacy issues, India’s greenfield centers can begin their operations with a fresh perspective and without the burden of historical environmental challenges.
  • Learning Opportunity: These greenfield centers in India can learn from the experiences of semiconductor companies in other parts of the world. They have the opportunity to incorporate global best practices right from the outset, making sustainability and environmental responsibility integral to their operations.
  • Smart City Programme: Many of India’s semiconductor hubs are planned as part of the government’s Smart City Programme. This planning approach involves creating modern, sustainable urban environments. As a result, these townships are more likely to incorporate eco-friendly and climate-resilient infrastructure and drainage systems.
  • Preventing Disruptions: The greenfield centers should prioritize strategies to prevent disruptions during extreme rainfall events. This proactive approach is important, considering the potential impacts of climate change, which can lead to increased rainfall and extreme weather events.

Way forward

  • Learning from Global Best Practices: By learning from the experiences of established global players and incorporating best practices from the outset, Indian semiconductor units can enhance their sustainability quotient.
  • Regional Considerations: The government’s vision of establishing Dholera in Ahmedabad as a chip-making hub should be attuned to regional climate factors. Climate change is expected to exacerbate heat-related stresses in the region, making it crucial to factor in climate-resilient infrastructure.
  • Government Intervention: In light of Moody’s report, it is evident that the government must play a pivotal role in supporting the semiconductor industry. This includes investment in climate-resilient infrastructure, providing guidance to the industry, and encouraging semiconductor units to adopt sustainable practices.

Conclusion

  • The Semicon India Programme holds the potential to propel India into the ranks of global semiconductor manufacturing leaders. However, this ambitious endeavor faces significant challenges, with climate change posing a formidable threat to its success. By taking proactive measures, India can navigate the treacherous waters of climate change and move closer to realizing its dream of becoming a chip-manufacturing hub.

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Manufacturing PMI eased to 5-month low

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Purchasing Managers' Index (PMI)

Mains level: Not Much

Central Idea

  • India’s manufacturing sector experienced a slowdown in September, reaching a five-month low, according to the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI).
  • The PMI eased to 57.5 from August’s 58.6. A reading of 50 reflects no change in activity levels.

Purchasing Managers’ Index (PMI)

  • PMI is an indicator of business activity — both in the manufacturing and services sectors.
  • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
  • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
  • The PMI is compiled by IHS Markit based on responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

How is the PMI derived?

  • The PMI is derived from a series of qualitative questions.
  • Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

How does one read the PMI?

  • A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
  • Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
  • If the figure is higher than the previous month’s then the economy is expanding at a faster rate.
  • If it is lower than the previous month then it is growing at a lower rate.

Analysis and Outlook

  • Mild Slowdown: The manufacturing industry in India showed mild signs of a slowdown in September, primarily due to a softer increase in new orders, which tempered production growth.
  • Positive Outlook: Despite the slowdown, both demand and output saw significant improvements, and manufacturers maintained a strongly positive outlook for production.
  • Job Creation and Input Stocks: Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks, indicating a favourable trajectory for the Indian manufacturing industry.
  • Concerns: However, the solid increase in output charges, despite easing cost pressures, could limit sales in the coming months, prompting caution.

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Purchasing Managers’ Index (PMI) reaches 31-month high

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Purchasing Managers' Index (PMI)

Mains level: NA

pmi manager

Central Idea

  • Surge in PMI to 31-month high: The S&P Global India Manufacturing PMI soared to 58.7 in May, the highest level in 31 months.

 

Service Sector

The service sector, also known as the tertiary sector, includes a wide range of economic activities that are focused on providing intangible goods and services to customers.

Some examples of activities that fall under the service sector include:

  1. Hospitality and tourism: This includes activities such as hotels, restaurants, travel agencies, and tour operators.
  2. Retail and wholesale trade: This includes businesses that buy and sell goods, such as supermarkets, department stores, and online retailers.
  3. Financial services: This includes banks, insurance companies, and investment firms.
  4. Professional and business services: This includes activities such as legal services, accounting, consulting, and advertising.
  5. Information and communication technology: This includes activities such as software development, telecommunications, and data processing.
  6. Healthcare and social assistance: This includes activities such as hospitals, clinics, nursing homes, and social services.
  7. Education and training: This includes activities such as schools, colleges, universities, and vocational training.
  8. Transportation and logistics: This includes activities such as shipping, warehousing, and distribution.

Purchasing Managers’ Index (PMI)

  • PMI is an indicator of business activity — both in the manufacturing and services sectors.
  • The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.
  • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
  • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.

How is the PMI derived?

  • The PMI is derived from a series of qualitative questions.
  • Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

How does one read the PMI?

  • A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
  • Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
  • If the figure is higher than the previous month’s then the economy is expanding at a faster rate. If it is lower than the previous month then it is growing at a lower rate.

Key insights of recent trend

  • Fastest factory order growth: Factory orders rose at the fastest pace since January 2021.
  • Unprecedented accumulation of inputs: Producers accumulated inputs at an unprecedented pace due to lower costs.
  • Improvement in operating conditions: The index reflects a substantial improvement in operating conditions, with a significant increase from 57.2 in April.
  • Strong growth in order books and exports: Order books grew for the 23rd consecutive month, supported by a rise in export deals.
  • Highest output levels in 28 months: Output levels reached the highest point in 28 months.
  • Increased hiring: Pressure on capacities led firms to increase hiring, reaching a six-month high.

Reasons behind this rise

  • Rise in selling prices: Producers raised selling prices at a solid and quicker rate in May, the highest in a year.
  • Mild input costs but adjusted charges: Input costs remained historically mild, but producers adjusted their charges due to sustained cost increases and a supportive demand environment.
  • Improved business confidence: Business confidence about growth improved, reaching a five-month high.
  • Public faith in economy: Factors such as publicity and demand resilience contributed to the optimistic outlook.

 

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Crisis Gripping Surat’s Diamond Industry

Note4Students

From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: Diamond Industry in India

diamond

Central Idea

  • Surat, acclaimed as India’s diamond city, is grappling with a distressing upheaval in its diamond industry. Job losses and tragic suicides have plagued the once-thriving sector.
  • This article delves into the origins of the crisis and its complex implications.

Surat’s Diamond Dominance

  • Economic Hub: Surat, located in Gujarat, is renowned for processing 90% of the world’s diamonds, with over 6,000 units cutting and polishing rough gems sourced globally.
  • Employment Powerhouse: Employing more than a million craftsmen and workers, the diamond industry contributes significantly to India’s economy, generating an estimated annual revenue of Rs1.6 trillion or more.
  • Exports Significance: Cut and polished diamonds constitute 65% of India’s gem and jewellery exports, amounting to Rs1.76 trillion in 2022-23.

Dark Clouds over Surat

  • Tragedy Strikes: Amidst the turmoil, nine individuals tied to the diamond industry have tragically taken their own lives. Over 20,000 workers have lost their jobs as the sector grapples with a multifaceted crisis.
  • Diminished Earnings: Many workers have experienced wage reductions of up to 30% due to shortened working hours, fewer workdays, and unpaid leaves during the summer, extending up to a month for some.
  • Gone Bonuses: The customary lavish Diwali bonuses, once a source of joy for diamond industry workers, have become a distant memory.

Unraveling the Factors

  • Sluggish Demand: Global consumer spending cuts due to high interest rates in the US and Europe and a slowing Chinese economy have contributed to a demand downturn.
  • Offtake Plunge: Despite exports totalling Rs1.76 trillion in 2022-23 (marginally lower than the previous year), global diamond demand plummeted by almost 30% within three months.
  • Geopolitical Impacts: With Russia being a significant source of rough diamonds (around 35% of supply), political tensions such as the Ukraine conflict have led to restrictions on Russian diamonds. Sanctions on major diamond miner Alrosa have disrupted the supply chain.
  • Lab-Grown Rivalry: The emergence of lab-grown diamonds, replicated under lab conditions and cheaper than natural counterparts, poses a significant challenge. These synthetic gems are becoming more popular and are 20% cheaper than natural diamonds of the same size.

Conclusion

  • Surat’s diamond industry, once a beacon of prosperity, finds itself at a crossroads.
  • The convergence of economic shifts, geopolitical dynamics, and technological advancements has disrupted its foundation.
  • As Surat navigates this tumultuous terrain, a resilient and adaptable strategy is essential to ensure the industry’s longevity and viability in a changing world of diamonds.

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A ‘fab’ way to conduct India-Japan tech diplomacy

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Semiconductor and its applications

Mains level: India-Japan semiconductor collaboration and its significance

What’s the news?

  • In July 2023, India and Japan announced a landmark collaboration aimed at bolstering the semiconductor sector’s resilience and jointly developing the semiconductor ecosystem.

Central idea

  • India and Japan’s pioneering collaboration aims to fortify their semiconductor industries and drive joint innovation in semiconductor design, manufacturing, equipment research, supply chain resilience, and talent development. This strategic partnership signifies a noteworthy advancement in both government-to-government and industry-to-industry engagements.

What are semiconductors?

  • Semiconductors are a class of materials that exhibit the unique property of electrical conductivity, lying between conductors and insulators.
  • Unlike conductors, which allow electricity to flow freely through them, and insulators, which do not conduct electricity at all, semiconductors have an intermediate level of electrical conductivity.

Semiconductor fabrication

  • Semiconductor fabrication, also known as semiconductor manufacturing or semiconductor processing, refers to the intricate process of creating semiconductor devices, such as integrated circuits (ICs), microchips, and other electronic components.
  • These devices are the building blocks of modern electronics and play a crucial role in various technologies, including computers, smartphones, televisions, and many other electronic devices.

The India-Japan Semiconductor Collaboration and a Strategic Policy Alignment

  • Common Vision and Agreements:
    • India’s Make in India and Japan’s Society 5.0 visions converge in the pursuit of self-reliance and innovation.
    • Bilateral agreements have been signed for technology transfer, cooperative semiconductor research, and reciprocal trade in related products.
  • Industry Leadership:
    • Japan’s advanced semiconductor industry’s global prominence complements India’s growing IT sector and rising demand for semiconductors across industries.
    • Their complementary strengths lay the groundwork for a mutually beneficial collaboration.
  • Addressing Challenges:
    • Geopolitical tensions and supply chain disruptions in the Indo-Pacific region highlight the need for diversified semiconductor supply chains and international collaboration.
    • Joint research efforts combine resources and expertise to address complex semiconductor design, manufacturing, and material challenges.
  • Human Resource Development:
    • Skill exchange programs, workshops, and training initiatives underline the commitment to cultivating skilled professionals.
    • The emphasis is on preparing the workforce for the evolving semiconductor landscape.

What are the challenges?

  • Technological Challenges:
    • Semiconductor Miniaturization: The challenge of creating smaller and more powerful semiconductor components to meet the increasing demand for compact and efficient devices
    • AI Integration: Integrating artificial intelligence into various applications requires specialized semiconductors that can handle complex AI algorithms efficiently. Developing such chips is challenging due to the need for high computational power and energy efficiency to accommodate AI workloads effectively.
    • Quantum Computing: Quantum computing, a cutting-edge technology, relies on quantum bits (qubits) for enhanced computational capabilities. Developing stable and reliable qubits is a challenge due to the delicate nature of quantum states and the need for advanced error correction mechanisms.
  • Supply Chain Resilience:
    • Disruptions in Semiconductor Supply Chains: The article highlights disruptions caused by supply chain vulnerabilities due to factors such as geopolitical tensions and natural disasters. Collaborations between nations like India and Japan aim to strengthen semiconductor supply chains to minimize such vulnerabilities.
  • Geopolitical Uncertainties:
    • Tensions in the Indo-Pacific Region: Geopolitical tensions in the Indo-Pacific region impact trade, technology transfer, and collaborations. The partnership between India and Japan reflects the need for like-minded countries to work together amidst such uncertainties.
  • Talent Shortage:
    • Shortage of Skilled Professionals: The article does not explicitly mention a shortage of skilled professionals in the semiconductor industry. However, the skill exchange programs and training mentioned in the article suggest that developing a skilled workforce is a priority for the partnership.

Indo-US Collaboration and the Emerging Landscape

  • Technology Partnership: The technology partnership between India and the United States encompasses investment, innovation, and workforce development. This collaboration underscores both countries’ commitment to advancing their semiconductor ecosystems in a strategic and comprehensive manner.
  • Academic Involvement: India is set to sign an agreement with Georgia Tech University, demonstrating a focus on academia-industry collaboration to foster semiconductor research and talent development.
  • Private Sector Investments: The partnership is reinforced by specific investments from Micron Technology and Applied Materials to establish semiconductor manufacturing units and research centers, signaling tangible private sector involvement.
  • Global Implications: The collaboration reflects global recognition of India’s semiconductor capabilities by the United States, positioning India as a significant player in semiconductor development on the global stage.
  • Supply Chain Resilience: The partnership’s emphasis on investment and innovation aligns with the broader goal of diversifying semiconductor supply chains, reducing dependencies, and enhancing resilience.
  • Complementary Collaborations: The collaboration complements India’s partnership with Japan, creating a multidimensional approach that addresses diverse aspects of the semiconductor landscape.

Conclusion

  • The India-Japan semiconductor partnership signifies a paradigm shift in global technology alliances. This collaboration not only holds the potential to reshape the semiconductor landscape but also contributes to regional stability and innovation. As India and Japan march forward hand in hand, their combined efforts promise to shape a future characterized by cutting-edge technologies and a shared resolve to achieve new frontiers of technological brilliance.

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Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

Northeast India’s Struggle with Special Economic Zones (SEZs)

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Special Economic Zones

Mains level: Read the attached story

sez

Central Idea

  • The Northeast region’s journey with SEZs has been marked by challenges and missed opportunities.
  • Despite the approval of five SEZs in the region between 2007 and 2021, none have become operational.

Overview of Unoperational SEZs in NE

  • Unrealized IT SEZs: The report underscores the delay in establishing IT SEZs in Manipur and Sikkim, both of which were approved in 2013 and 2021 respectively.
  • Nagaland’s Unfulfilled Promise: Despite approvals dating back to 2007-9, the SEZs in Nagaland remain dormant, representing a missed opportunity for economic growth.
  • Pending Agro-Products Zone: The agro-products zone approved in Tripura in 2019 is yet to materialize, indicating the need for coordinated efforts to overcome hurdles.

What are SEZs?

  • Distinctive Zones: A Special Economic Zone is an area characterized by distinct trade and business regulations set apart from the rest of the country.
  • Economic Objectives: SEZs aim to enhance trade balance, encourage investments, generate employment, facilitate efficient administration, and amplify economic growth.
  • Favorable Financial Policies: SEZs offer tailored financial policies that encompass investment, taxation, customs, trading, quotas, and labor regulations.
  • Tax Incentives: Businesses within SEZs may benefit from tax holidays, a designated period of reduced taxation upon establishment within the zone.

Inception of SEZs in India

  • EPZs Pioneering: India embraced the concept of Export Processing Zones (EPZs) with Asia’s inaugural EPZ established in Kandla in 1965.
  • Genesis: India’s SEZ policy was inaugurated on April 1, 2000, with the intent of bolstering foreign investments and creating a globally competitive environment for exports.
  • Objectives: The policy aimed to boost exports, level the playing field for domestic enterprises, and provide a comprehensive legal framework for SEZ development and operation.
  • Regulatory Framework: The SEZ Act of 2005 furnished the regulatory umbrella covering crucial aspects of SEZs and the units operating within them.

Distinct Characteristics of SEZs

  • Diverse Zone Types: SEZs encompass various categories such as free-trade zones (FTZs), export processing zones (EPZs), industrial estates (IEs), free ports, and more.
  • Enhanced Foreign Investment: SEZs attract foreign direct investment (FDI) by multinational corporations (MNCs) and international businesses, spurring economic growth

Setting up SEZs

  • Open to All: Any private, public, joint sector, state government, or its agencies can establish an SEZ.
  • Foreign Participation: Foreign agencies are also permitted to establish SEZs in India.
  • States Role: State government representatives within inter-ministerial committees on private SEZs offer consultations on proposals.
  • Infrastructure Provision: State governments must ensure the provision of essential resources like water and electricity before SEZ proposals are recommended.
  • Labor Laws: SEZs adhere to normal labor laws, enforced by respective state governments, with a focus on simplification of procedures and introducing single-window clearance.

Benefits offered

  • Economic Boost: SEZs aim to streamline business processes, improve infrastructure, and offer tax benefits, propelling FDI and export growth.
  • Trade Growth: SEZs contribute significantly to India’s exports by providing a conducive environment for production and export-oriented activities.
  • Investor Attraction: The relaxation of regulations and access to advanced infrastructure in SEZs entices international investors seeking to capitalize on export-driven opportunities.

Conclusion

  • The parliamentary report serves as a clarion call to address the stagnation of SEZs in Northeast India and transform the challenges into opportunities.
  • It underscores the importance of crafting a fresh industrial development scheme that is responsive to the region’s dynamics.
  • By leveraging the unique strengths of the Northeast, the government has the chance to not only rectify the current situation but also contribute to the inclusive economic growth of the entire nation.

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Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

Learning from the CHIPS Act of the U.S.

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Semiconductor policy and related updates

Mains level: India's Semiconductor Policy, CHIPS ACT and lessons for India

What’s the news?

  • The United States’ CHIPS Act, which authorizes substantial funding over five years to boost its semiconductor industry, celebrates its one-year anniversary.

Central idea

  • Industrial policies have become pivotal tools for nations to secure competitiveness, innovation, and national security. The CHIPS Act exemplifies such an endeavor, allocating $52.7 billion to bolster the American semiconductor sector. While not a blueprint, this Act offers essential lessons for India’s semiconductor strategy.

What is the CHIPS Act?

  • The CHIPS Act, or the Creating Helpful Incentives to Produce Semiconductors for America Act, is a United States federal law that was enacted in 2022.
  • It aims to address various challenges and concerns related to the semiconductor industry in the United States.
  • The CHIPS Act was introduced to boost American competitiveness, innovation, and national security in the semiconductor sector. It recognizes the strategic importance of semiconductor manufacturing and technology leadership for economic growth and national defense.

Notable features of the CHIPS Act

  • Significant Funding: The CHIPS Act authorizes $52.7 billion over five years to boost American competitiveness, innovation, and national security in the semiconductor industry.
  • Cooperation Across Government: The Act involves cooperation and coordination between multiple government arms, with separate funds allocated to different departments, including the Department of Commerce, the Department of Defense, the Department of State, and the National Science Foundation.
  • Lead Agency: The Department of Commerce is designated as the lead agency responsible for administering the $50 billion CHIPS for America Fund, which focuses on accelerating semiconductor manufacturing and research within the United States.
  • National Semiconductor Technology Center (NSTC): A nodal agency, the NSTC, is created to collaborate with industry and educational institutions to develop a competent semiconductor engineering workforce and promote growth in the field.
  • Investment Principals and Financial Structuring Directors: The CHIPS Act establishes a CHIPS Program Office (CPO) responsible for assessing project viability and attracting private sector investments. Investment Principals and Financial Structuring Directors are hired to catalyze private sector involvement.
  • Future Research Focus: The Act doesn’t solely focus on immediate manufacturing needs. It allocates funding, such as the $11 billion investment in future research, which includes areas like advanced packaging techniques, to ensure the country’s competitiveness in the long term.
  • Industrial Policy Template: The CHIPS Act provides a valuable template for effective industrial policy in the semiconductor industry, showcasing institutionalized administrative capacity that supports continuity beyond changes in government.

India’s semiconductor policy

  • MeitY’s Leadership: MeitY plays a pivotal role in formulating and executing India’s semiconductor strategy. The ministry’s oversight spans various aspects, including manufacturing, assembly, design, and compound semiconductors.
  • India Semiconductor Mission (ISM): Within MeitY, the India Semiconductor Mission (ISM) has been established to focus on manufacturing, assembly, and displays. ISM aims to foster indigenous production capabilities by collaborating with industry and academic institutions.
  • C-DAC for Chip Design: The Centre for Development of Advanced Computing (C-DAC), another MeitY initiative, focuses on chip design. By investing in research and development, C-DAC aims to enhance India’s expertise in chip design and innovation.
  • Chips2 Startup (C2S) Program: MeitY’s C2S program collaborates with universities and colleges to cultivate a skilled semiconductor engineering workforce. This initiative emphasizes the importance of industry-aligned training programs to cater to the sector’s specific needs.
  • Manufacturing and Export Incentives: To attract investment and promote domestic manufacturing, India offers incentives such as the Production Linked Incentive (PLI) scheme. This encourages semiconductor companies to establish manufacturing facilities in India.

Lessons for India

  • Whole-of-Government Approach: India’s semiconductor strategy should adopt a whole-of-government approach, similar to the CHIPS Act, to ensure coordination and continuity across different government departments and agencies involved in semiconductor-related initiatives.
  • Collaboration and Coordination: Like the CHIPS Act, India should emphasize collaboration between industry, academia, and government to build a skilled semiconductor workforce and ensure alignment between education and industry needs.
  • Certification of Training Programs: Instead of directly running training programs, India should focus on certifying quality training programs offered by universities and private training institutes to ensure a competent workforce in the semiconductor sector.
  • Long-Term Vision: India’s semiconductor strategy should not only address immediate manufacturing needs but also outline a long-term vision for sustained growth and leadership in the industry.
  • Public-Private Collaboration: India should encourage public-private collaboration to attract private sector investments and leverage the expertise of both government and industry for semiconductor development.
  • Flexibility in Policy Implementation: India’s semiconductor strategy should be adaptable, allowing for adjustments based on changing industry trends and challenges while aligning with the nation’s goals.

Conclusion

  • The CHIPS Act serves as a template for effective industrial policy in the semiconductor sector. By analyzing its strengths and weaknesses, India can learn valuable lessons for structuring its own strategy to achieve competitiveness, innovation, and national security in semiconductors. Effective execution and a comprehensive approach are key takeaways for India’s policymakers.

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The new restriction on Personal Computers/laptop imports: Why the move, and its potential impact

Note4Students

From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: India's electronics and IT hardware production capabilities, challenges and measures

What’s the news?

  • The central government has placed restrictions on the import of laptops, tablets, and computers with immediate effect. As per the notification, the import would be allowed under a valid license for restricted imports.

Central Idea

  • India has imposed restrictions on the import of personal computers, laptops, and other IT hardware from China to promote domestic manufacturing and reduce dependence on Chinese imports. This move is part of the government’s efforts to boost the electronics sector and strengthen India’s self-reliance in the production of IT hardware.

What does the notification for the restriction on imports state?

  • Restricted Categories: The notification restricts the import of personal computers, laptops, palmtops, automatic data processing machines, microcomputers and processors, and large or mainframe computers falling under the HSN code 8471.
  • Import Against a Valid License: Imports of laptops, tablets, all-in-one personal computers, and ultra-small form factor computers and servers under HSN 8741 will be allowed only against a valid license for restricted imports.
  • Exemption for Research and Development: The government has granted exemption from import licenses for imports up to 20 items per consignment used for research and development, testing, benchmarking, evaluation, repair and re-export, and product development purposes. However, these imports can only be used for the stated purposes and not for sale.
  • Exemption for Repair and Return: The license for restricted imports is not required for the repair and return of goods that were repaired abroad, as per the Foreign Trade Policy.

China’s Dominance in IT Hardware Imports

  • Increase in Electronic Goods Imports:
  • India has witnessed a significant increase in imports of electronic goods and laptops/computers in recent years.
  • During the April-June quarter, the import of electronic goods surged to $6.96 billion, accounting for 4–7 percent of the overall imports.
  • Dominance in the Personal Computers Category:
  • Among the seven categories of restricted imports, China holds a substantial share in the personal computer segment, which includes laptops and palmtops.
  • In the April-May period, imports of personal computers from China amounted to $558.36 million, representing roughly 70–80 percent of India’s total imports in this category.
  • Surge in imports from China:
  • While there was a decline in imports from China in the previous financial year, it is crucial to address the sharp surge in imports in the two preceding years (2021–22 and 2020–21).
  • In 2021–22, imports of personal computers and laptops from China saw a year-on-year increase of 51.5 percent, amounting to $5.34 billion.
  • Similarly, in 2020–21, there was a significant year-on-year increase of 44.7 percent, with imports totaling $3.52 billion.

Reasons behind the restrictions

  • Boosting Domestic Production: India aims to strengthen its domestic production capabilities in the electronics sector. By restricting imports, the government wants to push companies to manufacture these goods locally in India.
  • Reducing Reliance on China: India has seen a significant increase in imports of electronic goods and laptops/computers from China in recent years. By imposing restrictions, India intends to reduce its reliance on Chinese imports and diversify its sources of electronic products.
  • Supporting the PLI Scheme: The move is seen as a direct boost to the Center’s production-linked incentive (PLI) scheme for IT hardware. The restrictions aim to encourage companies to participate in the scheme and invest in local production.
  • Addressing Trade Imbalance: India has faced a trade imbalance in the electronics sector with China. By limiting imports, India aims to address this imbalance and potentially improve its trade position.
  • Strengthening the Domestic Electronics Industry: The restriction is part of India’s broader strategy to develop and strengthen its electronics manufacturing sector. By promoting domestic production, India seeks to create job opportunities and enhance its industrial capabilities.

Conclusion

  • India’s decision to restrict IT hardware imports from China aims to reduce import reliance on a single country. With the right incentives and measures in place, this restriction could pave the way for a robust and competitive domestic IT hardware industry in India.

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