Economic Development: October 2023 UPSC Current Affairs | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly PDF Download

Periodic Labour Force Survey Annual Report 2022-2023

Context

The 2022-2023 Annual Report of the Periodic Labour Force Survey (PLFS) has been unveiled, highlighting essential indicators related to employment and unemployment. The key findings of the survey are outlined below:

Labour Force Participation Rate (LFPR)

The labour force participation rate (LPR) is a measure of the proportion of a country’s working-age population that is actively engaged in the labour market. 

• An increasing trend in LFPR for persons aged 15 years and above was observed
• In rural areas, LFPR increased from 50.7% in 2017-18 to 60.8% in 2022-23.
• In urban areas, LFPR increased from 47.6% to 50.4% over the same period.
• LFPR for males in India increased from 75.8% in 2017-18 to 78.5% in 2022-23.
• For females, LFPR increased from 23.3% to 37.0% during this time.

Worker Population Ratio (WPR)

The worker-population ratio (WPR) is the ratio of a country’s working population to its population, multiplied by 100. It’s calculated by dividing the total number of workers by the total population.  

• The survey indicates a rising trend in Work Participation Rate (WPR) for individuals aged 15 and above.
• In rural regions, the WPR climbed from 48.1% in 2017-18 to 59.4% in 2022-23.
• Urban areas also experienced an increase in WPR, going from 43.9% to 47.7% during the same period.
• Males in India saw their WPR rise from 71.2% in 2017-18 to 76.0% in 2022-23.
• Similarly, for females, there was an increase in WPR from 22.0% to 35.9% over the specified time frame.

Unemployment Rate (UR) 

The unemployment rate is the percentage of unemployed workers in the total labour force. The labour force includes all people who are employed or unemployed. The unemployment rate is calculated by dividing the number of unemployed people by the total labour force. 

• A decreasing trend in UR for persons aged 15 years and above was observed.
• In rural areas, UR decreased from 5.3% in 2017-18 to 2.4% in 2022-23.
• In urban areas, UR decreased from 7.7% to 5.4% during the same period.
• UR for males in India decreased from 6.1% in 2017-18 to 3.3% in 2022-23.
• For females, UR decreased from 5.6% to 2.9% over this time frame.

World Cotton Day 2023

Why in News?

Recently, the Ministry of Textiles hosted a conference for World Cotton Day (7^th October , 2023) in collaboration with Cotton Corporation of India (CCI) and EU-Resource Efficiency Initiative which discussed best practices and sustainable methods in the cotton value chain.

• Conference led to the Introduction of the "Bale Identification and Traceability System" (BITS) using Blockchain Technology.
• It also led to the launch of the Kasturi Cotton program for quality cotton with traceability.

What is Bale Identification and Traceability System (BITS) and Kasturi Cotton Program?

• Bale Identification and Traceability System (BITS):
  • The BITS is a technological initiative in the cotton industry that utilizes Blockchain Technology to assign unique QR codes to cotton bales.
• Objective:
  • BITS was introduced to ensure that key information about cotton bales, such as their quality, variety, origin, and processing details, is transparent and easily accessible to both domestic and international buyers.
• Traceability:
  • By scanning the QR code, stakeholders, including cotton buyers, textile manufacturers, and others, can trace the entire journey of the cotton bale from its origin to the final product.
• Implementation:
  • BITS is implemented by the Cotton Corporation of India (CCI) in collaboration with other relevant stakeholders such as State Governments.
• Kasturi Cotton Program:
  • The Kasturi Cotton Program is an initiative introduced by the Ministry of Textiles in India to promote the production and availability of premium quality cotton with traceability.
  • TEXPROCIL, in collaboration with CCI on behalf of the Ministry of Textiles, is overseeing the implementation of this program.
• Certified Quality:
  • Kasturi Cotton is not just any cotton; it is certified to meet certain quality standards, which may include fiber length, strength, color, and other characteristics that make it suitable for premium textile products.

What are the Key Facts about Cotton?

• About: Kharif Crop which requires 6 to 8 months to mature.
  • Drought – resistant crops which are ideal for arid climates.
  • Occupies 2.1% of the world’s arable land, meets 27% of the world’s textiles needs.
• Temperature: Between 21-30°C.
• Rainfall: Around 50-100 cm.
• Soil Type: Well-drained black cotton soil (Regur Soil) (E.g. Soil of Deccan Plateau)
• Products: fiber, oil and animal feed.
• Top Cotton Producing Countries: India > China > US
• Top Cotton Producing States in India: Gujarat > Maharashtra > Telangana > Andhra Pradesh > Rajasthan.
• Four cultivated species of cotton: Gossypium arboreum, G.herbaceum, G.hirsutum and G.barbadense.
  • Gossypium arboreum and G.herbaceum are known as old-world cotton or Asiatic cotton.
  • G.hirsutum is also known as American cotton or upland cotton and G.barbadense as Egyptian cotton. These are both new world cotton species.
• Hybrid Cotton: Cotton made by crossing two parent strains that have different genetic characters. Hybrids are often spontaneously and randomly created in nature when open-pollinated plants naturally cross-pollinate with other related varieties.
• Bt Cotton: It is a genetically modified organism or genetically modified pest-resistant variety of cotton.

2023 Nobel Prize in Economic Sciences

News and context

Nobel Prize in Economics 2023 has been awarded to Claudia Goldin. Claudia Goldin’s work has uncovered the key drivers of  gender difference in the labour market. Goldin is individually the first and only the third woman in history to win this honour. 

What are the observations of Claudia Goldin’s research work that has been awarded the Nobel Prize in Economics 2023?

Claudia Goldin collected over 200 years of data from the US for her research work. According to Goldin, women are vastly underrepresented in the global labour market. Women are paid less than men. Claudia Goldin has demonstrated the gender differences in employment rates and earnings. She has provided the explanation for her observations.

1. Women’s Labour Force Participation(LFP) Rate

• What is Goldin’s Observation: The participation of married women decreased with the transition from an agrarian to an industrial society in the early nineteenth century, but then started to increase with the growth of the service sector in the early twentieth century. There is a U-shaped relationship between economic development and women’s Labour Force Participation(LFP).
• Goldin’s Explanation of the observation: According to Goldin, in the agrarian economies, women had a higher Labour Force participation, as women could fulfill both her domestic responsibilities and her duties on the farm. However, industrialisation made it harder for married women to work from home since they were unable to balance the demands of family and work. But with the growth of service sector and rise in women education levels in the 20th century, Labour force participation of women has increased.

2. Earning gap between women and men

What is Goldin’s Observation- Despite modernisation, economic growth and rising proportions of employed women in the twentieth century, there still exits significant gap between the earnings of men and women.
Goldin’s Explanation of the observation: Goldin has attributed the existing gap in the wages of men and Women to three factors-

• Occupational segregation: Women work in stereo typically feminine jobs that are lower paying.
• ”Greedy Jobs” and “Mommy Track“: “Greedy jobs” have massive wage premiums but, in return, require long work hours, networking, late-night meetings, travel. “Mommy track” jobs are less paying & less demanding jobs, which allows taking care of the kids’ school, homework, sports, music lessons, and doctor visits. According to Goldin, in most families, the man is in the greedy job and the woman is on mommy track. This creates a large pay gap between men and women.
• Role of Expectations and Career Choices: Women are expected to play a mother’s role and raise children. Thus their educational decisions and career choices are impacted by the future expectations from them as mothers. Hence, women settle for low paying careers from childhood itself.

3. Marriage Barriers in Employment

• What is Goldin’s observation: By the beginning of the 20th century, while around 20% of women were gainfully employed, the share of married women was only 5%.
• Goldin’s Explanation of the observation: Goldin has attributed this low share of married women participation in the workforce to two factors.
  • “Marriage bars”: the practice of firing and not hiring women once married.
  • ”Long and uninterrupted careers” in the service sector led to the exclusion of married women from the workforce.
• These two factors explain why the average employment level for women increased by so little, despite the massive influx of women into the labour market in the latter half of the century.

4. Role of Contraceptive Pills

• What is Goldin’s observation: Use of easy-to-use contraceptive pills by the end of the 1960s led to an increase in the female labour force participation rate.
• Goldin’s Explanation of the observation: Contraceptive pills allowed women to exercise greater control over childbirth and plan their careers and motherhood. This led to more women studying subjects like law, economics and medicine and entering various fields of employment.

5. Bias in hiring of female candidates

• What is the research- In her work, “Orchestrating Impartiality: The impact of blind auditions on female musicians”, Goldin showed that auditions for symphony orchestras done behind a screen, where the jury cannot see the candidate, resulted in greater hiring and advancement of women.
• What is Goldin’s Explanation: Goldin has attributed the low women labour force participation rate, to lower hiring of women due to the patriarchal bias of the recruiter. The patriarchal bias of the recruiter leaves the deserving women out of the workforce.

What is the significance of the research awarded the Nobel Prize in Economics 2023?

The research of Claudia Goldin has provided significant insights on the status, role and participation of women in the workforce. This has a lot of significance which are mentioned below-

• Making all economic analysis and policy-making gender sensitive- The research of Goldin can be applied in making the Government policies more gender sensitive. It can also be used to design special policies for women employment.
• Provides knowledge about underlying barriers hindering women employment– Goldin’s work has made us aware about various barriers like “marriage bars”, “mommy track”, “greedy jobs” phenomena, which hinders women employment in modern economies. India which is transitioning into a modern economy, must remove these barriers to reap rich economic dividends.
• Effective implementation of birth control Programmes- Goldin’s work has demonstrated how the use of birth control pills gave women the choice and agency to shape their careers. India must promote and effectively implement its Antara programme, to increase the use of oral contraceptive pills.
• Increase in the investment in women education- Goldin has pointed at the role of Women education in propelling economic growth and increasing individual productivity. There is a strong link between the “American Century” and the “Human Capital Century”. Developing countries like India, must also commensurately invest in women education so as to make it the “Indian century“.

What is the application of the research in the Indian context?

• Paradox of Female LFPR in India: With development and education, LFPR has gone upwards in most economies. In India, both economic growth and female educational attainment had increased rapidly between 2004-05 and 2011-12. However, during the same period, Female LFPR in the Indian labour market declined. The trend in FLFPR has not followed the increasing pattern estimated and forecast by Goldin. 
  • Application of Goldin’s research: The accompanying table shows that regardless of the definition, FLFPR estimates for 2022-23 are very close to the 1993-94 estimates, thus confirming the Goldin ‘U’-shaped curve. 
    
• Wage gap in India: For ages 25-64, the gender wage gap is 30%. However, this wage gap does not adjust for education. For all unmarried college degree workers, the wage gap is almost non-existent – only 3% (lower than the USA). For all college educated workers, the wage gap is just 16% (again, lower than in the USA).  

Conclusion

There had always been a widespread prevalence, of the acutely unfounded notion that economic growth alone can automatically reduce gender differences in the labour market. Many developing countries like India, need to study this issue more closely to develop better women centric labour policies. 

Prompt NPA Labeling for Wilful Defaulters

Context

The Reserve Bank of India (RBI) has announced stricter measures against wilful defaulters, aiming to prevent them from accessing additional credit facilities or credit restructuring. 

• The RBI has also barred any lender from extending credit to entities associated with wilful defaulters.
• The headquaters of RBI is located at Mumbai, Maharastra and it's Governor is Shaktikanta Das

Measures taken by RBI

• Timeline for Identification: The RBI has set a timeline of six months, starting from the classification of an account as a non-performing asset (NPA), within which a lender must identify borrowers who should be categorized as wilful defaulters.
• Dissemination of Credit Information: The RBI’s proposed changes include the establishment of a system for sharing credit information about wilful defaulters.
• Identification Process: In cases of wilful default, an “Identification Committee” will examine the situation.
• Criminal Action: Based on the specific circumstances of each case, lenders have the discretion to assess whether criminal action against wilful defaulters is warranted.

Definition of Wilful Default

The RBI defines a wilful default as a situation where a borrower fails to meet repayment obligations despite having the capacity to do so, diverting the loan for purposes other than its intended use, siphoning off funds that are no longer available in other forms, or disposing of assets securing a term loan without informing the lender. 

Rashtriya Gokul Mission

• Rashtriya Gokul Mission comprises of two components namely:
  • The national program for bovine breeding and National mission for bovine productivity.
• Underlying objectives of the Mission:
  • Development and conservation of indigenous breeds in a focused and scientific manner.
  • Undertake breed improvement program for indigenous cattle breeds so as to improve the genetic makeup and increase the stock.
  • Enhance milk production and productivity.
  • Distribute disease free high genetic merit bulls for natural service.

Significant initiatives under Rashtriya Gokul Mission

• Awards for encouraging farmers/breeder societies to rear Indigenous breeds of bovines:
  • Gopal Ratna awards: for farmers maintaining the best herd of Indigenous Breed and practicing best management practices.
  • Kamdhenu awards: for best managed Indigenous herd by Institutions/Trusts/ NGOs/ Gaushalas or best-managed Breeders’ societies.
• Gokul Gram: The Rashtriya Gokul Mission envisages the establishment of integrated cattle development centers, ‘Gokul Grams’ to develop indigenous breeds including up to 40% nondescript breeds (belonging or appearing to belong to no particular class or kind) with objectives to:
  • Promote indigenous cattle rearing and conservation in a scientific manner.
  • Propagate high genetic merit bulls of indigenous breeds.
  • Optimize modern Farm Management practices and promote Common Resource Management.
  • Utilize animal waste in an economical way i.e. Cow Dung, Cow Urine
• National Kamdhenu Breeding Centre: (NKBC) is being established as a Centre of Excellence to develop and conserve Indigenous Breeds in a holistic and scientific manner.
• “E-Pashu Haat”- Nakul Prajnan Bazaar: An e-market portal connecting breeders and farmers, for quality- disease-free bovine germplasm.
• Pashu Sanjivni: An animal wellness program encompassing the provision of animal health cards (‘Nakul Swasthya Patra’) along with UID identification and uploading data on National DataBase.
• Advanced Reproductive Technology: Including Assisted Reproductive Technique- In-vitro Fertilization (IVF)/ Multiple Ovulation Embryo Transfer (MOET) and sex-sorted semen technique to improve the availability of disease-free female bovines.
• National Bovine Genomic Center for Indigenous Breeds (NBGC-IB) will be established for selection of breeding bulls of high genetic merit at a young age using highly precise gene-based technology.

Implementing Agency

• Rashtriya Gokul Mission will be implemented through the “State Implementing Agency (SIA viz Livestock Development Boards).
• State Gauseva Ayogs will be given the mandate to sponsor proposals to the SIA’s (LDB’s) and monitor implementation of the sponsored proposal.
• All Agencies having a role in indigenous cattle development will be the “Participating Agencies” like ICAR, Universities, Colleges, NGO’s, Cooperative Societies and Gaushalas.

Why conservation of Indigenous breeds is the need of the hour?

• Indigenous bovines are robust and resilient and are particularly suited to the climate and environment of their respective breeding tracts and productivity of indigenous breeds is less likely to be impacted by the adversities of climate change.
• The milk of indigenous animals is high in fat and SNF content (The substances in milk other than butterfat and water in the form of casein, lactose, vitamins, and minerals which contribute significantly to the nutritive value of milk).

Goan Cashew Gets GI Tag

Context

The Geographical indication (GI) tag for Goan cashews holds significant implications for the cashew industry in Goa.

Significance of GI Tag for Goan Cashew

• The GI tag ensures that cashews bearing this label are authentic products originating from Goa. This helps consumers distinguish between genuine Goan cashews and those sourced from outside the state, which are often falsely marketed as 'Goan cashews.'
• Goan cashew manufacturers and processors can use the GI tag as a trademark in the international market. This protection helps safeguard the reputation and quality associated with Goan cashews.
• Goa has a long history of cashew cultivation, and the GI tag helps in preserving the cultural and historical legacy of Goan cashews.
• By promoting authentic Goan cashews, the GI tag can potentially boost the demand for these products, benefitting local cashew producers, manufacturers, and the state's economy.

Historical Context of Cashew in Goa

• Cashew was introduced to Goa by the Portuguese in the 16th century. Initially, it was primarily cultivated for afforestation and soil conservation purposes. However, it was not until a century after its introduction that the economic value of cashew nuts became apparent.
• The edible value of cashew nuts was reportedly discovered by Goan prisoners who were exiled to the Portuguese territory of Africa (Mozambique) during Goa's freedom movement in the mid-18th century.
• The first cashew factory in Goa began operations in 1926, and the first consignment of cashew kernels was exported in 1930. Over time, cashew production transitioned from a cottage industry to a large-scale one, driven by demand, particularly from the United States.
• Before Goa's liberation in 1961, the region exported substantial quantities of processed cashew nuts, both locally grown and imported from Portuguese colonies in Africa. On average, around 1500 tonnes of processed cashew nuts were exported to countries like the USA, Japan, Saudi Arabia, and West Germany.
• The cashew processing industry accounted for about 60% of industrial production in Goa by 1961, and it was a significant contributor to foreign trade. Various factors, including favourable import duties, port expenses, lower rents, wages, and salaries, contributed to the industry's growth and success.

Recent Challenges in the Goan Cashew Industry

• In recent years, the Goan cashew industry faced challenges due to the influx of cheaper imported cashews, often falsely labelled as 'Goan cashews' by small traders from other states. These traders did not always meet quality and compliance norms, affecting the reputation of Goan cashews.
• The competition from cheaper cashews, along with higher minimum wages and compliance standards compared to other states, resulted in a decline in sales for traditional Goan cashew processors. The number of processing units in Goa decreased from 40 in 2005 to over 15 at present.
• The GI tag is expected to address some of these issues by ensuring that authentic Goan cashews are protected, promoted, and recognized in the market, both domestically and internationally. It will help in distinguishing Goan cashews from others and potentially boost demand for the region's unique cashew products. Additionally, the government's crackdown on illegal marketing practices is expected to further protect the authenticity of Goan cashews and support the local industry.

Bidenomics

Context

2024 is going to be a massively significant year for the global economy because it will witness elections in some of the biggest and most influential economies. These include India, Russia, the UK, the EU and the US. Together, the GDP of these countries is more than $54 trillion — that’s around 52% of the global GDP in 2023.
However, with just about 12 months left, Biden is facing a stiff challenge from Donald Trump — the man he defeated in 2020. Most opinion polls suggest that President Biden’s approval ratings are at their lowest point.

Why Bidenomics matters

• While electoral reversals are par for the course in any democracy, Biden’s loss could result in another policy shock — both to the US and the global order. That’s because of two reasons.
  • Many of Trump’s policies were radical departures from the established US positions or the global consensus. For instance, under Trump, the US walked out of the Paris agreement on climate change. Similarly, Trump saw US trade deficits as necessarily bad, especially when they were against countries such as China
  • When Biden took charge, he unveiled his own version of a radical shift in economic policies — Bidenomics — that have since attempted to turn the clock back half a century. A Trump victory could lead to several reversals yet again.
• When it comes to Bidenomics, there are two main concerns.One, whether it is working or not. Two, whether enough voters are convinced that Bidenomics is working.
• But none of these factors take away from the significance of Bidenomics.
• Bidenomics is being seen as a blueprint for the kind of change that people want. For instance, in the UK, the Labour Party, which is widely expected to win in 2024, is reportedly taking notes on Biden’s more interventionist approach.
• There are others who are worried that Bidenomics, with its focus on providing subsidies for domestic producers, could be unleashing a global subsidy race where each country does the same and, in the process, increases inefficiency and inequity.

What is the rationale behind Bidenomics?

• In common parlance, Bidenomics is a term that is used to refer to any and every policy choice made by the Biden administration.
• Under Reagan/ Reaganomics, the idea was to provide tax cuts to the businesses in a bid to incentivise economic activity even as the role of the government in the economy was reduced. The hope was that the resultant benefits of lower taxes and faster economic growth will trickle down to the broader economy.
• To some extent this happened. But broadly speaking, over the decades since, this top-down approach made the rich richer without necessarily bringing about as much widespread prosperity as its proponents had promised.
• Biden bluntly stated: “trickle-down economics has never worked. It’s time to grow the economy from the bottom and the middle out.”

What is Bidenomics?

According to the White House, Biden’s economic vision is centred around three key pillars:

• Making smart public investments in America
• Empowering and educating workers to grow the middle class
• Promoting competition to lower costs and help entrepreneurs and small businesses thrive
  • In other words, Bidenomics involves policies that improve US’s physical and digital infrastructure, reduce its trade dependence on rivals such as China, raise the living standards and opportunities available for the middle 40% and the bottom 50% of the US population and, in doing all these things, boost job creation within its borders.
  • To achieve these goals, the Biden administration has tweaked both the tax regime as well as its spending choices. On the one hand, it aimed to raise $737 billion via more and higher taxation, while on the other, it decided to make fresh spending worth $500 billion towards investments in clean energy and in reducing healthcare costs.
  • It has also taken several steps to contain the concentration of economic powers in the hands of the few and tried to empower labour unions to safeguard labour rights.

Did it work?

• As things stand, if one looks at the macro indicators — GDP, unemployment and — inflation the Biden administration seems to have done quite well.
• CHART 1 shows, US economic growth level is just 1.4% below the pre-pandemic trend; in other words, its recovery has been so fast that it has almost caught up with where it would have been had it not been for the Covid pandemic.

• Same holds true for the unemployment rate, which has fallen sharply since Biden took charge and hit a historic low (CHART 2).

• The only, albeit substantial, downside is in terms of inflation , which spiked to its highest levels in four decades in 2022 in the wake of the Russia-Ukraine High energy prices and supply bottlenecks exacerbated the ill-effects of excess money that the government pumped into the economy.

Then why are so many people unhappy with Bidenomics?

There are two broad reasons.

• One has to do with the fact that Bidenomics has not had the kind of improvement in terms of income and wealth inequality that many may have expected. To be sure, it has been just two and a half years.
• The second reason has to do with the ideological disagreement with Bidenomics.
• Given its rationale and its components, the final goal of Bidenomics is to reduce existing inequalities in the economy. While many Americans seem to be benefiting on this count, almost an equal number are not.
• At the ideological level, many argue that Bidenomics is regressing to many policy choices that will not only increase inefficiency and corruption within the country but also lead to a global subsidy war that will eventually hurt the poorest nations.

Conclusion 

On the face of it, Bidenomics has its heart in the right place. It aims to address the widening economic inequalities in the wake of so-called neoliberal policies that started with the Reagan presidency. As a course correction, it is a valid move and should perhaps be given enough time to show results.

India-Japan Chip Supply Chain Partnership

Why in News?

Recently, the Union Cabinet has approved a Memorandum of Cooperation (MoC) between India and Japan on developing a semiconductor supply chain partnership.

• In recent times, India is looking to establish itself as a reliable presence in the semiconductor supply chain, especially at a time when companies are looking to diversify from China, which has been the hub of electronics manufacturing.

What is the Significance of the Present Memorandum of Cooperation?

• India-Japan Semiconductor Cooperation:
  • The Memorandum of Cooperation (MoC) between India and Japan in the semiconductor supply chain recognizes the significance of semiconductors for industry and digital advancements.
  • This MoC was initially signed in July between India's IT Ministry and Japan's Ministry of Economy, Trade, and Industry.
• India's Semiconductor Ambitions:
  • India is determined to establish a dependable presence in the global semiconductor supply chain while banking on its India Semiconductor Mission, particularly as companies seek alternatives to China, post Covid pandemic.
  • India has initiated a $10 billion plan to bolster local chip production, with companies like Micron Technology setting up assembly and packaging facilities in Gujarat.
• India-US Collaboration in Semiconductor Industry:
  • India and the United States are collaborating to strengthen chip supply chains. Both the countries reaffirmed their commitment to building resilient global semiconductor supply chains.
• Major Investments in India's Semiconductor Sector:
  • US chip companies like Microchip Technology and AMD are investing millions of dollars in India to expand their operations and set up research and development facilities.
  • Additionally, Lam Research and Applied Materials are planning substantial investments in engineering and training programs in India's semiconductor sector.

What is the India Semiconductor Mission (ISM)?

• About:
  • The ISM was launched in 2021 with a total financial outlay of Rs 76,000 crore under the aegis of the Ministry of Electronics and IT (MeitY).
  • It is part of the comprehensive program for the development of sustainable semiconductor and display ecosystems in the country.
  • The programme aims to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystem.

Components

• Scheme for setting up of Semiconductor Fabs in India:
  • It provides fiscal support to eligible applicants for setting up of Semiconductor Fabs which is aimed at attracting large investments for setting up semiconductor wafer fabrication facilities in the country.
• Scheme for setting up of Display Fabs in India:
  • It provides fiscal support to eligible applicants for setting up of Display Fabs which is aimed at attracting large investments for setting up TFT LCD / AMOLED based display fabrication facilities in the country.
  • Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India:
  • The Scheme provides a fiscal support of 30% of the Capital Expenditure to the eligible applicants for setting up of Compound Semiconductors / Silicon Photonics (SiPh) / Sensors (including MEMS) Fab and Semiconductor ATMP / OSAT(Outsourced Semiconductor Assembly and Test) facilities in India.
• Design Linked Incentive (DLI) Scheme:
  • DLI scheme offers financial incentives, design infrastructure support across various stages of development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design.

What are the Challenges Regarding Semiconductor Manufacturing in India?

• Extremely Expensive Fab Setup:
  • A semiconductor fabrication facility (or fab) can cost multiples of a billion dollars to set up even on a relatively small scale and lagging by a generation or two behind the latest in technology.
• Higher Investment:
  • Semiconductors and display manufacturing is a very complex and technology-intensive sector involving huge capital investments, high risk, long gestation and payback periods, and rapid changes in technology, which require significant and sustained investments.
• Minimal Fiscal Support from Government:
  • The level of fiscal support currently envisioned is minuscule when one considers the scale of investments typically required to set up manufacturing capacities in the various sub-sectors of the semiconductor industry.
• Lack of Fabrication Capacities:
  • India has a decent chip design talent but it never built-up chip fab capacity. The Indian Space Research Organisation (ISRO) and the Defense Research and Development Organisation (DRDO) have their respective fab foundries but they are primarily for their own requirements and are also not as sophisticated as the latest in the world.
  • India has only one old fab which is located in Mohali, Punjab.
• Resource Inefficient Sector:
  • Chip fabs are also very thirsty units requiring millions of litres of clean water, an extremely stable power supply, a lot of land and a highly skilled workforce.

What can be the Way Forward?

• Consistent Fiscal Support for All the Elements:
  • Considering India’s considerable talent and experience, it may be best if the new mission focuses fiscal support, at least for now, on the chip-making chain including design centres, testing facilities, packaging, etc.
• Maximising Self-Reliance:
  • Future chip production shouldn’t be a one-trick pony and must develop an ecosystem from design to fabrication, to packing and testing. India must also improvise research and development in this sector where it is currently lacking.
• Collaboration:
  • Besides the US, India should also explore similar opportunities to collaborate with other countries such as Taiwan or other technologically advanced, friendly nations to promote the Domestic manufacturing and reduce import dependency in the Semiconductor Sector.