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General Studies – 1
Topic: population and associated issues
Difficulty level: Moderate
Reference: Indian Express , Insights on India
Why the question:
Too often, India’s demographic dividend conversations have focused much on the dependency ratio and not enough on the policies and other factors involved.
Key Demand of the question:
To write about demographic dividend, impediments to achieving and ways to overcome it.
Directive word:
Analyse – When asked to analyse, you must examine methodically the structure or nature of the topic by separating it into component parts and present them in a summary.
Structure of the answer:
Introduction:
Begin by defining demographic dividend and its various features.
Body:
First, write about the various impediments to achieving the dividend – demographic dividend may turn into a liability in the absence of enough jobs and the required skilled workforce etc.
Next, suggest ways to overcome the limitations.
Conclusion:
Conclude with a way forward.
Introduction
Demographic dividend, as defined by the United Nations Population Fund (UNFPA) means, “the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older).” India has one of the youngest populations in an aging world. By 2020, the median age in India was 28 years. Demographics can change the pace and pattern of economic growth.
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Background
- Periodic Labour Force Survey (PLFS) in 2018 revealed that India’s unemployment rate was the highest (6.07%) in four decades.
- The latest PLFS suggests that the numbers now are not so drastic, with the overall unemployment rate at2% in 2020-21 compared to 4.8% in 2019-20 and the labour force participation rate (LFPR) increasing to 41.6%, up from 40.1% in 2019-20.
- In terms of the more widely used statistic internationally, the current weekly status of unemployment, the figure of5% for all persons in 2020-21 is still worrying.
- The study on demographic dividend in India by United Nations Population Fund (UNFPA) throws up two interesting facts.
- The window of demographic dividend opportunity in India is available for five decades from 2005-06 to 2055-56, longer than any other country in the world.
- This demographic dividend window is available at different times in different states because of differential behaviour of the population parameters.
- Since 2018, India’s working-age population (people between 15 and 64 years of age) has grown larger than the dependent population (defined as children aged 14 or below as well as people above 65 years of age).
- This bulge in the working-age population is going to last till 2055, or 37 years from its beginning.
- This transition happens largely because of a decrease in the total fertility rate (TFR, which is the number of births per woman) after the increase in life expectancy gets stabilised.
- Many Asian economies — Japan, China, South Korea — were able to use this ‘demographic dividend’, defined by the United Nations Population Fund (UNFPA) as the growth potential that results from shifts in a population’s age structure.
Issues hindering demographic dividend leverage
- Jobless growth: There is mounting concern that future growth could turn out to be jobless due to de-industrialization, de-globalization, the fourth industrial revolution and technological progress. As per the NSSO Periodic Labour Force Survey 2017-18, India’s labour force participation rate for the age-group 15-59 years is around 53%, that is, around half of the working age population is jobless.
- Asymmetric demography: The growth in the working-age ratio is likely to be concentrated in some of India’s poorest states and the demographic dividend will be fully realized only if India is able to create gainful employment opportunities for this working-age population.
- Lack of skills: Most of the new jobs that will be created in the future will be highly skilled and lack of skill in Indian workforce is a major challenge. India may not be able to take advantage of the opportunities, due to a low human capital base and lack of skills.
- Low human development parameters: India ranks 130 out of 189 countries in UNDP’s Human Development Index, which is alarming. Therefore, health and education parameters need to be improved substantially to make the Indian workforce efficient and skilled.
- Informal nature of economy in India is another hurdle in reaping the benefits of demographic transition in India.
Leveraging demographic dividend as an opportunity
- Building human capital: Investing in people through healthcare, quality education, jobs and skills helps build human capital, which is key to supporting economic growth, ending extreme poverty, and creating a more inclusive society.
- Skill development to increase employability of young population. India’s labour force needs to be empowered with the right skills for the modern economy. Government has established the National Skill Development Corporation (NSDC) with the overall target of skilling/ up skilling 500 million people in India by 2022..
- Education: Enhancing educational levels by properly investing in primary, secondary and higher education. India, which has almost 41% of population below the age of 20 years, can reap the demographic dividend only if with a better education system. Also, academic-industry collaboration is necessary to synchronise modern industry demands and learning levels in academics.
- Establishment of Higher Education Finance Agency (HEFA) is a welcome step in this direction.
- Health: Improvement in healthcare infrastructure would ensure higher number of productive days for young labourforce, thus increasing the productivity of the economy.
- Success of schemes like Ayushman Bharat and National Health Protection scheme (NHPS) is necessary. Also nutrition level in women and children needs special care with effective implementation of Integrated Child Development (ICDS) programme.
- Job Creation: The nation needs to create ten million jobs per year to absorb the addition of young people into the workforce. Promoting businesses’ interests and entrepreneurship would help in job creation to provide employment to the large labourforce.
- India’s improved ranking in the World Bank’s Ease of Doing Business Index is a good sign.
- Schemes like Start-up India and Make in India , if implemented properly, would bring the desired result in the near future.
- Urbanisation: The large young and working population in the years to come will migrate to urban areas within their own and other States, leading to rapid and large-scale increase in urban population. How these migrating people can have access to basic amenities, health and social services in urban areas need to be the focus of urban policy planning.
- Schemes such as Smart City Mission and AMRUT needs to be effectively and carefully implemented.
Conclusion
India is on the right side of demographic transition that provides golden opportunity for its rapid socio-economic development, if policymakers align the developmental policies with this demographic shift.
To reap the demographic dividend, proper investment in human capital is needed by focussing on education, skill development and healthcare facilities.
General Studies – 2
Topic: Issues relating to poverty and hunger.
Difficulty level: Moderate
Reference: Live Mint , Insights on India
Why the question:
At a time when central banks all over the world are into a round robin of interest rates hikes, in a context of impending recession in several major world economies, an unending war, and uncertainty about energy availability and pricing going into the northern hemisphere winter, the only cheering news was India’s further extension for three months upto the end of December 2022 of free food under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).
Key Demand of the question:
To write about the achievements of NFSA and the PMGKAY.
Directive word:
Elaborate – Give a detailed account as to how and why it occurred, or what is the context. You must be defining key terms wherever appropriate and substantiate with relevant associated facts.
Structure of the answer:
Introduction:
Begin by writing about the aims and the objectives of NFSA and PMGKAY.
Body:
First, in brief, write about the major features of NFSA and PMGKAY.
Next, write about the achievements of NFSA and PMGKAY since its inception. Cite statistics to substantiate. Highlight the role of PMGKAY in the pandemic times.
Next, write a few limitations of NFSA and PMGKAY and suggest ways to improve it.
Conclusion:
Conclude with a way forward.
Introduction
India has been celebrating the Azadi Amrit Mahotsav for some weeks, with listings of the several milestones that stand out over the last 75 years of Independent India. The biggest of them all was the Food Security Act, which encoded in law the right to defined amounts of subsidized food for 75% of the rural population and 50% of the urban population. The magnitude of this food guarantee in a country the size of India became possible only because it cohered with a long-standing price support incentive to farmers to grow our major foodgrain cereals, rice and wheat.
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Background
NFSA : National Food Security Act
- 5 Kgs of foodgrains per person per month at Rs. 3/2/1 per Kg for rice/wheat/coarse grains.
- The existing AAY household will continue to receive 35 Kgs of foodgrains per household per month.
- Meal and maternity benefit of not less than Rs. 6,000 to pregnant women and lactating mothers during pregnancy and six months after the child birth.
- Meals for children upto 14 years of age.
- Food security allowance to beneficiaries in case of non-supply of entitled foodgrains or meals.
- Setting up of grievance redressal mechanisms at the district and state level
PMGKAY
- PMGKAY is a part of the Pradhan Mantri Garib Kalyan Package (PMGKP) to help the poor fight the battle against Covid-19.
- The scheme aimed at providing each person who is covered under the National Food Security Act 2013 with an additional 5 kg grains (wheat or rice) for free, in addition to the 5 kg of subsidised foodgrain already provided through the Public Distribution System (PDS).
- It was initially announced for a three-month period (April, May and June 2020), covering 80 crore ration cardholders. Later it was extended till September 2022.
- Its nodal Ministry is the Ministry of Finance.
- The benefit of the free ration can be availed through portability by any migrant labour or beneficiary under the One Nation One Ration Card (ONORC) plan from nearly 5 lakh ration shops across the country.
Achievements of NFSA and PMGKAY
- It was the first step by the government when pandemic affected India.
- The scheme reached its targeted population feeding almost 80Cr people.
- It has proven to be more of a safety net to migrant people who had job and livelihood losses.
- This has also ensured nutrition security to children of the migrant workers.
Limitations of NFSA and PMGKAY
- Expensive: It’s very expensive for the government to sustain and increases the need for an abundant supply of cheap grains. In 2022, India has had to restrict exports of wheat and rice after erratic weather hurt harvest, adding to pressure on food prices, and rattling global agricultural markets.
- Increase Fiscal Deficit: It could pose a risk to the government’s target to further narrow the fiscal deficit to 6.4% of gross domestic product.
- Inflation: The decision on the program could also affect inflation. The prices of rice and wheat, which make up about 10% of India’s retail inflation, are seeing an uptick due to lower production amid a heatwave and patchy monsoon.
Conclusion and way forward
- There should be an all-encompassing database for migrant workers and their family. This should accurately capture the data on migration.
- The One Nation One Ration Card should be implemented in true spirit by all the states.
- Along with food security, there should be a sustainable income support through schemes like MGNREGS accompanied by free vaccines in nearest future.
- The leakages in PDS should be minimized through modernize PDS.
- To avoid leakages, there should be food-token system.
Topic: Important aspects of governance, transparency and accountability, e-governance applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures.
Difficulty: Moderate
Reference: The Hindu , Insights on India
Why the question:
Ever since the establishment of the Corporate Social Responsibility (CSR) regime in India under Section 135 of the Companies Act 2013, CSR spending in India has risen from ₹10,065 crore in 2014-15 to ₹24,865 crore in 2020-21. But there is no data to verify whether this increase is commensurate with the increase in profits of Indian and foreign (having a registered arm in India) companies.
Key Demand of the question:
To wrote about the issues with CSR and steps needed to make it more effective.
Structure of the answer:
Introduction:
Begin by defining CSR and its evolution in India.
Body:
First, write about the various aims and objectives behind CSR in India.
In the next part, write about the various issues in CSR – lack of community participation in CSR activities, need to build local capacities, issues of transparency and non-availability of clear CSR guidelines.
Next, write about the various measures that are needed to make CSR more effective.
Conclusion:
Conclude with a way forward.
Introduction
The term “Corporate Social Responsibility” in general can be referred to as a corporate initiative to assess and take responsibility for the company’s effects on the environment and impact on social welfare.
In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013. India is the first country in the world to mandate CSR spending along with a framework to identify potential CSR activities.
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Background: CSR in India
- The CSR provisions within the Act is applicable to companies with an annual turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a net profit of Rs. 5 crore and more.
- The Act requires companies to set up a CSR committee which shall recommend a Corporate Social Responsibility Policy to the Board of Directors and also monitor the same from time to time.
- The Act encourages companies to spend 2% of their average net profit in the previous three years on CSR activities.
- The indicative activities, which can be undertaken by a company under CSR, have been specified under Schedule VII of the Act. The activities include:
- Eradicating extreme hunger and poverty,
- Promotion of education, gender equality and empowering women,
- Combating Human Immunodeficiency Virus, Acquired Immune Deficiency Syndrome and other diseases,
- Ensuring environmental sustainability;
- Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women etc.
Benefits of Corporate social responsibility to the firms
- CSR increases employee engagement: Giving back to the community is a virtuous circle in which engaged employees are enriched by volunteering opportunities that further engage and encourage them.
- Contributes to the United Nations’ 17 Sustainable Development Goals
- Presents press opportunities: It provides more marketing for firms and increases brand engagement with the public.
- Increases customer retention and loyalty: CSR gives a company a chance to showcase consistency and win loyalty, which ultimately converts into customer retention and increased sales.
- CSR improves employer branding: It’s increasingly important for companies to have a socially conscious image. Consumers, employees, and stakeholders prioritize CSR when choosing a brand or company, and they hold corporations accountable for effecting social change with their beliefs, practices, and profits.
Issues pertaining to CSR
- Finding Right Partners: Despite growing awareness about the significance of CSR compliance, the challenges remain in identifying the right partners and projects, as well as in selecting projects that are long-term impactful, scalable, and are self-sustaining.
- Lack of Community Participation in CSR Activities: There is a lack of interest of the local community in participating and contributing to CSR activities of companies.
- This is largely attributable to the fact that there exists little or no knowledge about CSR within the local communities as no serious efforts have been made to spread awareness about CSR.
- The situation is further aggravated by a lack of communication between the company and the community at the grassroots.
- Issues of Transparency: There is an expression by the companies that there exists lack of transparency on the part of the local implementing agencies as they do not make adequate efforts to disclose information on their programs, audit issues, impact assessment and utilisation of funds.
- This reported lack of transparency negatively impacts the process of trust building between companies and local communities, which is a key to the success of any CSR initiative at the local level.
- Non-availability of Well Organised NGOs: There is non-availability of well organised NGOs in remote and rural areas that can assess and identify real needs of the community and work along with companies to ensure successful implementation of CSR activities.
Measures needed
- Beyond just allocating funds, the companies shall conduct regular reviews on progress of CSR compliance and put in place some measures for a more professional approach towards the same. Also, they should set clear objectives and align all the stakeholders with them.
- It is equally important to let their NGO partners know of their business needs.
- The latter should know that companies which award money from their CSR budgets are sincere about the causes they pick.
- The Companies must also refresh the roles of Board, CSR Committee, CFO and set-up new SOPs including a defined process for fund utilisation, determine applicability of impact assessment, prepare a detailed checklist of processes with the owners and timelines and formulate an annual action plan.
- The government must ensure that the activities included in the CSR Policy of a company are implemented by it.
- It is also the responsibility of the government to address the issues of non availability of the NGOs and create awareness in the society about the significance of the CSR and its activities.
- The government plans to use technology tools such as Artificial Intelligence and Machine Learning to do data mining of the mandated reports to bring changes to its policy on CSR.
- Leveraging technology to improve the oversight of India Inc is welcome, but this should be applied to the financial and governance aspects of companies before moving on to their social obligations.
Conclusion
More CSR decision-makers are shifting their focus from compliance with CSR laws to the social impact they are making. CSR funders are following several themes to make this transition, such as hiring professionals, coming together in collaboratives, and defining and publishing their impact metrics to hold themselves accountable. The idea is to move beyond signing cheques to recognising that, ultimately, what’s good for Indian society is also good for business.
General Studies – 3
Topic: Government Budgeting.
Difficulty level: Easy
Reference: Insights on India
Why the question:
The question is part of the static syllabus of General studies paper – 3 and mentioned as part of Mission-2023 Secure timetable.
Key Demand of the question:
To write about the weaknesses in the budgetary system and measures to overcome them.
Directive word:
Examine – When asked to ‘Examine’, we must investigate the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications.
Structure of the answer:
Introduction:
Begin by defining budget and major objectives of budgeting.
Body:
First, elaborate up on how budget provide framework of achieving annual objectives.
Next, write about the weaknesses in the budgetary system and its implementation – budget estimates, Skewed expenditure pattern, Poor planning and lack of long-term perspective etc.
Next, suggest measures to overcome the above weaknesses in order to ensure that budgetary objectives are achieved.
Conclusion:
Conclude by writing a way forward.
Introduction
Finance minister Nirmala Sitharaman on February 1 presented a budget worth Rs 39.45 lakh crore with massive push to infrastructure spending.
Spending outlays on several other key sectors including health care, rural development and the vital jobs and income providing national rural employment guarantee scheme have all shrunk as a percentage of overall expenditure in the Budget estimates for fiscal 2023 from the revised estimates for the current year, even if in some cases only marginally.
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Budget is the government’s blueprint on expenditure, taxes it plans to levy, and other transactions which affect the economy and lives of citizens.
According to Article 112 of the Indian Constitution, the Union Budget of a year is referred to as the Annual Financial Statement (AFS). The Budget Division of the Department of Economic Affairs in the Finance Ministry is the nodal body responsible for preparing the Budget.
Issues undermining the implementation of objectives in Union Budget
- Take off of Gati Shakti and NIP requires huge efforts and investments from States and private sector. Mobilising resources is not spelt out in the budget.
- Though opportunities exist for MSME sectors, issue of subsidising the dwarf industries that take away most subsidies still persists. These dwarfs employ less and take more incentives without growing up the ladder.
- Though defence outlay is reserved for domestic industries their export potential is not guaranteed.
- State governments were yet to get their GST arrears and Centre has not made them available to states on time.
- Finance Minister fourth successive budget, while common sensical in its approach, is not exactly bubbling with new ideas.
- With the economy still in search of durable momentum that could help entrench the recovery from the last fiscal year’s record contraction, Ms. Sitharaman has missed an opportunity to address the flagging consumer spending in the wake of erosion in real incomes and savings through a combination of tax breaks for the middle class and cash handouts for the poor.
Budget 2022-23: Creating meaningful employment and growth
- Boost to MSME sector: Budget continues to provide much-needed relief to the COVID-hit MSME sector. The revival of MSMEs is critical both from growth and employment perspective, and these measures are geared towards building a vibrant MSME sector.
- There are a host of measures aimed at small business, ranging from credit guarantee schemes to improving the ease of doing business, that help MSMEs navigate economic uncertainty.
- India’s MSME sector will be greatly benefited by the reservation of 68 per cent of the Defence Capital Budget for the domestic industry. Rs 7.5 lakh crore worth of public investment will give a new push to the economy and create new opportunities for small and other industries.
- PM Gati Shakti: PM Gati Shakti will pull forward the economy and will lead to more jobs and opportunities for the youth.
- It is a National Master Plan for Multimodal Connectivity in October 2021. This is a digital platform that aims to bring 16 Ministries including Railways and Roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects.
- Production Linked Incentive (PLI) Scheme for achieving Aatmanirbhar Bharat has received an excellent response, with potential to create 60 lakh new jobs and additional production of 30 lakh crore during next Keycap digit five years.
- Benefitting farmers: Measures such as a special fund for encouraging new agriculture start-ups and package for food processing industry will help in increasing income of farmers.
- Skill Development: Digital Ecosystem for Skilling and Livelihood (DESH-Stack e-portal) will be launched to empower citizens to skill, reskill or upskill through on-line training.
- This will lead to meaningful jobs for the youth entering the workforce.
Conclusion
The success of the budget can be assessed post-facto once the schemes kick in and take off in a large-scale manner. It has been called as the AatmanirbharBharatKaBudget, which brings with it new energy and strength to our development trajectory, especially at a time when we are courageously fighting a once-in-a-lifetime global pandemic. This Budget is supposed to bring more infra, more investment, more growth and more jobs taking India to newer heights.
Topic: Government Budgeting.
Difficulty level: Tough
Reference: Insights on India
Why the question:
The finance ministry on Monday cautioned the re-emergence of the twin deficit problem in the economy, with higher commodity prices and rising subsidy burden leading to an increase in both fiscal deficit and current account deficit. It’s also the first time the government has explicitly talked about the possibility of fiscal slippage in the current fiscal year.
Key Demand of the question:
To write about twin deficit, concerns associated with it and measures needed to avoid the problem.
Structure of the answer:
Introduction:
Begin by defining twin deficit.
Body:
First, write about the concerns associated with it and how it impacts various macro-economic parameters.
Next, write about the ways in which it could be avoided – write about various Fiscal, Monetary and other policy measures that are needed to avoid the twin deficit problem.
Conclusion:
Conclude with a way forward.
Introduction
Current Account Deficit and Fiscal Deficit (also known as “budget deficit” is a situation when a nation’s expenditure exceeds its revenues) are together known as twin deficits and both often reinforce each other, i.e., a high fiscal deficit leads to higher CAD and vice versa.
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Background
The finance ministry in its ‘Monthly Economic Review’ cautioned the re-emergence of the twin deficit problem in the economy, with higher commodity prices and rising subsidy burden leading to an increase in both fiscal deficit and Current Account Deficit (CAD).
- On Fiscal deficit: Fiscal deficit may be high due to cuts in excise duties on diesel and petrol.
- On Current account deficit
- Higher import bills may increase CAD: Costlier imports such as crude oil and other commodities will not only widen the CAD but also depreciate the rupee.
- A weaker rupee will, in turn, make future imports costlier.
- Pulling out of funds from emerging markets: Rupee can also weaken if, in response to higher interest rates in the western economies especially the US, foreign portfolio investors (FPI) continue to pull out money from the Indian markets, which too will hurt the rupee and further increase CAD.
- Higher import bills may increase CAD: Costlier imports such as crude oil and other commodities will not only widen the CAD but also depreciate the rupee.
- The World is looking at a distinct possibility of widespread stagflation.
- India, however, is at low risk of stagflation, owing to its prudent stabilization policies.
- Meanwhile, Indian financial markets have witnessed hefty foreign investment outflows the past eight months. A weak GDP growth outlook has exacerbated the situation.
- In a black swan event comprising a combination of shocks, there is a 5% chance of outflows under portfolio investments of 7.7 %of GDP and short-term trade credit retrenchment of 3.9 %of Gross Domestic Product (GDP).
Avoiding the twin deficit issue
- Although no cause of worry in the short term, the twin deficit may in the long-term reduce the savings, depreciate the rupee and imbalance the financial investments of the government for social purposes.
- Trim revenue expenditure (or the money government spends just to meet its daily needs)
- Use tight monetary policy to achieve fiscal consolidation
- Import cut of non-essential goods and make exports of Indian goods competitive
- Reforming the Indian market to make it attractive for FDI and FIIs.
- Accomodative fiscal stances of MPC helps investors to make robust investment.
- Maintaining the stock of essential commodities to balance the demand and supply situation.
- Ex: India’s Ban on wheat export to tame demand/supply situation.
- Revenue expenditure: There is a need to trim revenue expenditure or the money the government spends just to meet its daily needs.
- Rationalising non-capital expenditure has become critical not only for protecting growth supportive capital but also for avoiding fiscal slippages.
- Capital expenditure essentially refers to money spent towards creating productive assets such as roads, buildings, ports etc.
- The World is looking at a distinct possibility of widespread stagflation: India however is at low risk of stagflation, owing to its prudent stabilisation policies.
- India continued to be the quickest growing economy among major countries in 2022-23.
Conclusion
The finance ministry said the economy’s medium-term growth prospects remain bright as pent-up capacity expansion in the private sector is expected to drive capital formation and employment generation in the rest of this decade. Near-term challenges need to be managed carefully without sacrificing the hard-earned macroeconomic stability.
Topic: Science and Technology- developments and their applications and effects in everyday life.
Difficulty level: Moderate
Reference: Indian Express , Insights on India
Why the question:
India’s National Policy on Electronics (NPE) 2019 aims for the electronics industry to achieve a turnover of about Rs 33 lakh crore by 2025. But the industry is critically dependent on semiconductors, which are also used in high-demand consumer electronics like mobile phones, laptops, gaming consoles, refrigerators and microwaves. These use semiconductor components like integrated chips, diodes and transistors.
Key Demand of the question:
To write about importance of Semiconductors and its strategic significance. India’s strengths and weaknesses in this regard.
Directive word:
Evaluate – When you are asked to evaluate, you have to pass a sound judgement about the truth of the given statement in the question or the topic based on evidence. You must appraise the worth of the statement in question. There is scope for forming an opinion here.
Structure of the answer:
Introduction:
Begin by mentioning the aims and objectives of India Semiconductor Mission.
Body:
In the first part, mention the various applications of Semiconductors and reasons for their shortage.
Next, write about various steps taken in the recent past aimed at achieving self-sufficiency in semiconductors.
Next, write about the India’s strengths and weaknesses in this regard.
Conclusion:
Conclude by way forward to overcome weakness.
Introduction
Semiconductor chips are the basic building blocks that serve as the heart and brain of all modern electronics and information and communications technology products. These chips are now an integral part of contemporary automobiles, household gadgets and essential medical devices such as ECG machines.
Semiconductor shortage is turning into an acute issue. Due to it, the growth prospects of the auto industry are once again in jeopardy. This issue also offers immense opportunity for India to foray in to Integrated Circuits and Chip design.
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Strengths of semiconductor industry of India
- India’s biggest advantage in the Plus 1 space is its end-to-end design and manufacturing capabilities.
- Vietnam is known for strong midstream activities, and local companies focus mainly on assembly.
- Upstream activities, involving design and production, are mostly done overseas.
- India has a highly talented young engineering force.
- Not only is India considered to be the most digitally dexterous country in the world due to the largest Gen Z workforce, we have a huge domestic market.
- And we are closer to Africa, the Middle East and European markets.
Challenges
- For one, 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.
- 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.
- Even granting that India’s Production Linked Incentive scheme intends to give only 50% of the cost of setting up at least two greenfield semiconductor fabs by way of fiscal support, not much of the current scheme outlay of approximately $10 billion is likely to be left to support other elements including display fabs, packaging and testing facilities, and chip design centres.
- Chip fabs are also very thirsty units requiring millions of litres of clean water and extremely stable power supply.
- India has a decent chip design talent but it never built up chip fab capacity. The ISRO and the DRDO have their respective fab foundries but they are primarily for their own requirements and also not as sophisticated as the latest in the world.
- It may be best if the new mission focuses fiscal support, for now, on other parts of the chip-making chain including design, where surely India already has considerable talent and experience.
Way Forward
- Given the long gestation periods and rapid technology changes, India must out-strategize on design and functionality as the end product will be out only after three-four years from the moment work begins, by which point the prevailing chip shortage would have been resolved, while technology would have advanced further.
- Apart from incentivising more FDI in electronics to deepen our supply chains through incentive schemes, we need to focus on encouraging Indian manufacturers and start-ups to enter and master complex R&D and manufacturing verticals.
- We can then ensure that valuable Intellectual Property is created and owned by Indian companies.
- The semiconductor industry is changing fast as new-age technologies require innovation at the design, material, and process levels.
- Indian engineers have contributed immensely to this area in multinational companies. We must encourage them to set up their design start-ups with handsome government grants and tax incentives.
- Premier research institutions such as the Indian Institute of Science should also be asked to work aggressively on R&D in chip designing and manufacturing.
- Further, the government must focus on emerging technologies like LiDAR and Phased Array in which incumbents do not have a disproportionate advantage and the entry barrier is low.
- By working aggressively in new cutting-edge technologies, India can ensure that it becomes Aatmanirbhar.
- India needs to push for a Quad Supply Chain Resilience Fund to immunise the supply chain from geopolitical and geographic risks
- India and Taiwan have started negotiations for a free-trade agreement and setting up a semiconductor manufacturing hub in an Indian city, signalling their resolve to further expand the two-way economic engagement.
Conclusion
The program will usher in a new era in electronics manufacturing by providing a globally competitive incentive package to companies in semiconductors and display manufacturing as well as design. The program will promote higher domestic value addition in electronics manufacturing and will contribute significantly to achieving a USD 1 Trillion digital economy and a USD 5 Trillion GDP by 2025. This shall pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance.
Value addition
Government initiatives in this regard
The Union Cabinet’s decision to set aside ₹76,000 crore for supporting the development of a ‘semiconductors and display manufacturing ecosystem’ is a belated but welcome acknowledgment of the strategic significance of integrated circuits, or chips, to a modern economy.
- India Semiconductor Mission:
- In order to drive the long-term strategies for developing a sustainable semiconductors and display ecosystem, aspecialised and independent India Semiconductor Mission (ISM) will be set up.
- ISM will beled by global experts in the semiconductor and display industry. It will act as the nodal agency for efficient and smooth implementation of the schemes on Semiconductors and Display ecosystem.
- Production Linked Incentives:
- Incentive support to the tune of Rs.55,392 crore (7.5 billion USD) has been approved under PLIfor Largest Scale Electronics Manufacturing, PLI for IT Hardware, SPECS Scheme and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme.
- In addition, PLI incentives to the quantum of Rs.98,000 crore (USD 13 billion) is approved for alliedsectors comprising ACC battery, auto components, telecom & networking products, solar PV modules and white goods.
- Semiconductor Fabs and Display Fabs:
- It would provide fiscal support of up to 50% of the project costfor setting up semiconductor and display fabrication units.
- The Union government will work with the States to set up high-tech clusters with the required infrastructuresuch as land and semiconductor-grade water.
- Semi-conductor Laboratory (SCL):
- MeitY will take requisite steps for modernization and commercialization of Semi-conductor Laboratory (SCL).
- MeitY will explore the possibility for the Joint Venture of SCL with a commercial fab partnerto modernise the brownfield fab facility.
- Compound Semiconductors:
- It will support fiscal support of 30% of capital expenditure to approved units.
- At Least 15 such unitsof Compound Semiconductors and Semiconductor Packaging are expected to be established with Government support under this scheme.
- Semiconductor Design Companies:
- TheDesign Linked Incentive (DLI) Scheme shall extend product design linked incentive of up to 50% of eligible expenditure and product deployment linked incentive of 6% – 4% on net sales for five years.
- Support will be provided to 100 domestic companiesof semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design.
General Studies – 4
Topic: Case Study
(a) What are the ethical dilemmas in the above case?
(b) What action should be taken against the software company by the government? Why?
Difficulty level: Moderate
Structure of the answer:
Introduction:
Start by giving the context. Bring out the key stakeholders in the above case study.
Body:
In the body, write about the ethical dilemmas present in the case.
Next, write about the action that should government must take to resolve the issues and the justify the course of action
Conclusion:
Conclude by stressing on the importance of accountability.
Summarise by highlighting the importance contentment.
Introduction
Creating wealth through high quality accountability to customers, shareholders, staff and suppliers is the highest form of social responsibility. Many companies fail in all these respects. Many shady businessmen run trusts galore to launder black money. Others create trusts to fund grants and scholarships to children of politicians and bureaucrats, bribes by another name.
Body
Corporate social responsibility by default is viewed as a positive phenomenon in organization performance and consequently most investigations are focusing on this positive perspective. In the eyes of society socially responsible organizations are usually success stories of impeccable reputation, excellent performance, fostering the welfare of their employees, ensuring the clients’ rights and wealth, focusing on the impacts and outcomes for society, stakeholders and the firm itself; in other words they are an excellent example for all to emulate. However, the CSR domain is not always as brilliant as it may seem from the first glance, and even such organizations are incapable of obviating internal problems of destructive and controversial character.
Ethical dilemmas in the case
- The little money reaching the poor might be cut down.
- Engaging in cronyism
- Corruption hand in hand in the name of Corporate Social Responsibility.
Action to be taken
- The CSR programmes must be based on legitimate standards established by civil society, involving a diverse range of stakeholders from businesses, governments, and society, in general.
- These should be backed up by well-established processes for measurement and reporting. There should be ways to present the economic, social, and environmental impact of business practices.
- These should be built on a strong business case, so that it becomes easy to economically justify the adoption of CSR by companies. This might need putting an incentive mechanism in place.
- The Companies must also refresh the roles of Board, CSR Committee, CFO and set-up new SOPs including a defined process for fund utilisation, determine applicability of impact assessment, prepare a detailed checklist of processes with the owners and timelines and formulate an annual action plan.
- These must be flexible for companies to innovate and find workable solutions matching their unique situations.
Conclusion
The whole concept of CSR needs rethinking. The donations approach, with spending targets for corporations, is simply the wrong way to go about it. Jailing crooks is a far better way of improving corporate responsibility than mandating a 2% CSR target.
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