India Resets its Agenda on Pakistan

The barbaric massacre of 26 innocent Indian tourists at Pahalgam on April 22 by terrorists reminds us of a haunting conversation between Ivan Karamazov and his brother, Alyosha, in Fyodor Dostoevsky’s novel The Brothers Karamazov. Reflecting on the atrocities committed by humans during wartime, specifically the brutal acts carried out by the Turks in Bulgaria, Ivan observes: “People speak sometimes about the ‘animal’ cruelty of man, but that’s terribly unjust and offensive to beasts, no animal could ever be so cruel as a man, so artfully, so artistically cruel”.

Here, Dostoevsky, challenging the notion that human cruelty is merely “bestial”, suggests that ours is indeed a distinct form—nay, humanly-capable of a calculated, almost ritualistic form of wickedness. After all, it is only humans who would enquire about the religion of a man before deciding whether to kill, and even take delight in killing the selected man before his wife’s/kith and kin’s eyes. 

In response to these dastardly acts of terrorists, India imposed economic and trade sanctions against Pakistan, signalling its firm stance against terrorism. Over it, the Indus Waters Treaty was kept in abeyance to further emphasize India’s resolve in addressing cross-border terrorism.    

Prime Minister Narendra Modi underscored the government’s determination, stating in a public meeting, “India will identify, track, and punish every terrorist and their backers. We will pursue them to the ends of the earth …” On the night of May 6-7, India conducted precise air strikes against nine terrorist camps located in Pakistan and Pakistan-occupied Kashmir, including the Jaish-e-Mohammed stronghold of Bahawalpur and Lashkar-e-Taiba’s base in Muridke, which are linked to the orchestration and planning of cross-border terror attacks. The operations, executed within a 23-minute window, were carried out without violating Pakistani airspace and reportedly inflicted significant damage on the targeted camps. 

Not to escalate the conflict further, the Director General of Military Operations, Lt General Rajiv Ghai, made a call to his counterpart in Pakistan and informed that the Indian armed forces carried out ‘focused’, ‘measured’ and ‘non-escalatory’ strikes on nine terror sites in Pakistan and Pakistan-occupied Kashmir and that no Pakistani military establishment had been targeted. Further, any attack on India would invite a befitting response.  

However, Pakistan, as anticipated, retaliated with a barrage of drone and missile strikes. These were, however, successfully intercepted by India’s air defense network, minimizing damage. As the drone and missile strikes continued unabated from Pakistan, on the intervening night of May 9 and 10, India launched precision strikes on Pakistan’s air force infrastructure, including 11 airfields—Nur Khan, Rafiqui, Murid, Sukkur, Sialkot, Pasrur, Chunian, Sargodha, Skardu, Bholari and Jacobabad— air defense units, and control networks. This devastating blow resulted in Pakistan calling for a ceasefire. Having achieved all its goals of Operation Sindoor, India, wisely acceded to the call for a truce. 

A prolonged military campaign with Pakistan is certainly not in the interest of India for reasons galore: It adversely impacts India’s ambition to become a developed economy by 2047. Secondly, assuming a net revenue growth of about 11% and an expenditure growth of about 7%, the budget for 2025-26 projected a fiscal deficit of 4.4% of GDP. But a prolonged border conflict and the resulting rise in defense expenditure is likely to lead to unanticipated growth in budgeted expenditure. This, in turn, would have serious implications for the government’s fiscal consolidation road map. Thirdly, a sustained Indo-Pak conflict could even dent GDP to a significant extent. Indeed, one estimate puts this slide at 1.5 -3% of India’s GDP. So, India has more to lose, while Pakistan, a ‘basket case’, has little to lose. 

Against this backdrop, Prime Minister Modi set a new norm for tackling cross-border terrorism: Any future act of terror would be viewed as an act of war and would invite an appropriate military response against both the terrorist camps and also against their sponsors—the Pakistani military and government. Secondly, India will no longer tolerate Pakistan’s nuclear blackmail. Thirdly, the Indus Waters Treaty would be held in abeyance till India is convinced that Pakistan has stopped sponsoring terrorists. He thus said goodbye to India’s hitherto practiced soft approach. 

Nevertheless, going by the past, there is no guarantee that terrorist attacks from Pakistan will cease to occur in the future. This necessitates enhancing intelligence, surveillance and reconnaissance capabilities to pre-emptively neutralize such terror attempts. Over it, India must develop the ability to routinely dismantle terror infrastructure in Pakistan without relying on large-scale deployment of forces along the border. Lastly, India, as a nation united, must assert its own resolve to fight terrorism, for external support will inevitably wax and wane depending on shifting geopolitical dynamics.

 

Is ‘90-Hour Working Week’ the Panacea for Growth?

The recent opinions expressed by a few stalwarts of India Inc.—Narayana Murthy of Infosys and SN Subrahmanyam of L&T—favoring ‘70/90-hour working weeks’ as a solution for India’s growth had triggered a raging debate on social media. These remarks drew criticism from a few peers in the corporate world itself. Harsh Goenka, RPG Group Chairman, said that longer working hours is a recipe for burnout and not success. Anand Mahindra of Mahindra Group commented that the focus should be on the quality of work and productivity rather than the amount of time spent working. 

Even medical professionals have raised serious concerns about the ‘90-hours week’, calling it a ‘recipe for disaster’. According to them, overworking for such long hours can lead to burnout, decreased productivity at work, and a poor work-life balance. All this can, in turn, increase the risk of depression, anxiety, and stress. Over time, the cumulative effects of chronic stress can elevate the risk of heart attack, stroke, and even premature death. A study carried out by the World Health Organization in 2016 concluded that “working 55 or more hours per week is associated with an estimated 35% higher risk of a stroke and a 17% higher risk of dying from ischemic heart disease, compared to working 35-40 hours a week. 

The Economic Survey 2024-25 tabled by the Ministry of Finance in Parliament noted that “spending long hours at one’s desk is detrimental to mental wellbeing” and “individuals who spend 12 or more hrs at a desk have distressed/struggling levels of mental wellbeing”. The report also considered “… excessive hours spent working at the desk can adversely affect mental wellbeing and ultimately put the brakes on the pace of economic growth”. 

Interestingly, amidst the ongoing debate, Sanjiv Puri, Chairman, ITC Ltd., emphasized that empowering employees to realize their potential and perform their jobs well is more important than the number of hours put in.   

Reflecting on this perspective, we may take a look at a verse from Chandogya Upanisad: “Yadeva Vidyayā Karoti /Śraddhayopaniṣadā tadeva vīryavattaraṃ bhavatīti (1.1.10)—Whatever work is done with knowledge, / through faith and backed by meditation, / that alone becomes most effective”.

Vidya—knowledge—is the fundamental requirement for work efficiency, providing theoretical and conceptual clarity. However, knowledge without Sraddha—faith—remains static, a mere possession. It is the Sraddha (faith) demonstrated by the seeker that energizes the Vidya (knowledge) transforming it into Karma (action). 

Swami Vivekananda once said: “What makes the difference between man and man is the difference in this Sraddha and nothing else. He who thinks himself weak will become weak.” Faith simply generates ‘belief’. And belief in one’s knowledge-power alone makes things happen. 

Sraddha Sraddhamayoyam purso yo yat Sraddha na eva sah—Man consists of Sraddha. Whatever be the measure of his Sraddha, that will be the measure of his life as well”, says the Bhagavad Gita. Therefore, one needs to acquire Sraddha—this deep faith in oneself, so that one may develop into a dynamic character.

‘Knowledge’ can be imparted, but no training can impart Sraddha. Sraddha has to be captured by oneself. Sraddha is more of a spiritual value. It moves a man from within. It is simply a reflection of the richness of the personality. It imparts an artistic quality to one’s life and work. Faith in oneself, in the divine within, is the greatest source of personality enrichment. Such a person works out of the fullness of one’s heart. 

This flow of man’s energy from faith, Sraddha through knowledge, Vidya to action, Karma is the cornerstone of efficiency. However, this flow is vulnerable to disruptions caused by ups and downs in the emotional life of a person/employee. Inner disintegration or want of integration leads to external disorganization. This automatically lowers efficiency. On the other hand, Upanisad—meditation can help arrest these disturbances. Meditation gathers the mind into itself. When the mind takes leave of the body, thought becomes crystal clear. Upanisad—calm meditation—thus helps in properly directing and disciplining one’s knowledge. It makes one’s actions meaningful, Sarvopakri—good for everyone. 

Upanisad—meditation, fortifies the person/employee and his/her work. This fortification scatters fearlessness, love, and peace all around, uniting ‘philanthropic efficiency with a philosophic calm’. This fusion is what makes the conduct of a person/an employee, or the ‘governance’ of an organization, truly Sarvahit—‘omni-beneficial’. 

Whether in the realm of governance or among the governed, as employers or employees, those who embrace the values of Vidya (knowledge), Sraddha (faith), and Upanisad (meditative insight) can excel in effectiveness, efficiency, and acceptability. Such an approach to one’s Karma (action) enables individuals to realize their full potential in all pursuits. Perhaps, it is these values that organizations should foster in the workplace to nurture a culture of holistic growth and accomplishment. 

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Trump 2.0: The Threat of Uncertainty

Donald Trump’s decisive victory in the US presidential elections accompanied by Republicans seizing control of the Senate and the chair in the House of Representatives affords him far-reaching political power to pursue his economic agenda and foreign policy vision. 

Trump’s return as 47th President of the world’s largest economy alerted global leaders, investors and diplomats to wait and see what the unpredictable President will do. But the appointments that he has already made to the key positions make it amply clear that he is in a tearing hurry to implement his campaign promises—tariffs, tax cuts and deportation of migrants—which are bound to create economic uncertainty. 

The first thing among his planned actions would perhaps be imposing tariffs of up to 60% on imports from China and 10 -20% on imports from the rest of the world. For, he believes that any country that has a large trade surplus with America is ‘cheating’ Americans. This imposition is likely to get transmitted to consumers triggering a return to inflation build up domestically. This price rise in the US will in turn seep through globally as the US commands a large export share of technology and agricultural products. 

The next in line is perhaps, tax cuts. Trump intends to extend the tax cuts offered earlier for individuals that are due to expire in 2025, and to even lower the corporate taxes from the current 21% to 15% for companies that manufacture their goods in the US. This is certain to further worsen the fiscal deficit that has already touched 6.4% of GDP for FY24, which is around 3 percentage points higher than the average of the past 50 years. Any further expansion will only lead to sucking of global savings by the US, which is more likely to tighten the global financial conditions. This, coupled with higher inflation and relatively higher policy rates, will automatically increase the cost of money. Over it, as the US Treasury bills are considered as the safest investment in the world, money will flow to US, strengthening the dollar. This would trigger volatility in global currencies. 

The third agenda is mass deportation of illegal immigrants from the US. This is also likely to have an economic impact of triggering inflation, for some economists believe that the influx of illegal immigrants into the US labor force kept wage-inflation under check. So, to summarize, Trump’s economic agenda, though apparently appealing, might as well lead to unintended consequences. The slump in the bond market witnessed immediately after the election results is perhaps a pointer to this phenomenon. 

It is China that runs the biggest trade surplus with the US, followed by Mexico and Vietnam, and these countries will be hit hard by the uncertainties. Even India is in the hit list, though not to that extent. China may, however, cut its prices and even devalue its currency to circumvent the tariffs. Simultaneously, it will also redouble its efforts to penetrate further in the global South to protect its manufacturing base. Amidst these uncertainties, it is India with its inefficient manufacturing base and weak rupee that is likely to face more economic stress. For, with a strong dollar, our imports will cost dearer. The management of resulting trade imbalances is sure to pose a challenge for India. 

Trump has also promised to raise oil and natural gas drilling, which means he is not that serious to abide by climate goals. Therefore, the fear among the climate policy advocates that Trump may once again withdraw from Paris Agreement and may even take tougher steps, as he did in his first term as President, and hinder the global decarbonization efforts, is perhaps all set to turn true. The fall out of the world’s biggest historic carbon emitter watching from the margins would be: emboldened leaders of other countries may also slowdown their efforts, and all this cumulatively might impact global energy transition for decades to come. 

Next is his foreign policy initiatives: He may not outrightly abandon the protection of Europe, but may let NATO go dormant. It means Europe has to fix itself any military threat that it faces. The two military powers of Europe—UK and France—are passing through their worst Budget crisis. Germany’s economic outlook is equally scary. No wonder, Trump may come up with a peace proposal for Ukraine that involves Ukraine ceasing its right on the chunk of land already occupied by Russia. In this gloomy scenario, Putin may emerge as Europe’s problem. 

These are some of the probabilities, though there are others as well. Nonetheless, one thing is certain: the threat of uncertainty.

Leaders to Shun Ahankar and Observe Maryāda

Recently, Mr Mohan Bhagwat, Chief of Rashtriya Swaymsevak Sangh (RSS), delivered a statesman-like address at a periodic training program for RSS workers: “Jo vaastavik sevak hai …who maryada se chalta hai. Us maryada ka paalan karke jo chalta hai, who karm karta hai lekin Karmon mein lipt nahi hota. Usme ahankara nahin aata ki maine kiya” (He, who is a true worker, conducts himself with dignity. Whoever maintains propriety of conduct, he simply performs his duties; never gets attached to them; will not be overtaken by arrogance to claim the credit for the work done). Intriguingly, he also condemned the “bitterness” that was witnessed in the recent election campaign, which in his opinion can jeopardise social harmony.

In this address, which is sounding more as a sermon compelling us to ponder over, there are two keywords the import of which is far-reaching. They are: “ahankar” (arrogance) and “maryāda” (propriety of conduct), for they sound more like a model code of conduct for leaders—be they political or business leaders. 

There is, of course, ample evidence indicating that humble leaders outperform arrogant leaders, and yet we often see leaders having a hard time checking their egos at workplaces. Edgar Schein, Professor Emeritus at the Sloan School of Management, once asked a group of his students what a promotion to the rank of manager would mean to them. A pat reply was: “It means I can now tell others what to do”. It is perhaps, this “know-it-all style of leadership” that broods arrogance among leaders.

In his book, Humble Inquiry that he co-authored with Peter A Schein, Prof Edgar listed three different forms of humility. The first and the most basic form of expression that we generally adopt in social life is: “the humility that we feel around elders and dignitaries”. The second is “the humility that we feel in the presence of those who awe us with their achievements”, which indeed is a standard practice in our professional life. It is the third kind of humility, which he labeled as “here-and-now humility” that he considers as the most relevant for business leaders to achieve the mission of the organization but rarely observed. 

Now, the question is: why practicing “here-and-now humility” is so rare among leaders? Schein offers an explanation: A leader feels that his status turns inferior to the other when he asks him to perform some work for accomplishing his goal. He also feels that he is required to be humble in such situations. Hence, people often would rather prefer to give off the task than to admit their dependency on someone else. 

In Rāmāyana we come across a scene that is worth recalling here. Rāma, amidst the sound of kettle drums and couches, arrives in Lanka. Hearing the sounds, Rāvana summons his ministers to chalk out his further course of action. Malyavan, the maternal grandfather of Rāvana, a sagacious ogre, in an attempt to convince him about his folly, says: “That monarch, O King who is well-versed in the fourteen sciences and follows the path of prudence enjoys sovereignty for a long time and brings his enemies under subjection … our enemies who have embraced virtue and renounced evil are stronger than we …beholding dreadful portents, I foresee the extermination of all the ogres … Therefore, conclude peace, O Rāvana, with Rāma” (VR 6-35:7-37). 

But Rāvana, in his intoxication of power, abuses him thus: “This noxious and harsh utterance … has not caught my ears …I fear I have been told such harsh words by you either because of spitefulness to me, … or because of your predilection to the foe or because you were incited by the enemy to do so”. In that hubris, he goes on to claim, “Of whom will Rāvana entertain fear in an encounter”. Further, he proudly declares: dvidhā bhajyeyam apy evam na nameyam tu kasyacit / … (6-36:11)—I would fain break in two, but would never bend before anyone…” 

And, we all have seen how the fate of such leaders ends. It is thus evident that though ahankar gets attention, it is the modesty that gets results. Which is why, leaders in all walks of life may have to feel confident of themselves to be humble to admit that they don’t have all the answers and have to reach to people for right answers. 

It is from shunning the trait of ahankar, which emanates from self-belief, that Maryāda stems. Maryāda is a finely honed sense of rectitude in one’s behavior. This is an adjective that is often used by Vālmki to define the character of Lord Rāma and present him as the ideal role model. 

We come across a beautiful scene in Yuddhakānda that depicts the unimpeachable courtesy (Maryāda) for which Rāma is known. In the course of great fight with Rāvana, Rāma in his anxiety to stay focused on destroying Rāvana once for all, asks Mātali, the charioteer sent by Lord Indra, to advance the chariot swiftly towards the enemy’s chariot, without confusion and with steady heart and vision. Then suddenly, as if wondering how a mortal like himself could instruct Mātali, an immortal sent by Indra, lord of gods, he hurriedly says: “smāraye tvām—I am reminding you, na śikshaye—not teaching you” (6-106:13). As an occupant of the chariot, it is not wrong of Rāma to instruct the charioteer to operate the chariot in whatever way he wishes to gain advantage over the opponent. But Rāma, the Maryāda Purushottam, man embodied with a sense of honor, not mind to seek charioteer’s help humbly—“I am reminding you; not teaching you”—so that he gets the best of his attention in handling the chariot. That is the excellence of Rāma’s character. And indeed, Mātali, being extremely gratified with these words, drives the chariot as desired by Rāma (6-106:14). 

It is the maryāda sans ahankar that is the most effective and sustainable mindset which serves the leaders who aim at mighty goals in a world full of unknowns. 

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‘Kingmaker Naidu Returns’

 

‘Yes’— that was the headline on page 3 of the Economic Times of 5^th June 2024. Similar comments —“Naidu calls shots in Delhi”, “the CEO of AP is back in power”, etc.— were, of course, aired by every other member of the national media.

People of Andhra are however not enthused by that coverage, for it does not make much material difference to them. Rather, what they are concerned more about is:

• Can Mr Naidu make the abandoned Amaravati a functional city, vibrant with life?
• Can Mr Naidu restore law and order in the State to its rightful place?
• Can Mr Naidu complete the remaining 25% construction work of the Polavaram project and operationalize it?
• Can he create employment in the State?
• Can he generate income for the State which phenomena squarely rests on capital-incentive projects, which in turn calls for infrastructure development?

True, these tasks are not going to be easy, for Mr Naidu and his government are likely to face an acute shortage of financial resources. But his electoral college knows that the 75-year-old Naidu— a politician with a never-say-die attitude—weathered several such storms in the past, including an attack on his life by Naxalites in 2002, and hence, pinning all their hope on him, look forward to a liberal, law-abiding and an economically vibrant Andhra.

Interestingly, in a recent meeting with his party’s newly elected MPs, Mr Naidu said: “You will see a new Chandra Babu from now… there is an accusation that Chandra Babu will not change. It will not continue anymore…”

People of Andhra therefore presume that he “would not repeat the mistakes that he had committed during his previous tenure as the Chief Minister”. This indeed gives new hope to the farmers of Amaravati who willingly enabled him to procure 34000 acres of land for the proposed capital of the newly formed Andhra Pradesh. In this context, they expect Mr Naidu to:

• set aside his passion for building iconic structures such as those designed for housing legislative assembly, high court, etc., for their designing and construction are time-consuming and highly capital-intensive, and instead, build the road network as per his original plan of the city, create supporting urban infrastructure such as sewage system, electric lines, etc. so that it becomes ready for building superstructures by public and private investors…
• be content with the present structures that are housing the assembly and high court, at least for the time being so that the time, energy and financial resources can be used to make the pooled land ready for utilization by various agencies interested in setting up their establishments
• handover the developed and reconstituted plots to farmers who participated in the Land Pooling Scheme as agreed in the development program
• focus time and energy on finishing the construction of buildings such as secretariat towers, Judges' quarters, etc. that were left half-done and make them ready for occupation by the concerned on top priority
• pursue the Central Government Departments/Public Sector Undertakings that have earlier got the land allotted for them to construct their office buildings and also impress upon them to start functioning from Amaravati at the earliest
• pay the promised lease rentals to farmers of Amaravati that have been in pending for payment
• convince private establishments such as HCL Technologies, Amrita University, etc., who had acquired land and indeed started construction of buildings for establishing their institutions but half the way abandoned to start their operations in Amaravati by impressing them about the permanence of Amaravati as the capital city of AP.
• invite afresh tech companies, both global and domestic, to establish their service centres in Amaravati by showcasing the merits of Amaravati such as the availability of a pool of skilled manpower, a newly built planned city with hassle-free mobility, etc.
• squash the cases filed by police against the peacefully agitating Amaravati farmers, including women who relinquished lands under the LPS against the three capital proposals of the previous regime for more than three years

Simply put, citizens of AP are expecting Mr Naidu to make Amaravati fully functional in the coming three to five years so that no one can dare doubt its stature as the capital city of AP in the days to come. They also believe that once Amaravati is made functional with basic urban infrastructure in place, it grows on its own through private investment thereafter—even if someone shifts the Court or Secretariat to another place in the future.

Such a danger of shifting the administrative offices to other places cannot be ruled out since Indian polity is known for its idiosyncrasies: in our country, opposition party’s sole duty is to oppose everything that the ruling party does—whether it is good or bad, and once it comes to power, reverse all the decisions of the previous regime —no matter what it costs to the exchequer. That being the reality, people are looking at Mr Naidu to give a permanent shape to Amaravati in the coming three to four years.

Another important expectation of the youth from Mr Naidu is: Creation of employment. The ‘India Employment Report 2024’ released by ILO states that India’s large young workforce, often considered a demographic advantage, faces challenges due to lack of necessary skills. It states that a “significant portion of youth lacks basic digital literacy skills, with 75% unable to send emails with attachments, … and 90% unable to perform basic spreadsheet tasks like putting a mathematical formula”.

The report suggests “integrating high-quality skills training into education to uplift economically disadvantaged groups and boost employability. It also recommends improving access to IT and bridge the digital gap”. Despite the bitterest experience meted out by the previous regime to Mr Naidu, the youth of the State look at him to facilitate the development of their skills and make them employable, which calls for further strengthening the skill development facilities in the State.

Hope of the State is: Mr Naidu will simply deliver what the State is fondly expecting from him.

Should India Go Whole Hog for Chip Making?

Today, it is generally perceived that electronics is the core industry for economic success. For, electronic components are considered critical for manufacturing not just laptops, smartphones, and TVs, but also home appliances, cars, medical equipment, construction equipment, etc. If India wants to place itself in a prominent position in the changing world market that is today witnessing the Fourth Industrial Revolution, it must nurture companies that engage in design, innovation and manufacture of electronic devices.

Rightly, the Government of India has put in place a comprehensive industrial policy for electronics: It raised tariffs on certain electronic goods such as TVs and laptops and two, launched a Production-Linked Incentive (PLI) scheme for large-scale electronics manufacturing. Intriguingly, the PLI is currently focusing more on chip manufacturing.

In this context, we need to take a deeper look at chip-making. First things first. A semiconductor is a product made of silicon, which conducts electricity more than an insulator such as glass, but less than a pure conductor, such as copper or aluminium. The conductivity and other properties of a chip can be altered by introducing impurities, called doping, to meet the specific requirements of the electronic device in which it is going to reside. As we all notice, today these chips are found in many products such as smartphones, laptops, home appliances, gaming hardware, motor vehicles, medical equipment, etc.

Success in the chip business depends on creating smaller, faster, and cheaper products. The more the number of transistors on a chip, the faster it can perform the task. Incidentally, Moore’s law states that the number of transistors in a dense integrated circuit doubles in every two years. But nowadays, the doubling period is reduced to about 18 months. The result is: A consistent pressure on chip makers to come up with something better and cheaper than what is today available in the market—no matter even if it is considered as state-of-the-art.

Over it, the chip industry is highly cyclical—it is exposed to boom and bust cycles. For, demand depends on the demand for the end market products. Secondly, it is the hardest technical activity, for it involves, correctly etching and connecting billions of transistors that are 50 times smaller than a virus. And we lack the specialized hardware as well as service and skills ecosystems that the chip industry calls for. Thirdly, chip manufacturing calls for huge investments with long gestation periods. Fourthly, it requires ultra-pure water in large quantities and ultra-stable power supply.

Here, it is worth remembering what Chris Miller, the author of the book, Chip War, said in a fire-side chat at the Tamil Nadu Global Investors Meet: “Governments should be sceptical of the idea that spending a lot of money on fabrication is the best strategy. It could be in certain circumstances for certain purposes but your marginal dollar is probably best spent in other parts of the supply chain. There’s more money made in chip design each year than there is in fabrication.”

Miller went on to say that India already enjoys a distinctive advantage in chip design. For, currently more Indians are working on chip design than anywhere else in the world. This fact tells us that it makes more of a business sense to leverage on this part of the supply chain rather than investing afresh heavily in chip making.

Looking at these constraints, one wonders if India could become a global player in chip-making. Instead, as many academicians are recommending, the government may consider supporting the development of a cutting-edge fabless chip design industry in the country with appropriate incentives. Encouraging innovation in designing chips by appropriate subsidies may pave the way for the existing players to catch up with the high-end demands. Reports indicate that there are already over
20,000 engineers in the country designing and supplying about 2000 chips every year to third parties. So, leveraging on these strengths government should aid businesses to transform into such companies that design and sell their chips that are, of course, manufactured by a third party.

Similarly, we must also aim at leveraging our known strengths in the field of assembly and testing to credibly establish ourselves in the Outsourced Semiconductor Assembly and Test (OSAT) and Assembly, Test, Marking and Packaging (ATMP) segments of the industry. Indeed, these segments of the value chain are cheaper to set up and employ more people too.

As the US and EU are looking for new supply chains that exclude China, India can use its blooming relationship with them to step into these non-manufacturing segments of the supply chain of chips and make a mark for itself in the global chip industry as a reliable partner in the chain.

Against this backdrop, Tata Electronics is erecting a fabrication plant in Dholera, Gujarat with an investment of around $ 11bn (Rs 91 000 cr) in technical collaboration with Taiwan’s Powerchip Semiconductor Manufacturing Corp. It will focus on manufacturing legacy chips —chips of 28-nanometer—that are mostly used in automobiles, consumer electronics and defence.

Another Tata company, Tata Semiconductor Assembly and Test Pvt Ltd. is coming up in Assam with an investment of $ 3.26 bn (Rs 27000cr) to develop “indigenous advanced semiconductor packaging technologies” for automotive, EV and consumer electronic segments.

M/s CG Power is building its plant in Sanand, Gujarat in partnership with Japan’s Renesas Electronics Corporation and Thailand’s Stars Microelectronics with an investment of $ 1bn (Rs 7600 cr) to produce chips for consumer, industrial, etc., applications.

A couple of years back, Gujarat faced a shortage of even drinking water for supply to cities/towns. That aside, we also see the rush of fresh investment by giants such as Intel from the US, companies from Japan in partnership with Taiwan, and companies from the EU into chip manufacturing at the 'cutting edge'. Reports indicate a huge rush of companies from China, Korea, Japan and even Western countries to Malaysia to establish packaging, assembling, and testing chips. There is indeed a mad rush of fresh investment into semiconductor production, and amidst it, for a new entrant, the complexity and capital-intensive nature of chip manufacturing will become a real challenging endeavour. 

Normally, semiconductor companies are likely to realise positive cash flows within about five years, but if the utilization drops below the installed capacity, it may take even longer. Over it, the steady technological improvement being the mainstay of the semiconductor industry, a ‘winner-take-all’ dynamic has become the norm of the industry, in which a new player is certain to encounter stiff competition.

With so much at stake, the new players need to keep in mind all these consternations, which, of course, they would, for awareness of challenges may do a lot of good. 

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COP 28: Certain Programmes Call for Harder Pursuit

 

Way back on December 12, 2015, when the world’s community of nations had at last come up with a blueprint in Paris to address the threat posed by the most calamitous effects of climate change—ambitious plans were drawn to cut the greenhouse gasses enough to hold the rise in global temperature to well below 2⁰ C, and ideally just 1.5^o C from pre-industrial levels —everyone raised to their feet cheering in euphoria. At it, electronic media even proclaimed: “This is the end of fossil fuels.”

Encouragingly, following the Paris Agreement, the responses from the Western world looked promising as coal-fired power projects were scrapped. Electric cars and green energy have mushroomed all around giving faint hope that the end of fossil fuel growth is not far off. Alas! This didn’t however last for long. Reports indicate that record levels of coal was fired last year. The consumption of fossil fuels is reported to be at a record level this year.

Over it, the latest data released from Copernicus—an EU climate-monitoring service— reveals that the year 2023 was the hottest ever recorded. It put the average global temperature for 2023 at 1.48^o C above the pre-industrial average. Much of the heat ran for about six record-breaking months. The main reason for this warming is human greenhouse gas emissions. El Nino, a natural climate cycle, had, of course, further amplified it. It is further feared that this could make 2024 still hotter.

According to the 2052 Climate Change City Index developed by Nestpick, a range of high- and low-income cities stand exposed to the risk of rising sea-level damage. The list is headed by Bangkok at the top with Amsterdam, Shenzhen, and Dubai also ranking high. As extreme weather events are expected to become more intense and frequent, the number of cities exposed to extreme heat is expected to triple by 2030. This is likely to result in huge human and economic costs. This would be felt more in African and Asian cities.

Owing to increased economic activities and the resultant rise in population, the ‘urban heat island effect’—the phenomena of urban cities becoming hotter than villages due to heat-trapping and emissions from buildings — could also be exacerbated. So, it is feared that millions of impoverished urban dwellers from these developing countries would be exposed to the risk of flooding, sunstrokes, and famine. According to an estimate made by C40—a network of city mayors—climate-change-related flooding and drought could cost the world’s major cities about $ 194 bn annually.

As the Paris Climate Agreement’s goal of limiting the rise in global temperature to well below 2⁰ C, and ideally just 1.5^o C from pre-industrial levels potentially slipping out of accomplishment, such vulnerable cities are expected to step-change their resilience efforts. Yet, except for a few cities that have taken up activities such as greening, many cities have not initiated adequate measures. Unless cities wake up to the risk by undertaking greening of cities and retrofitting aged infrastructure, the urban economic powerhouses are sure to face increasing strain which could ultimately lead to high economic costs.

Amidst these threatening risks overpowering us, negotiators assembled at the COP28 hoisted by a petrostate, Dubai under the stewardship of a fossil-fuel CEO, had succeeded in getting the support of 118 governments to triple global renewable-energy capacity and double the annual rate of energy efficiency improvements by 2030. Another good news for climate activists is: 22 governments pledged to triple global nuclear-energy capacity by 2050.

Although the focus is more on reducing the emission of carbon dioxide, reduction in the emission of methane gas is considered responsible for 45% of the planetary warming of this decade. In this context, the long-awaited announcement by the US Environment Protection Agency on December 2 to cut methane emissions from the oil and gas sector by around 80% over 15 years, is quite laudable. Simultaneously, around 50 oil gas companies, including ExxonMobil, Shell, Saudi Aramco, and ADNOC pledged to eliminate methane emissions. It is hoped that this promise will turn into reality soon.  

All these pledges sound good, but the haunting fear is that the climate crisis cannot be tackled unless its financing is transformed. It is in everybody’s knowledge that the global South faces double jeopardy: one, countries in the global south are disproportionately affected by the consequences of climate change that was largely caused by the historical emissions of the global north; and two, they lack funds to address the threat posed by climate change.

Thus, the countries in the global south face a huge financial gap: They need about $ 4.3 tn by 2030 to escape from the worst impacts of climate change. Secondly, the quality of finance plays an equally important role. Thirdly, such spending must be looked at as an investment, but not a cost. For, the cost of inaction far outweighs the cost of action. So, if we wish to realize meaningful progress on the mitigation of climate change, we must move away from being reactive to a proactive state where financing the fight is well taken care of by the Western world to ensure a just green future.

Before concluding, a word about ‘solar geoengineering”, also called solar radiation management. Scientists have come up with a proposal to lower global temperatures by reducing the amount of light absorbed by Earth by stratospheric aerosol injection (SAI) or whitening clouds over the ocean. SAI is expected to reflect sunlight into space and hence it is expected to be effective at slowing global warming within years. It however entails certain concerns: SAI could deplete stratospheric ozone, may lead to acid rain, and most importantly, it may drive resources away from mitigation. It therefore calls for an in-depth study to ascertain its pros and cons and also public perceptions of such interventions.

That said, we must first appreciate that the planet’s vital signs are fast heading the wrong way. Hence, every effort toward decarbonization must be prioritized. However hard its pursuit might be, a worldwide campaign must be launched to mobilize resources, both financial and technological, to avert catastrophe, for our very existence rests on it.

 

2024: What Is at Stake?

As the New Year dawns, the ongoing globally significant events such as the Russia-Ukraine war, Israel’s bombing campaign in Gaza, climate catastrophes, and the recently unveiled ChatGPT are challenging the wit of mankind— indeed our very hope for a better future. 

Of these, the potential of generative artificial intelligence (GenAI) is certain to have a profound impact on the labor market. It is feared to result in the elimination of many jobs, and the restructuring of many others. The effect is likely to be more acute among knowledge workers. Indeed, Fortune predicts that within 15 years chatbots, robots, and other AI bots are likely to replace 40% of all jobs. 

Over it, Gary Marcus, a New York University Professor Emeritus of Cognitive Science and a skeptic of the deep learning-centric approach to AI, argues that the AI systems “can easily be automated to generate misinformation at an unprecedented scale”, for literally there are “no mechanisms for checking the truth of what they say”. He is therefore worried that GenAI poses “a real and imminent threat to the fabric of society”. 

A study carried out in Indian banks—both private and public sector—reveals that AI in banks might heighten existing risks and also introduce new risks such as consumer protection concerns. The opaqueness of AI models is found to make compliance with laws, regulations, and internal controls more complicated. The study also warns that AI models may trigger market shocks, besides amplifying systemic risks owing to procyclicality.    

It is also feared that there will be a lot of shrinking occupations—about 80% of the occupational transitions are likely to be around jobs such as customer service, food service, production, and office support. Even jobs such as writers, lawyers, and consultants that lie on the higher end of the wage range are also likely to be affected by AI and they all need to work differently. Cumulatively, the number of people going to be affected is significant and frightening. One estimate by McKinsey puts such occupational transitions that are likely to happen between now and 2030 at around 80% of the existing numbers. 

Amidst these threats, as noted by Tojin T Eapen et al. in their Harvard Business Review article (July-August 2023), GenAI also offers the biggest advantage of augmenting human creativity and overcoming the challenges of democratizing innovation. The authors also claim that AI can help in supplementing the creativity of employees and customers and help them produce and identify novel ideas. According to them, “AI can promote divergent thinking, challenge expertise bias, assist an idea evaluation, support idea refinement, and facilitate collaboration among users”. 

Amidst these conflicting expectations—some worrying about the threat posed by GenAI and some marvelling at its potential to make businesses more productive—one ends up wondering: Is the obsolescence of human beings the technological goal? Indeed, well-meaning people are challenged, nay prodded to ponder over the question raised by American novelist and poet Wendell Berry some five decades back: “What people are for?” 

This leads us to think about how to preserve the heart and spirit of people who are likely to be made obsolescent by AI. Of course, there is an answer: Encouragement from the employers for those employees who are likely to be affected by AI to acquire new skills so that they can repot themselves in other occupations. Such a massive reskilling and upskilling of those employees who become redundant can only happen under a kind of public-private partnership between companies and governments. 

Looking at the changing demographic pattern, consumption trends, and growing gross domestic product, one can safely presume a good rise in the number of jobs in the service sector but they certainly call for higher levels of education. In this context, educational institutes have a bigger role to play in imparting new skills to this class of workers. 

Said that, we must also bear in mind the special needs of the less-privileged class of society—women, people from hitherto suppressed classes, rural youth, etc.—so that they are not outrightly excluded from the future job market. 

Stakes are no doubt, high. But they are not insurmountable. For, the fear of new technology evaporating jobs is after all as old as civilization. Here, it is worth remembering what Tojin T Eapen et al said: “AI’s greatest potential is to assist humans in their individual and collective efforts to create hitherto unimaginable solutions”. So, all that it calls for is: A strong resolution among employers, employees, and the government to reequip the concerned to unlock the value embedded in AI’s revolutionary technology.

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Image courtesy: Science.org

Vande Mātaram …

 

As India is getting ready to celebrate its 77^th Independence Day, a picture that was etched in my mind since my childhood by virtue of reading Andhra Patrika, a popular Telugu newspaper of the fifties, flashed in my mind. It was none other than the iconic image of Pandit Nehru on the red fort (placed alongside).

The other thing that I remembered is the comments of colonialists: India is a “mere geographical expression” and is “no more a united nation than the Equator”. For the colonialists, India, with its kind of ethnic, religious, linguistic, and developmental diversities, cannot dream of having self-government. They even predicted that if the British left, it would “fall back quite rapidly … into the barbarism and privations of the Middle Ages.”

Similar trepidations—“forecasts of imminent dissolution, or of its descent into anarchy or authoritarian rule”—continued to haunt the country even after it commenced its independent journey towards its chosen ‘tryst with destiny’.

Not surprisingly and despite these predictions, we have remained together —both in our fight against internal and external threats and in progress. We have proved to ourselves that ‘democracy’ is a cherished value to us.

And the credit for this goes to Pandit Jawaharlal Nehru —the first Prime Minister Of Independent India—who at the stroke of midnight hour on August 14, 1947, when India “awakened to life and freedom” from years of suppression, pondered thus:

The future beckons to us. Whither do we go and what shall be our endeavor? To bring freedom and opportunity to the common man, to the peasants and workers of India; to fight and end poverty and ignorance and disease; to build up a prosperous, democratic and progressive nation, and to create social, economic and political institutions which will ensure justice and fullness of life to every man and woman,

and his deputy, Sri Vallabhbhai Patel, for whom the rulers of various kingdoms were “worthless … sycophants’ deserve to be dethroned by their people, in the larger interest of the nation, adopting a diplomatic and pragmatic approach convinced the princes of the benefits of joining the Indian Union and thus avoided the possible ‘balkanization’ of India.

The ‘unending quest’ that Pandit Nehru launched 76 years ago and navigated the newly independent India through democracy for the first 17 years assiduously, leaving behind a certain ‘something’ about his midwifery to the nation’s cause which even to date smells sweet, is still firing the nation’s zeal, though one is not sure if we have ended “poverty and ignorance and disease and inequality of opportunity.” Nor could the nation wipe out “every tear from every eye,” for worries continue to haunt rural India.

That said, we must also note that the progress we have achieved during the last 76 years is phenomenal. Today’s India is more vibrant, confident, and enterprising. Its economy which once almost stagnated under colonial rule for more than a century, is today growing at around 6% plus. It has improved its literacy rate, banished famines, drastically reduced poverty, achieved global competitiveness in information technology, became a de facto member of the nuclear club, and its democratic government’s commitment to secularism that has taken the nation forward with all its inherent diversities has become its hallmark.

Talking of India’s accomplishment in managing its inherited diversities much against the speculation of many skeptics, one is reminded of the strong foundation laid by its maharishis of yore for nurturing the spirit of accommodating diverse languages and lifestyles—all under a unifying umbrella of dharmic principles enshrined in the Vedas and Upanishads.

Interestingly, for these maharishis India is: Jambudweepe, Bharatvarshe, Bharatakhande… For them India is a khand of chappanna-desh. Each of them—Anga, Vanga, Kalinga, Khambhoja, Sourashtra, etc.—is encouraged to live with its own language, its own customs, and practices, almost as an independent state. But the use of local languages is just limited to the material world. When it comes to their adhyatamic pursuits, right from Kanyakumari to Kashmir, everyone has to resort to Sanskrit—God’s language in which their dharma had been enshrined. They had no alternative and that holds good even today.

In the same vein, their epics are in Sanskrit. Nobody knows in what language Sri Rama spoke to Sita. Yet, everyone knows him through Sanskrit. And so only he has become the soulmate of everybody.

The concept of Bharatvarsh and chappanna-desh is like light and darkness. When light is there, darkness remains away. And in darkness light becomes invisible. Similarly, when an individual is Bengali, the Indian in him stays away. In the same way, when a Bengali becomes Indian, then Bengali disappears. And as light cannot be perceived without darkness, an Indian cannot be perceived without there being a Bengali, Gujarati, Malayali, etc., and vice versa. The maharshis of yore have thus ingrained the concept of ‘unity in diversity’ at the dawn of civilization.

It is through such yoking together of diverse lingua franca by subordinating their material living to the unifying dharma expressed in Sanskrit, that the maharshis could succeed in creating and sustaining Bharatvarsha.

And so long as India abides by these inherited values—the “loftiest Vedantic thought, Vasudeva Kutumbakam”, a certain kind of agnostic pluralism leading to universalism as against the “exclusive individualism” of the West—nothing can wean it away from its chosen path of being a free, all-encompassing, progressive and progressing nation.

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Adani Group: A Ride by a Short Seller!

 

It all happened within a week: Gautam Adani, founder of the Adani Group, who until recently was the richest Indian in the world, has now slipped to the 22nd spot in the Forbes billionaire list.

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On January 24, Hindenburg Research, a US-based investment research firm with a focus on activist short-selling founded by Nathan Anderson in 2017, released a report accusing the Adani Group of “a brazen stock manipulation and accounting fraud scheme.” Citing two years of research, including talks with former Adani senior executives and the analysis of thousands of documents, it stated that the key listed companies in the group had “substantial debt,” and thus the group companies are on “precarious financial footing.” 

The report further stated that “the seven key listed companies of the Adani Group are 85% plus overvalued even if you ignore our investigation and take the companies’ financials at face value.” It is, perhaps, in support of this averment, the report furnished a table indicating a company-wise PE ratio, a price/sales ratio, and an EV/EBITDA ratio, along with the industry average and the implied downside thereof. They are all on the higher side vis-à-vis industry averages. For instance, the PE ratio of Adani Enterprises is shown at 508x as against the industry average of 12x, which would mean a downside of –97.68%, a price/sales ratio of 5.7x as against the industry average of 0.5x, which implies a downside of–91.33%, and an EV/EBITDA ratio of 66x as against the industry average of 8x, which means an implied downside of –88.16%. 

Within a couple of days of the release of the Hindenburg report, Adani Group countered the accusations with a 413-page response calling the document “a malicious combination of selective misinformation and concealed facts relating to baseless and discredited allegations to drive an ulterior motive. This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gains through wrongful means at the cost of countless investors.” This is, however, rebutted by Hindenburg, who states that Adani’s response did not address any of the substantive points that the report raised. 

The outcome of all this is the free fall of the share prices of the Adani Group companies. According to a report in Reuters, the combined market cap of the group fell within a week by 47.44% to $108 bn as against $218 bn before the release of the report. Its spillover is felt by the rest of the market too: the share prices of LIC and SBI declined by 8% and 5%, respectively. This has also moved Gautam Adani out of the top 20 richest people’ list of the world. It even hurt the FPO of Adani Enterprises, which was opened for subscription on January 27, for the participation of retail investors was tepid, leading the group to finally junk it, although subscriptions from qualified institutional investors and anchor investors came in. 

Now, the moot question is: What did Hindenburg get out of all this? As mentioned in its report, having taken a “short position in Adani Group companies” through bonds that trade in US and other investments that trade outside India, it might have made a profit. For, shorting is nothing but borrowing the stock from the market and selling them expecting its prices to fall substantially owing to the report released, hoping to buy them back at a lower price and thus make a killing. However, in view of the prevailing Indian regulations that make upfront disclosure of short positions mandatory, it is not clear how it structured its bet. One possibility is that it might have taken a position in the derivatives market or in the bond market. Nevertheless, going by its past actions, it becomes very clear that it released the report with the intention to make a profit. 

Amidst this crisis, Adani Group has made a smart move: it has called off the FPO of Adani Enterprises. In a regulatory filing, Gautam Adani, Chairman of Adani Group, said, “… the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the company’s board felt that going ahead with the issue would not be morally correct. The interest of the investor is paramount, and hence to insulate them from any potential financial losses, the board has decided not to go ahead with the FPO.” He also said, “… the company shall forthwith refund to the bidders the entire application bid amounts or subscription amount received in the offer in accordance with applicable law.” 

Of course, one has to wait and see how good this move would be in creating confidence in the governance practices of the group. There is a general perception in the market that the stocks of Adani Group have outperformed the market, but its debt instruments are declining in value. This phenomenon, coupled with the regulator’s likely probe of the whole issue, could mean the group would have to wait longer than expected before it regained investors’ confidence. Meanwhile, it may be safe to say that there may not be any existential threat for the group, although its ability to fund its Capex programs will be affected. Also, the fact that no rating agency has yet reappraised its debt too could give some relief to it and also to its various stakeholders. Nevertheless, in light of the canceled FPO, it will have a tough time servicing its debt from internal revenues. And to that extent, the extant lenders to the group stand exposed to default risk. But Mr. Adani, who is known as an able operator, is sure to wriggle out of the crisis.