Building India’s Semiconductor Industry
Dear Reader,
We hope you are doing well. This week’s edition discusses how India can build its semiconductor industry, assesses the Quad’s efforts to curb illegal fishing, and evaluates why tech sanctions will not be enough to stop Chinese aggression.
Building India’s Semiconductor Industry
In December 2021, the government of India approved a ‘comprehensive programme for the development of a sustainable semiconductor and display ecosystem’ – the first national program targeting the strategic industry. By announcing an allocation of US$9.78 billion towards developing a full-stack semiconductor ecosystem, New Delhi made clear that industrial policies are its instruments of choice.
In practice, however, state support through industrial policies can be problematic and does not always result in sectoral growth. Equally important – but underappreciated – to thriving semiconductor ecosystems are the roles of trade policies and technology transfers, which have led to greater efficiency, higher productivity, lower consumer prices, and faster technological advancement. Exploring this further, Pranay Kotasthane and Arjun Gargeyas wrote a paper for the Hinrich Foundation.
The paper outlines the role of trade policies in India’s current context. Divided into five parts, it offers examples of the utilisation of trade policies and technology transfer agreements by states to build industrial capacity and delves further into India’s semiconductor industry and its comparative advantages. The paper concludes with a review of the country’s current approach, the geopolitical challenges facing India to grow its microchip sector, and policy recommendations.
India’s Fantasy Sports Industry Needs a Coherent Policy
Last week, reports emerged that the Union government has set up an inter-ministerial panel to regulate online gaming. Online gaming is a popular emerging sector with great economic potential that has thus far been hamstrung by regulatory uncertainty. One of the reasons behind this uncertainty lies in the nomenclature. As a catch-all term, online gaming sometimes includes everything from online casinos to fantasy sports platforms such as Dream11. This is unfortunate given that Indian courts have repeatedly distinguished games of skill (such as Dream11) from games of chance (such as online casinos).
In an article on News18.com, Atish Padhy assessed the current state of the online fantasy sports industry and argued why the move to constitute a panel to look into the regulation of fantasy sports is welcome.
Xi Jinping’s Power is Intact
The past two months have seen intense speculation about the political churn within China. There have been reports of unhappiness and factional contestation around Xi Jinping’s policies on the Russian invasion of Ukraine, Covid-19 containment, and the direction of economic policy. This has fuelled rumours of a deeper pushback against Xi, heading into the 20th National Congress of the Chinese Communist Party (CPC). But that doesn’t necessarily mean that Xi’s authority has diminished.
Manoj Kewalramani wrote an article in the Hindustan analysing why Xi continues to enjoy unparalleled authority. He argues:
Over the past 10 years, Xi has structurally concentrated power. This has been done through the anti-corruption campaign, by taking charge of key policy groups, having key party and State institutions personally report to him annually and revising inner-party regulations. At least, 70% of the current effective central party regulations have been issued during Xi’s reign.
Similarly, while there was pushback against the central leadership’s COVID-19 containment policy after fresh outbreaks were reported in China, local officials have largely complied despite grumblings over the zero-Covid-19 policy and its adverse economic impact.
This demonstrates either the lack of broad political will to push back against Xi or that the political cost of such pushback is believed to be extremely high and, therefore, unviable. In such an environment, it is perhaps much more useful to think of reports of factional contestation as political jostling for crucial party positions and influence over policy direction instead of a political backlash against Xi’s continued rule.
Quad’s Attempt to Curb Illegal Fishing in the Indo-Pacific
In his column in ThePrint, Lt. Gen. Prakash Menon analysed the Quad’s new initiative, the Indo-Pacific Partnership for Maritime Domain Awareness (IPMDA), which is designed to respond to humanitarian and natural disasters and combat illegal fishing. He argued:
Notably, combating overfishing is part of other goals in the United Nations List of Sustainable Development Goals. Reports emanating from the West indicate that China leads in overfishing activities. But overfishing is difficult to prove. The more complicated part of the plethora of activities connected to illegal fishing is the friction generated by maritime claims based on the United Nations Conventions of the Law of the Sea (UNCLOS) wherein Exclusive Economic Zones (EEZ) provide geography based rights to nations for control of economic activities within the Zones.
It is difficult to envisage how the Quad can be the policeman to enforce an international agreement except with the concurrence of the United Nations. Moreover, the US has not ratified the UNCLOS but maintains that it recognises the UNCLOS as a codification of customary international law. According to a report by a private organisation based in Geneva, the two leaders in illegal fishing are China and Russia. South Korea and Japan too are high on the list. The US’ is also fairly high on the violator’s list. It would therefore be interesting to observe how the Quad will progress in combating illegal fishing.
Elinor Ostrom’s Framework for Effective Group Coordination
Dr Elinor Ostrom was one of the greatest environmental optimists of our time.
She won the Nobel Prize in 2009 for work on “Analysis of economic governance, especially the commons”, making her the first woman to win the prestigious award in economics.
In the June 3 episode of All Things Policy, Priyal D’almeida and Ritul Gaur talk about her work on the governance of commons, the eight core design principles that she derived from her extensive travel and study of thriving communities, and their implication in the Indian context.
Tech Sanctions Alone Cannot Stop China
Russia’s recent invasion of Ukraine led to targeted sanctioning activity by the western countries. Led by the US, these sanctions were meant to hurt the backbone of Russia’s economy and act as a deterrence tool for the country to scale back its military operations in Ukraine.
An interesting aspect of the West’s response was the imposition of tech sanctions on Russia. This was the first time that a single state was targeted with specific technology-related sanctions, such as export controls and import restrictions of critical technology components like semiconductor chips.
The tech sanctions on Russia would have a devastating impact on its economy and affect the domestic market’s ability to access essential technology goods. But if there is Chinese aggression against Taiwan in the near future, sanctions might not be enough. In his new article on News18.com, Arjun Gargeyas explored why.
That’s it from us this week. Take care!