Editorial 1 : As the World Warms and Cools
Context: Why climate change is a national security issue.
Disasters: Economic Downturns
- The effect of natural and other disasters in different parts of the country around the year, hugely dent the national aspirations of making India a $5-trillion, and then a $10-trillion economy.
- Disasters are major causes of economic downturns.
- They are also a major threat to national security.
Disaster Risk Insurance
- At the Asian Ministerial Conference on Disaster Risk Reduction (DRR) held in New Delhi in 2016, PM Modi outlined the Ten-Point Agenda for Disaster Risk Reduction (DRR).
- The second point of the agenda states: “Risk coverage must include all, starting from small households to SMEs, to multinational companies”.
- Disaster Risk Coverage: Connotations
- Physical safety from disasters through early warning systems, mitigation, and effective responses when everything else fails.
- Necessity of the hope of receiving optimum compensation for losses.
- Need for Insurance: It is difficult for the state to compensate individuals in full to rebuild lives and livelihoods, and simultaneously recoup losses in terms of infrastructure and other aspects of recovery.
- Insurance companies have analysed disaster risk in a professional way at the international level and found that there are doable business models.
Disaster Risk Insurance in India
- Lately, disaster-related insurance is receiving due attention in India.
- The National Disaster Management Authority (NDMA) of India recently conducted a daylong workshop on this theme along with the heads of several important insurance companies and intellectuals from the financial world.
- It provided several takeaways that can be developed into insurance instruments in ways that satisfy the objectives of insurance companies, government and private individuals.
Parametric Insurance
- Parametric insurance is the sought-after financial domain by disaster managers with no apparent objection from the insurance world.
- It ensures that on the occurrence of certain mutually accepted parameters related to identified hazards, insurance will be available to the insured without verification of individual claims.
- Benefit: This cuts down time-consuming and often annoying bureaucratic scrutiny and approval spirals.
Human Security and National Security
- Disaster risk insurance can enhance key aspects of human security and human security holds the key to national security.
- Displaced and homeless people have always been targeted by radical ideologies around the world. Their vulnerability is exploited to the hilt.
- Such vulnerabilities invariably lead to illegal migrations and restiveness in the receiving societies.
Examples from Around the World
- Haiti, 2011 Earthquake
- 3,16,000 people died and many Haitians were forced to migrate due to the inability of the country’s government to assist them in rebuilding their lives.
- The wave of migration from that event haunts the US even today and is a major issue in the current presidential contest.
- Africa – Frequent Droughts
- Africa’s frequent tryst with drought has had an immense impact on nations such as Somalia, Sudan and Western Sahara.
- It has been one of the reasons for societal turbulence that has afflicted a large number of countries in Africa and pushed them into severe debt traps.
- Pakistan-Afghanistan
- In 1981, three million refugees came out of Afghanistan as a consequence of the Soviet invasion. They were housed in tented camps in Pakistan along the Pakistan-Afghanistan border and fed by UNHCR.
- The presence of hundreds of radical preachers ensured the birth of the young Taliban.
Conclusion: As the world warms and cools, it needs to look at human security much more pragmatically and be more focused on bringing disaster risk insurance to the fore, globally.
Editorial 2 : The $500 Billion Opportunity
Context: India’s $500 billion opportunity for electronics manufacturing and how not to lose it.
Electronics Manufacturing Target
- PM Modi announced a $500 billion target for electronics manufacturing in India by 2030.
- Benefit: Growth in electronics manufacturing will help solve India’s jobs challenge.
- Audacious Target
- India’s entire manufacturing output in 2023-24 was roughly $660 billion.
- Meeting the target would mean sustaining growth rates few countries have achieved and will require equally audacious reform.
- Much of this growth will have to be export-led.
Achieving Export Competitiveness
- Competitive Regional Clusters
- From its beginnings in Silicon Valley to its later centres Taiwan, Japan, South Korea and then more recently Shenzhen in China and Northern key economic region (NKER) in Vietnam, competitive regional clusters have driven growth in electronics.
- In India too, clusters in regions like Sriperumbudur in Tamil Nadu and Noida in Uttar Pradesh have recently been growing fast, and account for nearly 50 per cent of our electronics exports.
- To sustain and accelerate growth in electronics, we need deep and ambitious region-led reform that can create large, globally competitive electronics manufacturing regions.
Factors for Success of Regions
- Large size with anchor investors
- Large size is essential for competitiveness.
- Large size helps in co-locating suppliers and buyers, which is important for ecosystem competitiveness.
- It also helps invest in large, efficient shared industrial infrastructure like effluent plants and testing facilities that lower costs for everyone.
- Large zones make it possible to have social infrastructure like worker housing, schools, hospitals and recreation facilities.
- Shenzhen which alone exports around $350 billion, is 2,000 km2, while the largest Indian electronics cluster, under the government’s Electronics Manufacturing Cluster (EMC) scheme, is 2.5 km2.
- Customised regulations to suit export activity
- Large size and anchor investors alone will not be enough. These regions need a regulatory environment that is conducive to exports and comparable to the best manufacturing regions.
- Labour Laws: The priority would be pro-employment labour laws, allowing longer shifts, globally competitive over-time rules and removing restrictions on employing women, who make up a majority of electronics workers.
- Taxation: The other key area of customised regulation is taxation and tariffs. Electronics manufacturing have extremely specialised supply chain participants, it means that much of movement is cross-border, even in countries with much greater value add. We should allow foreign vendors or brands to manage component inventory seamlessly across borders without tax or tariff implications.
- Current Indian tax laws make inventory management by foreign entities unviable, making manufacturing needlessly complex.
- Corporate tax and GST rates needs to be benchmarked against those in Vietnam and China to attract large global players.
- Devolution of administrative power down to the industrial park level.
- To ensure responsive governance, central and state governments also need to devolve requisite powers to the EMC authority so that it can provide all necessary approvals and permissions.
- PPP models that attract private players to manage the region and build plug and play parks are a good way of speedy and high-quality execution.
- Government has shown the willingness to enable such a differentially regulated zone for financial services in GIFT city, and needs to do the same for electronics manufacturing regions.
Conclusion: Without thriving manufacturing regions, the ambitious goal set by the PM will remain just another manufacturing target we have no hope of achieving.