GS Analyst: Daily Current Affairs

Context:

Sri Lanka struggles to attract foreign investment, hindered by land access issues, while regional peers excel in industrial development.

Sri Lanka's FDI Challenge and Land Access

• Comparative FDI Records: Sri Lanka lags behind in attracting foreign direct investment (FDI) compared to East Asian and Southeast Asian peers.
• Land Access Bottleneck: Difficulty in obtaining land has been a major obstacle for investors in Sri Lanka, hindering industrial growth.
• Efficiency of Export Processing Zones (EPZs): EPZs in East Asian countries offer pre-allocated land, reliable utilities, and streamlined services, a model Sri Lanka initially followed.

Government's Inaction

• Lack of New EPZs: Sri Lanka has failed to invest in new EPZs since 2002, despite acknowledging the issue.
• Unfulfilled Promises: Government made pledges to establish EPZs, but progress remains stagnant, as seen in budget speeches.
• Wasted Public Funds: Inadequate planning led to infrastructure spending without completing land acquisition, causing financial losses.

Regional Disparities

• Comparative Land Conversion Efforts: Neighboring countries have outpaced Sri Lanka in converting available land to industrial use.
• Shift in Global Supply Chains: Emerging opportunities in South and Southeast Asia for export-oriented FDI require addressing key bottlenecks.
• Call for Action in Budget Speech: The Finance Minister must move beyond promises and focus on concrete action for growth.

Context:

According to the recent estimates, India's Goods and Services Tax (GST) collections are expressing concerns over slowing growth and anomalies in import-related revenues.

Concerns about GST Revenues

• Slowing Growth Trend: GST collections in September 2023 showed a slowdown, with a growth rate of 10.2%, the lowest since July 2021.
• Factors Contributing to Slowdown: The growth in revenues from domestic transactions and services imports has decreased from 18% in June to 14% over the past two months.
• Impact of Pending Dues and E-Invoicing: September's revenues included pending dues from businesses since the GST regime's inception in 2017-18. Mandatory e-invoicing for firms with turnovers above ?5 crore since August 1 also affected compliance.

Analyzing Trends

• Shrinking Goods Imports Revenues: Revenues from goods imports have decreased significantly this year, raising concerns about possible revenue leakages.
• Anomalies in Import-Related Revenues: Despite a surge in goods imports to a nine-month high of $58.6 billion in August, revenues collected in September were 5.7% lower than the previous month.
• Need for Deeper Investigation: Authorities should conduct a thorough investigation to identify potential revenue leaks in the import sector.

Macroeconomic Resilience

• Positive Fiscal Outlook: India's GST revenues for 2023-24 stand at over ?9.92 lakh crore, showing an 11.1% increase over the previous year, with average monthly revenues of ?1,65,418 crore.
• Festive Season Boost: The ongoing festive season is expected to maintain collections above ?1.6 lakh crore this quarter, providing a comfortable margin for the government.
• Anticipated Slowdown in Q1 2024: The central bank expects a slowdown in real GDP growth to 5.7% in the January-March 2024 quarter, prompting the need for careful fiscal planning.

Context:

Government must invest in climate-resilient infrastructure and nudge fab units to adopt sustainable practices.

Challenges for India's Semiconductor Industry

• Semicon India Programme: Launched in December 2021 with Rs.76, 000 crore, aimed at developing semiconductor manufacturing in India.
• Need for Talent Development: Experts emphasize investment in talent development alongside financial backing for the semiconductor industry.
• Climate Change Risk: Moody's report highlights climate change threats, warning of potential damage to facilities, supply chains, and financial losses.

Environmental Impact of Semiconductor Industry

• Essential Role of Silicon Chips: Crucial for computing, smartphones, defense, and clean energy technologies like electric vehicles and solar panels.
• Large Environmental Footprint: Chip fabrication plants consume significant water, produce hazardous waste, and rank among top GHG emitters.
• Industry's Shift towards Sustainability: Leading companies like Taiwan's TSMC and others commit to achieving net-zero emissions by 2050.

Navigating Climate Challenges and Industry Growth

• Advantage of Starting Anew: India's semiconductor sector has a fresh start, learning from global best practices for sustainability.
• Need for Climate-Resilient Infrastructure: Greenfield centers in India's Semicon Programme should prepare for climate-related disruptions.
• Government's Role in Industry Development: Requires support, climate-resilient infrastructure investment, and promotion of sustainable practices in fab units.