HIGHLIGHTS OF THE WEEK

• A recent survey shows a sharp rise in self-employed women in India, driven by household enterprises and informal In FY 2023-24, 67.4% of working women were self-employed, up from 51.9% in FY 2017-18. Women’s labour force participation has also increased significantly, particularly in rural areas, but much of this is unpaid or informal work. Although more women are joining the labour force, this shift reflects economic distress rather than formal job creation.

• The Goods and Services Tax (GST) Council has established a 10-member Group of Ministers (GoM) to decide on the future taxation structure for luxury, sin, and demerit goods, following the planned end of the compensation cess in March 2026. Their task is to develop a proposal that will either retain the cess or replace the existing compensation cess regime with an alternative taxation method.

• With the US government imposing tariffs on Chinese goods ranging from 7.5% to 100%, concerns rise that China may divert its exports to other countries, including India. Products like solar panels, electric vehicles, and steel face the risk of being dumped into India, challenging local industries. Industry stakeholders have called for the government to prepare measures to monitor and prevent such dumping to safeguard its domestic market.

• Indian startups saw a slight 7% decline in funding, from US$8.2bn in 2023 to US$7.6bn in 2024, with a significant drop in funding rounds. However, India remained comparable to China, despite the large gap with US startups. The fintech sector also experienced a notable 39% decline in investments compared to last year
• Tata Electronics has entered an agreement with Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) for technology transfer to establish a semiconductor manufacturing facility in Dholera, Gujarat. This Rs 910bn investment aims to boost India’s semiconductor landscape, creating 20,000 jobs and advancing domestic production. The facility will produce advanced chips for AI, automotive, and other industries, leveraging next-gen factory automation.

1.   Economy at a glance – data release(s) of the week

    1.1.  Self-employment among women rises driven by household enterprises and informal work but share of women in regular salaries jobs declines¹

• A sharp increase in self-employment among Indian women has been reported in the FY 2023-24 Periodic Labour Force Survey (PLFS), with more than two-thirds of working women categorised as self-employed. This trend is largely driven by women’s involvement in household enterprises and small businesses.
• In rural areas, the proportion of self-employed women rose significantly to 5% in FY 2023-24, from 57.7% in FY 2017-18, while urban areas saw a rise to 42.3%. Overall, the labour force participation rate (LFPR) for women increased to 41.7%, compared to 23.3% in FY 2017-18.

• The increased access to basic amenities like piped drinking water and clean cooking fuel has freed women from household duties, allowing them to contribute to agricultural and household businesses. However, this increase does not indicate the creation of new jobs but rather reflects the addition of surplus labour to the already strained agricultural sector.
• Despite the rise in female labour force participation, the share of women in regular salaried jobs is at a seven-year low, with only 15.9% of employed women holding such positions in FY 2023-24, down from 21% in FY 2017-18. The data suggests that economic distress, rather than opportunity, is pushing women into the labour force, particularly in unpaid roles within agriculture and household enterprises. This “feminisation” of agriculture is seen as a structural shift, where male labour exits the sector, and female labour remains, often in less favourable conditions.

¹ https://www.business-standard.com/india-news/women-s-labour-force-participation-in-india-doubled-in-7- yrs-mandaviya-124092700499_1.html

https://www.business-standard.com/economy/news/share-of-self-employed-women-increased-to-67-in-2023- 24-plfs-data-124092601012_1.html

https://www.mospi.gov.in/sites/default/files/publication_reports/AnnualReport_PLFS2023-24L.pdf

2.   Government policy moves

     2.1.  GST council sets up GoM to decide on future of taxation for luxury and other goods²

• The Goods and Services Tax (GST) Council has established a 10-member Group of Ministers (GoM) to decide on the future taxation structure for luxury, sin, and demerit goods, following the planned end of the compensation cess in March The GoM, chaired by the Minister of State for Finance Pankaj Chaudhary, includes representatives from nine states: Assam, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Punjab, Tamil Nadu, Uttar Pradesh, and West Bengal.
• Their task is to develop a proposal that will either retain the cess or replace the existing compensation cess regime with an alternative taxation model. The GST regime currently imposes a compensation cess on luxury and demerit goods, in addition to the 28% tax rate, to compensate states for revenue losses post-GST implementation.
• • Initially set to end in 2022, the compensation cess was extended to March 2026 to repay loans worth Rs 2.69trn (interest + principal) taken to make good states’ revenue loss during the pandemic.

• If the GoM decides to discontinue the cess and impose additional taxes on luxury, sin and demerit goods, then it has to suggest what would be the rates, how many new slabs would be required and what are the legislative amendments that would be required.
• The GST Council would also have to decide whether it would continue with the compensation cess till March 2026 or end it by January 2026 or as and when the loan is repaid and bring in the new taxation proposal as per the suggestions of the GoM on GST compensation cess.

  Takeaway: Businesses dealing in luxury, or demerit goods could face potential changes in their taxation structure. The uncertainty around whether the compensation cess will continue or be replaced with additional taxes could influence pricing strategies and profit margins. Industries in these sectors may also need to prepare for possible new tax slabs or rates, potentially increasing the tax burden. The decision will likely affect the planning of businesses for product development and sales strategies.

² https://currentaffairs.adda247.com/gst-council-establishes-gom-on-compensation-cess/

https://www.thehindu.com/business/Economy/gst-council-sets-up-gom-on-compensation-cess-panel-to- submit-report-by-december-31/article68691069.ece

https://www.thehindubusinessline.com/economy/gst-council-sets-up-gom-on-compensation-cess-panel-to- submit-report-by-dec-31/article68689067.ece

https://www.business-standard.com/economy/news/gst-council-forms-gom-on-compensation-cess-report- expected-by-dec-31-124092700347_1.html

3.   Market watch

    3.1.  Import tariffs by US government on Chinese goods pose risk of flooding Indian markets³

• The US government has imposed tariffs of up to 100% on Chinese imports, including key sectors like solar panels, electric vehicles, lithium-ion batteries, and As these tariffs take effect, there is growing concern that Chinese manufacturers will divert their products to alternative markets, including India, to counteract reduced access to the U.S. market.
• This could result in Chinese goods flooding Indian markets, especially in industries where Indian businesses already face stiff competition from Chinese counterparts.

• Experts warn that Chinese dumping could destabilise Indian industries, especially in critical areas like steel, solar energy, and electric Industry experts and stakeholders have called for the Indian government to establish a monitoring system or “war room” to closely track imports and intervene if necessary.

• India does have a framework in place, including anti-dumping measures and the Directorate General of Trade Remedies (DGTR), to deal with such situations, but experts stress the need for timely action.

• While solar panels may be somewhat protected due to India’s Approved List of Models and Manufacturers (ALMM), other sectors, particularly steel, are vulnerable to Chinese oversupply. In the past year, Chinese steel exports to India have surged, and with fewer barriers in India than in other countries, the risk of continued dumping remains high.

  Takeaway: Indian steel manufacturers are likely to face increased pressure from low-cost Chinese steel, threatening profitability, and market share. India’s ALMM system protects the solar industry from immediate dumping, the situation could strain domestic production if Chinese products find indirect ways into the market. The potential influx of cheap Chinese electric vehicles and batteries could disrupt India’s emerging EV sector, making it harder for local companies to compete. Indian businesses may benefit from proactive government measures such as anti-dumping duties, but timely interventions will be crucial.

    3.2.  Indian startup funding dips by 7% in first nine months of 2024⁴

• In the first nine months of 2024, Indian startups secured US$7.6bn in funding, a 7% decrease from US$8.2bn during the same period in 2023, according to the Tracxn India Tech 9M 2024 report.

³ https://www.lemonde.fr/en/economy/article/2024/09/27/trade-barriers-increase-globally-as-the-tone-rises- against-china-s-massive-surpluses_6727389_19.html

https://www.indiatoday.in/business/story/china-boosts-exports-solar-ev-will-it-hurt-india-other-global- markets-2607297-2024-09-27

https://epaper.business-standard.com/bs_new/index.php?rt=main/mainpage#1

⁴ https://www.business-standard.com/companies/start-ups/indian-startup-funding-dips-7-to-7-6-billion-in- first-nine-months-of-2024-124092400899_1.html

https://www.fortuneindia.com/macro/6-unicorns-29-ipos-indian-startups-see-7-decline-in-funding-so- far/118527

The number of funding rounds also dropped sharply from 1,579 to 1,036, highlighting a tightening investment environment.

• Despite this, India’s startup funding figure remains similar to China’s US$8.2bn, though far below the US figure of US$86.2bn. In comparison, the first half of 2024 saw Indian startups raise US$4.1bn across 540 funding rounds. Notably, six new unicorns emerged during this period, and 29 companies went public through IPOs.

• Zepto, a quick-commerce platform, led the pack by raising nearly US$1bn in a single round, marking it as the only company to exceed US$500m in funding this year. In total, 12 funding rounds across the tech ecosystem surpassed US$100m in Meanwhile, the fintech sector, which attracted US$1.49bn in 2024, experienced a significant 39% year-on-year decline from US$2.46bn in 2023.

  Takeaway: The decline in startup funding may push Indian startups to focus more on sustainable growth and profitability, given the smaller pool of available capital. The reduced number of funding rounds suggests increased scrutiny from investors, benefiting only the most promising ventures. Sectors like fintech, which saw a sharp drop in funding, may face increased pressure to consolidate or innovate to survive. The rise in IPOs reflects startups’ desire to diversify funding sources, while large funding rounds, such as Zepto’s, signal that companies with solid business models can still attract significant investments.

4.   Industry alliances, partnerships and investments

 4.1.  Tata Electronics partners with PSMC to build semiconductor unit in Gujarat⁵

• Tata Electronics, a subsidiary of Tata Sons, has signed a definitive agreement with Taiwan-based Powerchip Semiconductor Manufacturing Corporation (PSMC) for a major technology transfer and infrastructure As per this agreement, PSMC will lend its expertise in designing and constructing a greenfield semiconductor manufacturing facility (Fab) in Dholera, Gujarat.
• The plant, with a planned investment of Rs 910bn, will also receive a broad range of licensed technologies from PSMC to ensure smooth operations and technology In addition, PSMC will offer extensive engineering support to guarantee the successful transfer of licensed technologies into the Fab.
• This state-of-the-art facility will be equipped with cutting-edge automation, leveraging data analytics and machine learning to maximise production The Fab will manufacture semiconductors with applications in power management, display drivers, microcontrollers, and high-performance computing, primarily catering to high-demand sectors like AI, automotive, wireless communication, and data storage.

• The partnership is a significant leap towards strengthening India’s semiconductor ecosystem, providing over 20,000 direct and indirect skilled jobs, and enhancing self-reliance in this critical

  Takeaway: The collaboration will strengthen India’s positioning in the global semiconductor supply chain, reducing dependency on imports. The Fab’s advanced manufacturing capabilities will cater to industries like AI, automotive, and telecom, fostering innovation and growth. This large-scale investment will stimulate local economies in Gujarat and promote India’s electronics manufacturing sector.

⁵ https://www.businesstoday.in/amp/latest/economy/story/tata-psmc-sign-pact-for-rs-91000-cr-dholera-chip- plant-meet-pm-modi-to-discuss-semiconductor-manufacturing-447710-2024-09-27

https://www.projectstoday.com/News/Tata-Electronics-PSMC-complete-tech-transfer-pact-for-fab-unit https://www.thehindu.com/business/Industry/tata-electronics-taiwans-psmc-complete-technology-transfer- pact-for-indias-first-semiconductor-fab/article68685671.ece

https://www.business-standard.com/companies/news/tata-electronics-psmc-complete-tech-transfer-pact-for- gujarat-fab-unit-124092601225_1.html