The Indian semiconductor sector has seen rising investor interest, with more than half a dozen startups in talks to raise funds from domestic venture capital firms, partly due to the government's push for self-reliance and geopolitical uncertainties.

The DLI scheme offers government incentives to selected companies, enabling them to access funding more easily and making the Indian semiconductor space attractive to both VC firms and large corporations like Zoho.

Several startups, such as CalligoTech, 3rdiTech, SandLogic, and Terminus Circuits, have directly benefited from DLI by raising substantial investments, with Indian semiconductor startups raising $90 million in five years.

The DLI tag acts as a filter, helping venture capitalists shortlist promising semiconductor startups for investment, and companies receiving DLI support are more likely to attract pre-seed discussions with investors.

The emergence of AI and advanced chip technologies has further intensified investment interest, with global semiconductor majors also joining or launching Indian AI chip ventures.

UPSC Key Term Definition
Design-Linked Incentive (DLI) Scheme:
A government initiative aimed at supporting and incentivizing domestic semiconductor design startups by offering financial and infrastructural assistance, which helps increase innovation, self-reliance, and global competitiveness in the semiconductor sector

Key Points:

India has begun small but significant steps to extend the use of rupee in international trade with neighboring countries like Nepal, Bhutan, and Sri Lanka by allowing rupee-denominated trade loans and special rupee accounts for foreign partners.

While the idea of being able to convert any amount of rupees to dollars and easing capital controls sounds appealing, it carries risks such as large outflows causing forex reserve depletion and rupee value volatility.

India’s aim is to gradually reduce reliance on the US dollar in international trade and finance, moving towards a more internationalized rupee, but full convertibility requires strong capital account management and economic strength.

The article draws historical lessons from Britain’s experience with sterling convertibility post-WW2, which failed due to capital flight, and China's gradual internationalization of the RMB, stressing that such transitions are complex and require caution.

Small incremental reforms like the recent RBI steps are prudent, but ambitious full convertibility of the rupee is not advisable for decades to come due to structural economic factors and risks in capital flows.

UPSC Key Term:
Capital Account Convertibility - The freedom to convert local financial assets into foreign financial assets and vice versa at market-determined rates without restrictions. It allows capital flows across countries but requires strong financial stability and regulatory oversight to prevent economic shocks.

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China has expanded its export controls to include five more rare earth elements (holmium, erbium, thulium, europium, ytterbium), significantly tightening its grip over the global rare earth supply ahead of important trade talks with the US.
• These rare earth elements are crucial for high-tech industries such as semiconductors, fiber optics, X-ray and laser equipment, nuclear reactors, and advanced medical imaging, underscoring their strategic importance.
• The new controls mean foreign companies must now get licenses from the Chinese government to export items containing even minimal amounts of these rare earths, with license applications for military or sensitive use typically being denied.
• China processes about 90% of the world’s rare earths, giving it major leverage in the global technology supply chain and making these export restrictions a powerful bargaining tool in international trade disputes
• In total, 12 out of the 17 rare earth elements now face export restrictions, highlighting increasing efforts by China to protect its national interests and influence key global industries like EVs, aircraft, and military equipment.

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New company to prevent digital frauds

Indian Digital payments intelligence corp

Furniturend Bank of Baroda will lead a new Indian Digital Payment Intelligence Corporation (IDPIC) to prevent payment frauds, with all 12 state-run banks taking equity stakes.
- IDPIC will be established as a Section 8 company, with authorised capital of ₹500 crore (paid-up ₹200 crore), and senior executives from both banks will join as directors.
- The main goal is to collect real-time information across banks—covering accounts, telecom, and locations—to detect and stop fraudulent transactions effectively.
- Risk Management - this platform boosts digital public infrastructure and strengthens risk management in banking.

Indian fertiliser companies are planning to set up a new plant in Russia to secure over 2 million tonnes per annum (mtpa) of urea due to Chinese export restrictions.
• Key negotiations are ongoing regarding land, gas supply, and logistics, with Russia’s major gas reserves being a significant attraction for India.
• The venture is designed to cushion India against global price and supply shocks in fertilisers, especially after shortages during the last kharif season.
• Rising fertiliser prices have strained government subsidy budgets, making overseas ventures crucial for price stability.
• Domestic urea production has hit a record 31.4 million tonnes this year, reflecting government efforts to enhance self-sufficiency.
• Food Security—urea supply is vital for agricultural productivity and national food security.