AI hub in AP, Rare earths, and Pakistan-Afghanistan ties

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies-III: Science and Technology- developments and their applications and effects in everyday life,  Awareness in the fields of IT. 

What’s the ongoing story: Google has announced an investment of $15 billion over five years to set up an artificial intelligence (AI) data centre in Andhra Pradesh, in what will be its biggest investment yet in the country. The tech giant has partnered with the Adani Group and Airtel to build the infrastructure for the project, which also includes the construction of a new international subsea gateway.

Key Points to Ponder:

— What is AI?

— What are the various applications of AI?

— What is a distinction between AI data centres and traditional data centres

— What is the IndiaAI Mission?

— What are the concerns associated with the use of AI?

— What are the initiatives taken by India to develop its own AI model?

— What are the recent collaborations signed by India in this regard?

— What are the challenges associated with the AI data centres?

Key Takeaways:

— The big investment commitment comes amid soured ties between India and the United States, with Prime Minister Narendra Modi having called for people to prioritise local, or swadeshi, products, with key members of his Cabinet promoting domestically made communication and navigation apps.

— Google’s data centre will come up in the port city of Visakhapatnam, and will be a part of the company’s global network of AI centres spread across 12 countries. 

— An AI data centre is different from a traditional data centre in terms of it being specifically tailor-made to support AI applications. Traditional data centres typically consist of CPU-powered servers that support tasks such as website hosting, cloud storage, and business applications.

— An AI data centre, on the other hand, is needed to process vast amount of data, and is equipped with more cutting edge hardware such as GPUs to handle tasks like image and video production, generative AI, etc. Since these data centres handle high-performance GPUs, they require robust power infrastructure and cooling solutions, making them significantly more energy-intensive than traditional data centres.

— Being developed with AdaniConneX and Airtel, the AI hub will be built with the same infrastructure that powers Google products like Search, Workspace, and YouTube. 

— Google’s AI hub investment includes construction of a new international subsea gateway, including multiple international subsea cables to land in Visakhapatnam on India’s eastern coast — connecting to Google’s more than two million miles of existing terrestrial and subsea cables. Airtel will assist Google on this.

— Google will work with local partners to deliver new transmission lines, clean energy generation, and energy storage systems in Andhra Pradesh. 

— India’s data centre market is currently estimated to be worth $10 billion, with around $1.2 billion revenue generated in FY24, according to a recent report by Anarock. As per real estate firm JLL, India is expected to add 795 MW of new capacity by 2027, taking the total capacity to 1.8 GW.

— AI data centres have a massive energy demand. As per the International Energy Agency (IEA), data centre power usage could double by 2026, making the challenge for companies to become net zero or carbon negative by 2030 increasingly unattainable.

— Power consumption and related infrastructure costs are a key part of a data centres’ capital and operational expenditure. 

Do You Know:

— Artificial intelligence (AI) refers to the field of computer science which aims to make computer systems think, reason, learn, and act to solve a complex system like humans.

— To enable computer systems to imitate the way that humans learn, and perform tasks autonomously (meaning, without instructions), machine learning (ML) is used. ML is implemented by training (this term will also be explained in subsequent explainers) computers on data so that they can make predictions about new information.

Other Important Articles Covering the same topic:

📍Google pledges $15 bn for AI hub in Andhra, its largest outside US

📍AI basics: What are artificial intelligence and machine learning?

Previous year UPSC Prelims Question Covering similar theme:

(1) With the present state of development, Artificial Intelligence can effectively do which of the following? (UPSC CSE 2020)

1. Bring down electricity consumption in industrial units

2. Create meaningful short stories and songs

3. Disease diagnosis

4. Text-to-Speech Conversion

5. Wireless transmission of electrical energy

Select the correct answer using the code given below:

(a) 1, 2, 3 and 5 only

(b) 1, 3 and 4 only

(c) 2, 4 and 5 only

(d) 1, 2, 3, 4 and 5

EV sops: China files complaint against India at WTO

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies-II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests, Important International institutions, agencies and fora- their structure, mandate. 

What’s the ongoing story: China has lodged a formal complaint against India with the World Trade Organization (WTO), challenging New Delhi’s subsidies for electric vehicles (EVs) and batteries. The Commerce Ministry will examine China’s detailed submissions.

Key Points to Ponder:

— Read about the WTO in detail.

— What is the WTO’s principle of national treatment?

— What is the current status of India-China trade relations?

— What is the Production-Linked Incentive (PLI) scheme?

— What is the WTO’s dispute settlement mechanism?

— What are the shortcomings of the WTO?

Key Takeaways:

— According to China’s Commerce Ministry, India’s measures violate multiple WTO obligations, including the principle of national treatment, and amount to prohibited import substitution subsidies. The ministry claimed that these policies unfairly benefit India’s domestic EV industry and undermine China’s commercial interests, PTI reported.

— The complaint comes as Beijing seeks to expand exports of its electric vehicles to India, following the two countries’ efforts to normalise ties after a five-year freeze triggered by the Eastern Ladakh standoff. Given the size of India’s auto market, Chinese EV manufacturers view it as a key opportunity to boost overseas sales.

— Facing domestic overcapacity, declining profits, and intense price competition, Chinese EV makers such as BYD are increasingly targeting overseas markets in Asia and the EU.

— China is India’s second-largest trading partner. India’s exports to China fell 14.5 per cent to USD 14.25 billion in 2024-25, while imports rose 11.5 per cent to USD 113.45 billion, widening the trade deficit to USD 99.2 billion.

— India has rolled out several measures to boost domestic EV production, including the Electric Vehicle Policy and the Production-Linked Incentive (PLI) scheme.

Do You Know:

— The World Trade Organization is the only international organization that deals with the rules of trade between countries.

— It was founded in 1995, the WTO is run by its 164 members, and according to its rules, all decisions are taken through consensus and any member can exercise a veto.

— It aims to promote free trade, which is done through trade agreements that are discussed and signed by the member states.

— The WTO also provides a forum for countries to negotiate trade rules and settle economic disputes. The Ministerial Conference is the WTO’s top decision-making body and usually meets every two years.

— All members of the WTO are involved in the Ministerial Conference and they can make decisions on all matters covered under any multilateral trade agreements.

Previous year UPSC Prelims Question Covering similar theme:

(2) In the context of which of the following do you sometimes find the terms ‘amber box, blue box and green box’ in the news? (UPSC CSE 2016)

(a) WTO affairs

(b) SAARC affairs

(c) UNFCCC affairs

(d) India-EU negotiations on FTA

Previous year UPSC Mains Question Covering similar theme:

What are the key areas of reform if the WTO has to survive in the present context of ‘Trade War’, especially keeping in mind the interest of India? (UPSC CSE 2018)

EXPLAINED

The new power of rare earths

Syllabus:

Preliminary Examination: Current events of national and international importance, Economic Development. 

Main Examination: General Studies-II: Effect of policies and politics of developed and developing countries on India’s interests. 

What’s the ongoing story: The China-US trade war has had an enduring sticking point: rare earth minerals. Last Thursday, China ramped up the clampdown on its rare earth exports, prompting US President Donald Trump to threaten economic retaliation by way of 100% tariffs.

Key Points to Ponder:

— What are rare earths? Why is it called rare earth minerals?

— Which country has the most rare earth deposits?

— What effects does China’s dominance over the processing of rare earth magnets have on global supply chains?

— What are the rare earth minerals found in India?

— What should India do to prepare for future shortages of strategic minerals such as rare earth elements?

Key Takeaways:

— Trump also suggested that he could cancel a scheduled meetup with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation Leaders’ Meeting in South Korea later this month, although he toned down his rhetoric just hours later.

— Rare earths are a subset of the critical minerals grouping that includes 17 metallic elements nestled lower down in the periodic table, from lanthanum (atomic number 57) to lutetium (71), as well as plus scandium (21) and yttrium (39).

— These elements are characterised by their high density, high melting point, high conductivity and high thermal conductance. They are classified as heavy or light, based on atomic weight.

— Rare earths form crucial inputs, although often in trace volumes, across a range of products, from weapons platforms and electronics, including flat screen TVs and smartphones, to wind turbines, robotics, electric vehicles, MRI scanners and cancer treatment devices.

Periodic table

— The term “rare” earths, however, is a bit of a misnomer: with the exception of the highly unstable promethium, these elements are found in relatively high concentrations across Earth’s crust. Cerium is, in fact, the 25th most abundant element in the planet’s crust, more abundant than gold, silver, tungsten, and many other elements which do not enjoy the “rare” tag.

— There are two main reasons why the tag “rare” is used.

1. One, although moderately abundant, these elements are not found in large concentrations. This makes them difficult and costly to extract, and thus, challenging to exploit economically.

2. Two, according to the International Energy Agency, more than 60% of mined rare earth production currently comes from only one country: China. Moreover, Beijing controls more than 90% of the global output of rare earths in the processing stage.

— Starting in 1987, when Deng Xiaoping, considered to be the “architect of modern China”, compared China’s rare earth reserves in Inner Mongolia to West Asia’s oil reserves, the country has built up near-total control of the minerals as part of its wider industrial policy.

Global mine deposits distribution.

— China’s repeated curbs on rare earth minerals, especially the heavy ones like terbium (65) and dysprosium (66), which are more scarce than their lighter counterparts, are part of its stated policy to weaponise trade.

— Trump’s tariff threats have further prompted Beijing to use rare earths as leverage in its trade war with the US, especially to gain escalation dominance ahead of the upcoming talks.

— It is not that rare earths cannot be found outside China: Brazil has large reserves, so does Australia, and even India. The problem is that most of these countries are not doing all that much in the way of mining. This is driven by both economic viability issues, as well as concerns over the pollution that rare earth mining, an extremely dirty process, causes.

— In its most recent move, China has added five rare earth elements — holmium, erbium, thulium, europium, and ytterbium — as well as related magnets and materials, to its existing control list, requiring export licenses. That takes the total amount of restricted rare earths to 12. Seven — samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium — were restricted earlier in April.

— The impact of China’s rare earth restrictions on India is expected to be limited, given its relatively low domestic consumption of rare earths (although demand has seen some growth in recent years).

— India imported 2,270 tonnes of rare earth elements in 2023-24, up 23% from 1,848 tonnes in 2019-20, according to the Ministry of Mines. Imports from China accounted for 65% of this amount, and another 10% came from Hong Kong. The two sectors that have been badly affected by the Chinese supply curbs in April are the auto industry, especially EV makers, and the electronics sector.

World reserves of rare earths.

— India is, however, hoping to ramp up its exposure to rare earths. In November last year, the country launched an auction for seven seabed blocks in the Andaman Sea for exploration and eventual mining. These blocks are estimated to hold polymetallic nodules and crusts, which can contain heavy rare earth metals.

Do You Know:

From the Front Page “China’s rare earth squeeze may push India-US deal to finish line, but timing key”

— With Indian negotiators in Washington this week — Commerce Secretary Rajesh Agrawal, who is heading the negotiations, will join the Indian delegation in the US tomorrow — shared concerns over critical minerals could provide the much-needed political push for the India-US trade deal that has remained stalled for months.

Other Important Articles Covering the same topic:

📍Knowledge Nugget: Geopolitics and Minerals – What is the UPSC relevance of Rare Earth Elements?

UPSC Prelims Practice Question Covering similar theme:

(3) With reference to the Rare Earth Elements, consider the following statements:

1. These are crucial for manufacturing high-value goods in defence and clean energy.

2. The United States dominated rare earth elements, supplying 85 to 95 per cent of the world’s demand.

3. Gadolinium (Gd) and holmium (Ho) are considered Rare Earth Elements.

Which of the statements given above are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Pakistan-Afghanistan ties: Past imperfect, present tense, future uncertain

Syllabus:

Preliminary Examination: Current events of national and international importance. 

Main Examination: General Studies-II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

What’s the ongoing story: Except for brief periods since 1947, Pakistan-Afghanistan ties have been marked by mutual distrust, rancour, recriminations, and hostility. This has led sometimes to armed clashes, as were seen recently.

Key Points to Ponder:

— Read about the Durand Line. 

— What are the issues of Pakistan-Afghanistan ties?

— How has India’s relationship with Afghanistan evolved in recent years?

— Know about the history of the Taliban group and how they came to power. 

— What are human rights concerns highlighted in Taliban-ruled Afghanistan?

— What is the strategic significance of Afghanistan for India?

— Map work: Locate Afghanistan on map.

Key Takeaways:

— This negativity between Pakistan and Afghanistan has continued during both civilian and direct military rule in the former, and fundamental system transformations, turmoil and two failed superpower interventions in the latter— by the Soviet Union (1979-1989) and the United States (2001-2021). During both, Pakistan has helped the Afghan resistance.

— Afghanistan witnessed the end of the monarchy in 1973, and a brief period of nationalist rule followed by 11 years under a communist government till 1989, during which the state unsuccessfully sought to change society and polity. Then came a three-year stretch of nationalist President Najibullah, whose rule collapsed in 1992. That led to nine years of civil war between the erstwhile Mujahideen and the Taliban, who emerged in 1994 and with Pakistan’s help swiftly took over large swathes of Afghan territory, including Kabul, in 1996.

— The Taliban were ousted from Afghanistan into Pakistan in end-2001 through a US invasion because of the Al-Qaeda terrorist attacks on September 11, 2001. The US created an Islamic Afghan Republic, which failed to take root. On their part, US forces were unsuccessful in defeating the Taliban insurgency.

— Accepting defeat, the US withdrew from Afghanistan in August 2021. The Taliban, again with Pakistan’s assistance, militarily defeated their Afghan opponents and this time became masters of all Afghanistan.

— The issues that divide Afghanistan and Pakistan range from Afghanistan’s refusal to recognise the Durand Line as the international border, to control over transit and trade, and social contradictions despite the bonds of Islamic faith.

— Afghans governments and peoples have the persistent resentment that Pakistan has insensitively tried to control and exploit them, especially since their monarchical system was overthrown.

— Pakistan continues to consider Afghans ahsanfaramosh (ungrateful). For, they hosted millions of Afghan refugees and enabled Afghan insurgencies to defeat two super powers. And, finally, the shadow of India has always loomed large over Afghan-Pakistan bilateral ties.

— For the Afghan Pashtun, the 2,640-km Durand Line is a historical wound. It derives its name from Sir Mortimer Durand, Foreign Secretary of British India, who compelled Afghan ruler Amir Abdul Rehman Khan to accept a division of his territories in 1893. This also meant division of the Pashtun tribes who were till then his “subjects”.

— However, once demarcated, the British rulers of India considered it as a permanent international border. That is what Pakistan during its creation also contented. Afghanistan rejected that interpretation. Prior to Britain’s departure from India in 1947, Afghanistan urged it to relinquish the Durand Line Agreement. That would have meant that all the Pashtun lands ceded to British India would revert to Afghanistan, effectively making the Indus as the border between Pakistan and Afghanistan. The British refused to do so. Consequently, Afghanistan became the only country to oppose Pakistan’s entry into the UN.

— Afghanistan is land-locked. Its possible transit routes are via Pakistan, Iran, and the Central Asian Republics, which were earlier part of the Soviet Union.

— Pakistan has always feared being squeezed by India and Afghanistan simultaneously. They therefore want Kabul to limit its ties with India. But no Afghan government wants its foreign policy choices to be made in Islamabad. That is a source of permanent tension between the two countries. Today, Pakistan is convinced that the Taliban are hurting Pakistan’s interests by opening up to India and that is, for them, unforgivable ingratitude.

Other Important Articles Covering the same topic:

📍Other options if peace efforts don’t work: Taliban Minister Muttaqi warns Pakistan

Previous year UPSC Prelims Question Covering similar theme:

(4) Consider the following countries: (UPSC CSE 2022)

1. Azerbaijan

2. Kyrgyzstan

3. Tajikistan

4. Turkmenistan

5. Uzbekistan

Which of the above have borders with Afghanistan?

(a) 1, 2 and 5 only

(b) 1, 2, 3 and 4 only

(c) 3, 4 and 5 only

(d) 1, 2, 3, 4 and 5

THE EDITORIAL PAGE

A cut in the right direction

Syllabus:

Preliminary Examination: Current events of national importance, Economic and social development.

Mains Examination: General Studies- II, III: Government policies and interventions, Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.

What’s the ongoing story: Surjit S Bhalla and Rajesh Shukla write- “The GST cut that kicked in on September 22 has been near-universally applauded for its boldness in drastically reducing taxes on most consumption items. It is estimated, officially and by most analysts, that this cut, while large, will only result in a net tax loss of Rs 1 trillion for the next 12 months.”

Key Points to Ponder:

— What is Goods and Services Tax (GST), and how does it work?

— What is the objective of introducing next-generation reforms?

— What are the key GST 2.0 institutional reforms?

— How will the new GST rates boost consumption and benefit the Indian economy?

— What are the various tax slabs before and after the reform?

Key Takeaways:

— “The experts’ reasoning for their optimistic little tax loss estimate is that they are allowing for all the tax cut effects to play out. Their argument is that there will be increased consumption and compliance, which will result in higher GST revenues. But is this argument correct? Econ 101 suggests that the tax cut will result in an increase in post-GST tax income of Rs 10 trillion. Instead of this money going to the government to spend wastefully, it will be spent “efficiently” by private individuals. This increase in income will be allocated to both consumption and savings, approximately in a 50-50 proportion (middle-class and above have a higher savings rate).”

— “Hence, consumption increase is likely to be about Rs 5 trillion, which with a consumption tax rate of 6.2 per cent will result in an increase in GST revenue of Rs 0.31 trillion. Adding this to the base case of Rs 13 trillion yields a net tax collection of Rs 13.3 trillion; adding Rs 1 trillion due to input tax credit not passed on in the new system yields Rs 14.3 trillion. This is still almost Rs 9 trillion less than the government-expert estimate!”

— “For governments around the world, one source of (cold) comfort is the inflation tax. However, the world has changed and is changing. One likely safe assumption is that present and future nominal GDP growth is declining because inflation is declining (not just in India but in the entire world). There is demographics, AI, increases in productivity especially in services, increasing global uncertainty, a lack of real wage increases because of sharp increases in global supply of educated labour, etc.”

— “Is the GST cut a bad policy move? No. One of us (Surjit) has consistently argued that one of the important factors constraining Indian growth was the very high tax-to-GDP ratio. The recommendation of ever-higher tax collection is flawed and leads to lower than potential GDP growth. Given half a chance, most Indian reformers point to China’s growth outperforming that of India. But not one of these growth critics (including experts from the IMF, senior Indian finance professionals, senior government officials and the RBI!) has pointed out that the average all tax-GDP ratio in India is now very high (around 18-19 per cent), whereas the average for East Asian economies is around 13 per cent, and that of China around 15 per cent. A low taxation ratio helps higher growth and productivity.”

— “The GST cut, along with the February income tax cut, is likely to reduce India’s tax-GDP ratio to around 15.5-16.5 per cent (close to China’s!) and for this reason alone is a very positive move.”

Do You Know:

— The GST came into effect in 2017 and was billed as an attempt to simplify the existing tax structure in India, where both the Centre and states levied multiple taxes, and to make it uniform.

— The President set up the GST Council as a joint forum of the Centre and the states, under Article 279A (1) of the amended Constitution. It said that members of the Council include the Union Finance Minister (chairperson), and the Union Minister of State (Finance) from the Centre. Each state can nominate a minister in charge, of finance or taxation or any other minister, as a member.

Other Important Articles Covering the same topic:

📍Knowledge Nugget: What is GST Council, and what were key decisions taken during its 56th meeting? Here’s everything you need to know for UPSC exam

Previous year UPSC Prelims Question Covering similar theme:

(5) What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’? (UPSC CSE 2017)

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.

2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.

3. It will enormously increase the growth and size of the economy of India and will enable it to overtake China in the near future.

Select the correct answer using the code given below:

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Previous year UPSC Mains Question Covering similar theme:

Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017. (UPSC CSE 2019)

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