Why in the News?

DeepSeek has disrupted the global tech industry and stock markets with its affordable artificial intelligence (AI) model.

How does DeepSeek’s low-cost AI model pose a threat to India’s dominance in the global IT sector?

• Cost Efficiency and Competitive Pressure: DeepSeek’s AI models, developed at a fraction of the cost compared to traditional models, could pressure Indian IT firms to reduce their prices, potentially impacting profit margins. For example, DeepSeek’s R1 model was built using less-advanced Nvidia H800 chips, significantly lowering development costs.
• Acceleration of AI Adoption: The affordability of DeepSeek’s models may lead to faster AI adoption globally, compelling Indian IT companies to integrate AI rapidly into their services to remain competitive. This swift integration could strain resources and require substantial upskilling of the workforce.
• Shift in Client Expectations: Clients may begin to expect more cost-effective AI solutions, challenging Indian IT firms to innovate and offer similar value propositions. This shift could disrupt traditional business models that rely on higher-cost infrastructures.
• Increased Global Competition: DeepSeek’s success might inspire other low-cost AI entrants, intensifying competition in markets where Indian IT firms have traditionally held strong positions. This could lead to a more crowded marketplace, making differentiation more challenging.

What lessons can Indian IT firms learn from DeepSeek’s approach to research and development (R&D)?

• Prioritize Long-term Innovation Over Short-term Gains: DeepSeek treated AI development as a secondary initiative, yet its investment in long-term innovation led to groundbreaking success. Indian IT firms should allocate resources to explore emerging technologies beyond immediate client needs.
• Utilize Surplus Capital for Experimental Projects: DeepSeek leveraged excess resources from its financial trading operations to invest in AI research. Indian IT companies can similarly channel surplus funds into experimental R&D, such as advanced AI and quantum computing.
• Invest in Talent and Advanced Research: DeepSeek’s success was driven by advanced AI expertise. Indian IT firms should actively recruit and retain top researchers, particularly those with specialized skills (e.g., PhDs in machine learning), to drive future innovation.

Why is increasing Gross Domestic Expenditure on R&D (GERD) crucial for India?

• Enhances Technological Competitiveness: Higher R&D spending fosters innovation, enabling India to compete globally in emerging technologies like AI, quantum computing, and biotechnology. Without increased GERD, India risks falling behind nations like China, which invests over 2.43% of its GDP in R&D.
• Drives Economic Growth and Job Creation: Increased R&D investment stimulates industrial innovation, leading to the development of new products, industries, and high-value jobs. Countries with higher GERD, like South Korea (4.93% of GDP), have seen robust economic growth driven by technological advancements.
• Reduces Dependence on Foreign Technologies: Greater domestic R&D investment strengthens self-reliance in critical sectors such as defense, healthcare, and clean energy. For instance, India’s investment in space technology through ISRO’s R&D has reduced dependency on foreign satellite services while enhancing national security.

Why is increasing Gross Domestic Expenditure on R&D (GERD) crucial for India?

• Strategic National Security Advancement: Quantum technology can revolutionize secure communications through quantum encryption, making data virtually unhackable. Countries like China have already developed quantum communication satellites, enhancing their cybersecurity capabilities.
• Global Competitiveness in Emerging Industries: Investing in quantum computing enables breakthroughs in industries like pharmaceuticals, finance, and logistics. For instance, quantum simulations can accelerate drug discovery by accurately modeling complex molecules.
• Reducing Dependence on Foreign Technology: Developing indigenous quantum capabilities reduces reliance on global tech giants for advanced computing solutions. India’s National Quantum Mission (NQM) aims to build quantum computers and communication networks, promoting self-reliance.
• Strengthening Scientific Collaboration and Talent Development: Quantum research encourages interdisciplinary collaboration and advanced skill development, attracting top scientific talent. India’s initiatives like the Quantum-Enabled Science & Technology (QuEST) program aim to build a skilled workforce and global research partnerships.

How can India balance the growth of both manufacturing and services sectors to foster innovation and economic competitiveness? (Way Forward)

• Promoting Synergy Between Manufacturing and Digital Services: Encourage the integration of advanced digital technologies (e.g., AI, IoT) in manufacturing to enhance productivity and global competitiveness. For instance, initiatives like “Make in India” combined with “Digital India” promote smart manufacturing and digital service exports.
• Investing in Skill Development for Both Sectors: Develop a workforce equipped with technical and digital skills to meet the demands of both manufacturing and service industries. Programs like the Skill India Mission train workers in emerging technologies, bridging the gap between traditional manufacturing and modern services.
• Strengthening R&D and Innovation Ecosystems: Foster public-private collaboration to drive research and innovation across sectors, ensuring technological advancements benefit both industries. For example, the Production Linked Incentive (PLI) scheme incentivizes domestic manufacturing while encouraging innovation in areas like electronics and pharmaceuticals.

Mains PYQ:

Q “The emergence of the Fourth Industrial Revolution (Digital Revolution) hasinitiated e-Governance as an integral part of government”. Discuss. (UPSC IAS/2020)

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