In an effort to further augment our relations with the countries of Latin America region, Minister for External Affairs, Dr. S Jaishankar visited three countries-Argentina, Brazil and Paraguay in August 2022. This visit along the other recent high level visits to the region by officials and by the President and Vice President of India are indicators of India intensifying its engagement with Latin America with the countries of the region also deepening their engagement with India.
Within the region, India is building on the foundations of its over six decades of successful diplomatic relations with Peru where the two nations have cooperated with each other in multilateral forums such as the NAM, the G-77 etc. and are working together to support a reformed and expanded United Nations (UN). The online interaction between the External Affairs Minister and the Peruvian Foreign Minister on 28 April 2020 focused on cooperation in dealing with the challenges presented by the pandemic and also highlighted the areas of priority which would help strengthen cooperation. The two nations are also negotiating a bilateral trade agreement which would help further strengthen the existing economic ties. Peru is also engaging actively with the countries of Asia and particularly India, in an effort to diversify its trade and investment opportunities and become a partner to India growing trade and investment portfolio.
While the traditional areas of cooperation such as agriculture, pharmaceuticals etc. remain important pillars of the economic relations, this paper identifies four areas that could be explored with an eye on the future trajectory of bilateral relations.
A) The Start-Ups Scene in India and Peru
India has the 3rd largest start-up ecosystem in the world, after the US and China, which is expected to witness a year on year consistent annual growth of close to 12-15%. India had about 50,000 start-ups in 2018; with around 8,900 – 9,300 of these being technology led start-ups[i]. As of 07th September 2022, India is home to 107 unicorns with a total valuation of $ 340.79 billion.
Start-up India (2016) is the flagship initiative of the Government of India that has catalysed the start-up culture and built a strong and inclusive ecosystem for innovation and entrepreneurship in India. These include setting up a Rs 10,000 crore fund as venture capital for the micro, small, and medium enterprises (MSME) sector, allocating Rs 20,000 crore to set up a specialised bank for the SME sector (Mudra Bank), and earmarking Rs 1000 crore to support start-ups.[ii] The Government has allocated Rs 126 crore towards the Start-up India Seed Fund for the financial year 2021-22. The fund aims to provide financial assistance to early stage start-ups in sectors such as water management, biotechnology and defence, which do not usually attract institutional venture capital funding.[iii]
Funding of Latin American start-ups has increased exponentially in the past few years with start-up funding reaching $20 billion in 2021 which is a 320% increase from 2020.[iv] In the region, Peru continues to have one of the best-performing economies and fastest-growing start-up scene. The Government-backed program Innóvate Perú awarded approximately $13.8 million of its total investments almost exclusively to start-ups in the country. Peru has start-ups such as Pixed Corp and Nvidia in the biotechnology sector and iPuton, an edtech start-up that helps students get ready for their university exams.
A massive FinTech boom is playing out across Latin America. The largest FinTech in Latin America- Nubank raised $750 million in pre-IPO financing in 2021 before going public and today is valued at over $45 billion.[v] Peru is home to an estimated 120 FinTech start-ups actively tackling the issues of financial inclusion and better servicing the region’s small and medium-sized businesses. Start-ups like Kambista, Solven provide FinTech solutions that are helping the nation to improve financial literacy and access to financial products, with a focus on Peruvian SMEs. India is recognised as a strong FinTech hub globally, and as the Indian entrepreneurial landscape continues to evolve, more FinTech use-led businesses will be developed requiring more investments.
The promising Indian FinTech market is expected to grow in market size to reach US$1 trillion by 2030 from US$ 31 billion in 2021[vi]. Innovation by Indian FinTech has powered the financial inclusion drive being witnessed in the country today. With Peru’s FinTech sector poised to grow in the near future, it provides an area of cooperation for exchange of ideas, investment and collaborations with both nations having similar visions for encouraging start-ups to help build innovative solutions, greater financial inclusion, easy access and increased financial literacy among their people.
B) Artificial Intelligence (AI)
The use of AI in areas such as healthcare, education, urban infrastructure, retail and mobility has the potential to revolutionise these segments over the course of the coming years. India, in June 2020, joined the Global Partnership for Artificial Intelligence[vii], which is an international and multi-stakeholder initiative to guide the responsible development and use of AI, grounded in human rights, inclusion, diversity, innovation, and economic growth. This is also the first initiative of its type for evolving a better understanding of the challenges and opportunities around AI using the experience and diversity of participating countries.
India boasts a robust AI ecosystem and structure. According to a discussion paper released in 2018 by NITI Aayog titled ‘National Strategy for Artificial Intelligence #AIforAll’, AI has the potential to accelerate India’s economic growth, and by some estimates can add US$ 1 trillion to India’s economy by 2035. The NITI Aayog paper identifies five focus areas where AI development could enable both growth and greater inclusion: healthcare, agriculture, education, urban-/smart-city infrastructure, and transportation and mobility. The paper also discusses five barriers to be addressed: lack of research expertise, absence of enabling data ecosystems, high resource cost and low awareness for adoption, lack of regulations around privacy and security, and absence of a collaborative approach to adoption and applications. The paper highlighted two key recommendations: the establishment of academic research hubs under the ‘Centres for Research Excellence in AI’ and the development of industry-led ‘International Centres for Transformational Artificial Intelligence’.
The Indian Government has signalled its awareness of AI’s importance through the National Programme for Artificial Intelligence,“ has been conceptualized to provide benefits of AI and related technologies to the common man.” This programme has identified 9 priority areas namely Healthcare, Agriculture, Education, Smart Cities, Transportation, Cyber Security, Energy, Finance and Indian languages.[viii] India’s AI vision envisages a vibrant data ecosystem for research, innovation, and adoption of AI and emerging technologies; access to state-of-the-art AI computing infrastructure; financing through grant and equity support to start-ups; development of products and solutions and implementation of high-impact projects; and training and skilling of the workforce.[ix] A key initiative taken by India in this regard was the launch of “AI for All” website by Prime Minister Modi in July 2021. It is a self-learning online program designed to raise public awareness about AI and is one of the largest AI public awareness programs, with the aim to train 1 million citizens in one year.[x]
Peru is recognised as the Latin American leader in research, development, innovation, deployment, use, adoption of AI, and in its ethical and responsible use in the production of public and private goods and services. These efforts aim to accelerate national development and promote digital inclusion while ensuring the reduction of social gaps. The government of Peru has articulated its vision through its National AI Strategy is for the country to become the leader in research, development, innovation, deployment, use, adoption of AI, and in its ethical and responsible use in the production of public and private goods and services. These efforts aim to accelerate national development and promote digital inclusion while ensuring the reduction of social gaps.[xi] Peru is taking advantage of AI to achieve sustainable growth while also enhancing its AI research and development for use in healthcare, education and climate change mitigation efforts.
AI will be the driving force in technological innovation for the future across every sector such as transportation, education, healthcare and manufacturing. The development of AI and machine learning is the future for global economics allowing companies to improve performance by reducing errors and improving quality and speed. Governments and private AI researchers and developers working together across national borders can maximise economies of scale and utilise comparative advantages for mutual gain. Without international cooperation, competing and duplicative investments in AI capacity would be made. The field offers India and Peru opportunities to explore mutual collaborations and build partnerships for an economy that will be led by smart technology.
C) Satellite Technology
Space technology, as the powerful enabler, provides a variety of vital inputs for holistic and rapid development of rural areas, and villages in particular. Space based systems are effective in supporting disaster management at community level, wherein the vulnerability and risk related information, early warning, forecast of unusual/extreme weather conditions can be gauged in advance.
India has been among the world leader in developing end-to-end capability in both satellite remote sensing and communication. Indian Space Research Organisation (ISRO) has made remarkable progress in building state of the art space infrastructure such as the Indian National Satellite (INSAT) for communication and the Indian Remote Sensing (IRS) satellites for earth observation.
Latin American space programs have continued to develop and expand in recent years, with countries like Bolivia and Peru successfully launching their satellites which provide services ranging from better access to communication services to helping monitor their territories, particularly after extreme weather events. Following India’s successful Mars mission a few years ago wherein the ISRO proved that it is capable of achieving even inter-planetary missions in a cost-effective manner, in addition to having a reliable programme, LatAm countries are now keen on launching their satellites through ISRO. Some of the countries from the region including Brazil, Argentina, Mexico, Ecuador, Chile, Peru, Venezuela, Bolivia and Nicaragua are reaching out to ISRO for help in developing and building satellites. Experts from Argentina, Brazil, Chile, Mexico and Panama, are among the 45 countries that are training and working with scientists in ISRO to build nano-satellites. India has already launched nano satellite for Colombia.
Peru signalled its space ambitions by launching its first Earth-observation satellite on September 15 Called PerúSAT-1. This satellite has helped study forest health and monitor natural disasters, among other things. Even in the future it is likely to help authorities monitor illegal logging and mining in Peru’s forests. Peru is looking forward to develop small rockets and nano-satellites. This would help Peru build robust telecommunication networks across the country helping millions of Peruvians to access affordable 4G service on their mobile devices to stay connected. Nano-satellites and related technology are areas in which India is strengthening its expertise. As Peru looks for partners in this field, India and Peru could explore the possibility of space collaboration as they share similar goals.
D) Climate change
India has displayed commitment and leadership by taking affirmative action in climate change mitigation. On the domestic front, India has reduced its emission intensity by 21% of its GDP[xii] and is on track to achieve its goal of 33-35% by 2030 as promised under Paris commitments.[xiii] India has installed 100 GW of renewable energy capacity, while 50 GW is under installation and 27 GW is under tendering. India has also enhanced its ambition to install 450 GW of renewable energy capacity by 2030.[xiv] As of 2019, Indian renewable energy sector was the fourth most attractive renewable energy market in the world. India ranked fifth in wind power, fifth in solar power and fourth in renewable power installed capacity.[xv] At the recently held CoP26, Prime Minister Modi enunciated India’s new climate change target - increase India’s non-fossil fuel power capacity to 500 gigawatts (GW) by 2030, up from 450 GW, and; 50% of India’s energy to come from renewable sources by 2030.
Additionally, India has also taken a range of climate actions in various critical sectors like industry, transport, electricity, etc. These include: 30% of all new vehicles that will be sold would be electric vehicles[xvi]; increase in the renewable energy capacities; and decarbonisation of Indian railways with the target of achieving net zero carbon emissions by 2030. Focusing on meeting its climate targets, India also announced the launching of the National Hydrogen Mission in August 2021. The focus is on generation of hydrogen from green power resources and to link India’s growing renewable capacity with the hydrogen economy.
Another critical area is regarding the use of hydrogen in energy mix. Hydrogen is emerging as an important source of energy since it has zero carbon content and is a non-polluting source of energy, in contrast to hydrocarbons that have net carbon content in the range of 75–85%. As per International Renewable Energy Agency (IRENA), Hydrogen shall make up 6% of total energy consumption by 2050.
Prime Minister Modi launched National Hydrogen Mission (NHM) on 15 August 2021 with the aim to cut down carbon emissions and increase the use of renewable sources of energy. The NHM, according to a draft paper prepared by the Ministry of New and Renewable Energy (MNRE), has identified pilot projects, infrastructure and supply chain, research and development, regulations and public outreach as broad activities for investment. While development of Hydrogen as an energy source is at a nascent stage, yet it has considerable potential for aiding the process of energy transition from hydrocarbons to renewables, therefore, this could be one of the areas for collaboration between India and Peru.
According to Peru’s National Energy Plan 2014 – 2025, it is committed to the development and promotion of clean energy strategies. Likewise, the National Energy Policy 2010-2040, approved by Supreme Decree N° 064-2010-EM, has set having a “diversified energy mix, with an emphasis on renewable sources and energy efficiency” as one of the country’s main goals for 2040. Peru is exploring use of hydrogen to meet its Paris agreement goals. In early 2021, the Peruvian Hydrogen Association called H2 Peru was created. Its main goal is to promote the development of the green Hydrogen industry in Peru, which is expected to generate employment and new competences. H2 Peru is working in close collaboration with government agencies and the private sector to promote the development and use of green Hydrogen in the Peruvian economy. While it is not to say that the change is not without challenges, exchange of ideas and views would help both nations to overcome hurdles and achieve their clean energy goals.
Internationally, India is leading the efforts for combating climate change with the establishment of International Solar Alliance (ISA) which aims to mobilise more than US$1 trillion by 2030 to promote solar power globally. ISA, in August 2020, launched “One Sun One World and One Grid” plan, which aims to connect 140 countries through a trans-national grid that will be used to transfer solar power. India was also a critical in the launching of International Coalition for Disaster Resilient Infrastructure (CDRI) at the UN Climate Action Summit in 2019. Peru is a member of the ISA and has expressed its commitment to support the construction of climate-resilient infrastructure. These can also serve as platforms for enhancing cooperation between India and Peru on issues related to clean and sustainable energy, good practices related to infrastructure, and climate resilience and the possible displacement of people as a result of climate change.
India and Peru are the most promising economies of their respective regions. Diplomatic relations started in the seventies have helped trade and economic exchanges that form the bedrock of the relations. Today, the bilateral agreements among these countries include education, geology, natural resources, investment promotion, health, taxation, and in the last few years, the negotiations for an FTA. Nonetheless, while the two nations continue to explore traditional areas of cooperation, they need to also look at new areas of cooperation that will play a role in providing services, reduce economic costs, promote entrepreneurship and innovation and help develop sustainable economic potentials. Exploring these new avenues would help strengthen the bilateral relations.
*Dr. Stuti Banerjee, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: The views expressed are personal.
[i] Ministry of Commerce and Industry, Government of India, “Indian Start-Up Ecosystem,” https://www.startupindia.gov.in/content/sih/en/international/go-to-market-guide/indian-startup-ecosystem, Accessed on 04 October 2022.
[iii] ----, “Government earmarks Rs 126 crore for Start-up India Seed Fund,” Economic Times, https://economictimes.indiatimes.com/tech/startups/government-earmarks-rs-126-crore-for-startup-india-seed-fund/articleshow/80647675.cms?from=mdr Accessed on 04 October 2022.
[iv] Sean Salas, “Fintech Leaps Forward In Latin America,” Forbes, 10 March 2022, https://www.forbes.com/sites/seansalas/2022/03/10/fintech-leaps-forward-in-latin-america/?sh=49f8d5f42eb7, Accessed on 04 October 2022
[vi] The Hindu Bureau, “Indian FinTech market to reach $1 trillion by 2030, says CEA,” The hindu, 20 September 2022, https://www.thehindu.com/business/indian-fintech-market-to-reach-1-trillion-by-2030-says-cea/article65915274.ece#:~:text=%E2%80%9CIndia%20is%20among%20the%20fastest,of%20Finance%2C%20Government%20of%20India, Accessed on 12 October 2022
[vii] The other members of the partnership are: USA, UK, EU, Australia, Canada, France, Germany, Italy, Japan, Mexico, New Zealand, Republic of Korea and Singapore.
[viii] National E-Governance Division, “National Programme on Artificial Intelligence,” https://negd.gov.in/node/80, Accessed on 12 October 2022.
[ix] HT Tech, “India’s AI Marathone has Begun Well,” https://tech.hindustantimes.com/tech/news/indias-ai-marathon-has-begun-well-71631978085203.html, Accessed on 12 October 2022.
[x] New18, “Modi Launches AI for All, Aims at Training 1 Million Indians in Artificial Intelligence in a Year,” https://www.news18.com/news/education-career/modi-launches-ai-for-all-aims-at-training-1-million-indians-in-artificial-intelligence-in-a-year-4022762.html, Accessed on 12 October 2022.
[xi] OECD. AI, “National AI Strategy,” https://oecd.ai/en/dashboards/policy-initiatives/http:%2F%2Faipo.oecd.org%2F2021-data-policyInitiatives-27146, Accessed on 06 October 2022
[xii] Reducing Emission Intensity - Emissions intensity is the level of GHG emissions per unit of economic activity, usually measured at the national level as GDP. This is usually done by tapping into non-fossil fuel energy sources and creating additional carbon sinks to fulfil commitment towards fight against climate change.
[xiii]The Economic Times, 5March 2021, https://economictimes.indiatimes.com/news/politics-and-nation/india-to-meet-its-paris-agreement-commitments-ahead-of-2030-pm-narendra-modi/articleshow/81351882.cms?from=mdr#:~:text=%22India%20is%20well%20on%20track,below%202005%20levels%20by%202030, Accessed on 18 August 2021
[xiv] Down to Earth, 13 August 2021, https://www.downtoearth.org.in/news/renewable-energy/india-s-renewable-energy-capacity-at-100gw-still-far-away-from-2022-target-78449, Accessed on 18 August 2021
[xv] Renewable Energy Industry of India, India Brand Equity Fund, 11 August 2021, https://www.ibef.org/industry/renewable-energy.aspx, Accessed on 18 August 2021
[xvi] The Hindu Businessline, 30 April 2021, https://www.thehindubusinessline.com/economy/logistics/evs-will-make-up-30-of-indian-auto-sales-in-2030-iea/article34437072.ece, Accessed on 12 October 2021