Arvind's Newsletter -Weekend edition

1.Krutrim, founded by serial entrepeneur Bhavish Aggarwal is India's first $1 billion AI start-up

Krutrim has gained unicorn status after securing $50 million in funding from investors including Matrix Partners India.

It becomes the first Indian AI start-up to gain a billion-dollar valuation, a mere month after debuting a large language model, the firm said in a blog post. Krutrim, which translates to “artificial" in Sanskrit, is also developing data centers and will ultimately aim to create servers and super computers for the AI eco-system.

A clutch of Indian startups and academic groups are racing to build large language models in Indian languages, so called Indic LLMs, after the launch of OpenAI’s ChatGPT more than a year ago. Countries are hoping to create their own competing AI systems, rather than relying on technology from the US or China. In Europe, investors are pouring cash into France’s Mistral AI, valued at $2 billion after being founded last year. The United Arab Emirates touts its Falcon model, which is backed by an Abu Dhabi government research institute.

2.Kashmir has been laid low by a snowless winter

Every year, thousands of tourists visit Kashmir in winter to enjoy skiing and sightseeing. But the absence of snowfall this year has bought the region's tourism industry to its knees.

Close to 100,000 tourists visited Kashmir last January, but this year that number has reduced by more than half, officials say.

Experts say the snowless winter will have a disastrous impact on the territory's economy as the tourism sector accounts for about 7% of GDP. It will also impact farming and water supply as scanty snowfall will not replenish groundwater reserves adequately.

Environmentalists say that climate change has been impacting the region, causing extreme weather events and prolonged dry spells in both winter and summer. Jammu and Kashmir's weather department recorded a 79% rainfall deficit in December and a 100% deficit in January.

The valley is also experiencing warmer weather, with most stations in Kashmir recording a 6-8C (11-14F) rise in temperature this winter.

3.India-France relations continue to strengthen

French President Emmanuel Macron will be the chief guest at India’s Republic Day festivities on Friday, a sign of how close the two countries have become. 

Paris and New Delhi have had a mostly tension-free dynamic for nearly three decades — France is now the second largest defence exporter to India — and Macron’s visit is expected to yield new military and tech partnerships, analysts said. They have some foreign policy differences, but France is often reluctant to criticize India on issues like human rights and democracy, a South Asia expert noted in Foreign Policy. Their relationship takes on greater importance now, as more Western countries view India as a counterbalance to China. “France bet on India very early on. India fully reciprocated. Today, those bets are paying off,” an Indian Express columnist wrote.

4.US Growth Beats Expectations

The US economy grew at an annualised rate of 3.3% in the final quarter of 2023, according to preliminary data released yesterday, significantly outpacing analyst expectations of around 2%. Sustained consumer spending fueled the growth, including a holiday season that saw record retail spending of almost $965B (unadjusted for inflation). 

The fourth quarter figure brings full-year gross domestic product growth to 3.1%, capping a 12-month period that began amid fears of a recession and inflation near 6.5% (currently 3.4% as of December). The federal reserve has signaled at least three interest rate cuts are likely in 2024 if current economic conditions hold, moves analysts say would likely sustain continued growth in the near term. 

 The country's total yearly GDP is roughly $27.6T, with a debt-to-GDP ratio of 120%.

The US has pulled further ahead of China as the world’s biggest economy, thanks in part to those big-spending American consumers. “It is a striking turn of fortunes,” said Eswar Prasad, who once led the International Monetary Fund’s China team and is now at Cornell University. “The strong performance of the US economy, in tandem with all the short-term and long-term headwinds the Chinese economy is facing, renders it a less obvious proposition that China’s GDP will someday overtake that of the US.”

5According to Reuters, Tesla has targeted the second-half of 2025 to finally start production of a “mass market” EV, something BYD specialises in. Codenamed Redwood, the model is likely to be a compact crossover that may run on Tesla’s next-gen architecture, referred to internally as NV9X.

Tesla is considering a slate of cheaper EVs that will allow it to compete with gasoline-powered and hybrid cars when growth is slowing for the global EV market and Musk himself has warned of lower sales volumes this year.

India, where Tesla has expressed interest in building a factory, could be integral to its mass market plans.

Meanwhile,Musk’s AI start-up plans to raise $6bn from investors to challenge Open AI. Musk hoped to raise as much as $6bn in fresh equity capital for xAI at a proposed valuation of $20bn. However, negotiations were ongoing and that the Tesla chief was still testing investor appetite for such large sums.

Musk’s xAI launched its first product in December, a chatbot named Grok, which is being trained using social media posts on X, allowing it to give more up-to-date answers than its competitors. Morgan Stanley — which in 2022 helped finance Musk’s leveraged buyout of X, formerly Twitter — is co-ordinating the fundraising.

6.Airbus, Tata Group to jointly set up helicopter manufacturing facility

The Tata group and European aerospace company Airbus have signed an agreement to manufacture H125 civilian helicopters together in India. This announcement came as India and France adopted a joint defence production roadmap and an agreement on defence space partnership, following talks between Prime Minister Narendra Modi and French President Emmanuel Macron.

French defence major Thales, too, said it is bringing its “trusted” high-tech capabilities to India and that it plans to set up an avionics MRO (maintenance, repair, and operations) unit in Delhi to provide world-class services to its airline customers.

Under negotiation for the past year, the India-France Defence Production Roadmap could catapult Indian defence producers into the global league by allowing them access to European technology and exposure to France’s list of clients in the Asia-Pacific and beyond.

7.Will AI transform the Emerging World? The Economist opines.

New technology brings with it both the sweet hope of greater prosperity and the cruel fear of missing out. Satya Nadella, the boss of Microsoft, says he is haunted by the fact that the Industrial Revolution left behind India, his country of birth. (Indian manufacturers hardly enjoyed a level playing-field—Britain was then both their rival and their ruler.) Many technologies, such as online-education courses, have generated more hype than economic growth in the emerging world. Some people worry that generative artificial intelligence (AI), too, will disappoint the global south. The big winners so far seem to be a bunch of Western early adopters, as well as startups in San Francisco and America’s “magnificent seven” tech firms, which include Microsoft and have together added an astonishing $4.6trn to their market value since Chatgpt’s launch in November 2022.

Yet AI stands to transform lives in the emerging world, too. As it spreads, the technology could raise productivity and shrink gaps in human capital faster than many before it. People in developing countries need not be passive recipients of AI, but can shape it to suit their own needs. Most exciting of all, it could help income levels catch up with those in the rich world.

The promise of AI in developing countries is tantalising. As in the West, it will be a useful all-purpose tool for consumers and workers, making it easier to obtain and interpret information. Some jobs will go, but new ones will be created. Because emerging countries have fewer white-collar workers, the disruption and the gain to existing firms may be smaller than in the West. The imf says that a fifth to a quarter of workers there are most exposed to replacement, compared with a third in rich countries.

But a potentially transformative benefit may come from better and more accessible public services. Developing economies have long been held back by a lack of educated, healthy workers. Primary-school teachers in India have twice as many pupils as their American counterparts, but are ill-equipped for the struggle. Doctors in Africa are scarce; properly trained ones are scarcer. Whole generations of children grow up badly schooled, in poor health and unable to fulfil their potential in an increasingly global labour market.

Policymakers and entrepreneurs around the world are exploring ways that AI can help. India is combining large language models with speech-recognition software to enable illiterate farmers to ask a bot how to apply for government loans. Pupils in Kenya will soon be asking a chatbot questions about their homework, and the chatbot will be tweaking and improving its lessons in response. Researchers in Brazil are testing a medical AI that helps undertrained primary-care workers treat patients. Medical data collected worldwide and fed into AIs could help improve diagnosis. If AI can make people in poorer countries healthier and better educated, it should in time also help them catch up with the rich world.

Pleasingly, these benefits could spread faster than earlier waves of technology. New technologies invented in the early 20th century took more than 50 years to reach most countries. By contrast, ai will spread through the gadget that many people across the emerging world already have, and many more soon will: the phone in their pockets. In time, chatbots will become much cheaper to provide and acquire.

Moreover, the technology can be tailored to local needs. So far there is little sign that ai is ruled by the winner-takes-all effects that benefited America’s social-media and internet-search firms. That means a variety of approaches could prosper. Some developers in India are already taking Western models and fine-tuning them with local data to provide a whizzy language-translation service, avoiding the heavy capital costs of model-building.

Another idea that is also taking off in the West is to build smaller, cheaper models of your own. A narrower set of capabilities, rather than the ability to get every bit of information under the sun, can suit specific needs just fine. A medical ai is unlikely to need to generate amusing limericks in the style of William Shakespeare, as Chatgpt does so successfully. This still requires computing power and bespoke data sets. But it could help adapt ai in more varied and useful ways.

Some countries are already harnessing ai. China’s prowess is second only to America’s, thanks to its tech know-how and the deep pockets of its internet giants. India’s outsourcing industry could be disrupted, as some back-office tasks are taken on by generative ai. But it is home to a vibrant startup scene, as well as millions of tech developers and a government that is keen to use ai to improve its digital infrastructure. These leave it well-placed to innovate and adapt. Countries in the Gulf, such as the United Arab Emirates and Saudi Arabia, are determined to build an ai industry as they shift from oil. They already have the capital and are importing the talent.

Each country will shape the technology in its own way. Chinese chatbots have been trained to keep off the subject of Xi Jinping; India’s developers are focused on lowering language barriers; the Gulf is building an Arabic large language model. Though the global south will not dislodge America’s crown, it could benefit widely from all this expertise.

Plenty could yet go wrong, obviously. The technology is still evolving. Computing power could become too expensive; local data will need to be gathered and stored. Some practitioners may lack the ability to take advantage of the knowledge at their fingertips, or the incentive to try new things. Although countries in sub-Saharan Africa stand to gain the most from improvements to human capital and government services, the technology will spread more slowly there than elsewhere without better connectivity, governance and regulation.

The good news is that investments to speed ai’s diffusion will be richly rewarded. Much about the ai revolution is still uncertain, but there is no doubt that the technology will have many uses and that it will only get better. Emerging countries have suffered disappointments before. This time they have a wonderful opportunity—and the power to seize it.