From UPSC perspective, the following things are important :
Mains level : Paper 3- Importance of innovation for self-reliance.
What does it take to be self-reliant? (Hint: R&D!) This is the question this article tries to answer. After independence, we had a good start in R&D. But what went wrong? What was the role played by globalisation? Did the globalisation deliver on its promise of technology transfer? And finally, what lies on the way forward for India? This article answers all such question.
What went wrong: historical perspective
- India chose the path of self-reliance in state-run heavy industries and strategic sectors after independence.
- In the decades following independence, this choice of self-reliance had placed India ahead of most developing countries.
- In the 1970s and 80s, however, India did not modernise these industries to climb higher up the technological ladder.
- The private sector, which had backed the state-run core sector approach in its Bombay Plan, stayed content with near-monopoly conditions in non-core sectors in a protected market.
- Little effort was made to modernise light industries or develop contemporary consumer products.
- India’s industrial ecosystem was thus characterised by low productivity, poor quality and low technology, and was globally uncompetitive.
What did India lose in the ‘lost decades’?
- India completely missed out on the ‘third industrial revolution’.
- Third industrial revolution comprised electronic goods, microprocessors, personal computers, mobile phones and decentralised manufacturing and global value chains during the so-called lost decade(s).
- Today, India is the world’s second-largest smartphone market.
- However, it does not make any of these phones itself.
- India manufactures only a small fraction of solar photovoltaic cells and modules currently used, with ambitious future targets.
What happened to ‘self-reliance’ after India embraced globalisation?
- At the turn of the millennium, when India embarked on liberalisation, privatisation and globalisation.
- So, the very concept of self-reliance was rubbished.
- This happened in the belief that it was like reinventing the things already invented and wasting money on it.
- And when advanced technologies could simply be bought from anywhere at lower costs.
- Two related ideas have prevailed since then, and neither delivered the desired results.
So, what are these two basic ideas?
1. Unsuitability of PSUs in the globalised world
- The first idea was that public sector undertakings (PSUs) are, by definition, inefficient and sluggish for the competitive globalised scenario.
- No effort was made to engender either real autonomy or a transition to new technological directions.
- Instead, PSUs with capability and scale were undermined or abandoned, along with many nascent research and development (R&D) efforts, for instance, in photovoltaics, semiconductors and advanced materials.
So, what was the result of this attitude towards PSUs?
- The private sector displayed little interest in these heavy industries and showed no appetite for technology upgradation.
- With entry of foreign corporations, most Indian private companies retreated into technology imports or collaborations.
- Even today, most R&D in India is conducted by PSUs.
- And much of the smaller but rising proportion of private sector R&D is by foreign corporations in information technology and biotechnology/pharma.
- Conclusion: Given the disinclination of most of the private sector towards R&D and high-tech manufacturing, significant government reinvestment in PSUs and R&D is essential for self-reliance.
2. Foreign companies were expected to bring new technologies in India
- The second idea was that inviting foreign direct investment and manufacturing by foreign majors would bring new technologies into India’s industrial ecosystem.
- This was thought to obviate the need for indigenous efforts towards self-reliance.
So, what happened on the ground?
- But mere setting up of manufacturing facilities in India is no guarantee of absorption of technologies.
- There is no evidence from any sector that this has taken place or has even been attempted.
- The fact is, foreign majors jealously guard commercially significant or strategic technologies in off-shore manufacturing bases.
- Conclusion: The key problem of self-reliance is therefore neither external finance nor domestic off-shore manufacturing, but resolute indigenous endeavour including R&D.
Let’s look at experience of other Asian countries towards self-reliance
Three models emerge from Asian countries.
1. Focus on technology and industries
- Japan’s post-war success, was seen as a template by some countries to follow.
- These include countries like South Korea, Taiwan, Singapore and Hong Kong
- These countries took huge technological and industrial strides in the 1970s and 80s.
- South Korea emerged as a global powerhouse in manufacturing, but also in indigenously developed technologies.
- Taiwan developed technologies and manufacturing capacities in robotics and micro-processors.
- While Singapore and Hong Kong adapted advanced technologies in niche areas.
- These self-reliant capabilities were enabled, among other factors, by planned state investments in R&D including basic research (3-5% of GDP), technology and policy support to private corporations, infrastructure and, importantly, education and skill development (4-6% of GDP).
2. Focus on off-shore manufacturing and not on self-reliance
- Countries like Thailand, Malaysia, Indonesia and Vietnam have focused on off-shore manufacturing lower down the value chain and without the thrust on self-reliance.
- This is useful for job creation but is an unsuitable model for a country of India’s size and aspirations.
3. China: Transition from low-end manufacturing to dominant role in supply chains
- China is, of course, unique in scale and in its determination to become a superpower not just geopolitically but also in self-reliant S&T and industrial capability.
- China advanced purposefully from low-end mass manufacturing to a dominant role in global supply chains.
- It has now decided on shifting to advanced manufacturing.
- It has set itself a target of becoming a world leader by 2035 in 5G, supercomputing, Internet of Things (IoT), artificial intelligence (AI), autonomous vehicles, biotech/pharma and other technologies of the ‘fourth industrial revolution’.
Way forward for India
- India may well have missed the bus in many of technologies in which the U.S., Europe and China have established perhaps insurmountable leads.
- Yet, self-reliant capabilities in electric and fuel cell vehicles, electricity storage systems, solar cells and modules, aircraft including UAVs, AI, robotics and automation, biotech/pharma and others are well within reach.
- Large-scale concerted endeavours would, however, be required, since self-reliance will not happen by itself.
- State-funded R&D, including in basic research, by PSUs and research institutions and universities needs to be scaled-up significantly, well above the dismal 1% of GDP currently.
- Upgraded and reoriented PSUs would also be crucial given their distinctive place in the ecosystem.
- Private sector delivery-oriented R&D could also be supported, linked to meaningful participation in manufacturing at appropriate levels of the supply chain.
- India’s meagre public expenditure on education needs to be substantially ramped up including in skill development.
Consider the question “The path to the self-reliance of any country goes through robust capabilities in the R&D. Comment”
Self-reliance would need a paradigm shift in our approach toward many things. First and foremost is the R&D. Potential of the PSUs has to be tapped to their fullest in the realms of R&D. The second area of focus should be education. These two areas are the key to achieve self-reliance and should be the focus of policymakers.
Back2Basics: Bombay Plan
- The Bombay plan was a set of proposal of a small group of influential business leaders in Bombay for the development of the post-independence economy of India.
- This plan was published in two parts or volume- first in 1944 and second in 1945.
- The prime objectives of the plan were to achieve a balanced economy and to raise the standard of living of the masses of the population rapidly by doubling the present per capita income within a period of 15 years from the time the plan goes into operation.