Topic: General Studies 2,3:
- Government policies and interventions for development in various sectors
- Indian Economy and issues relating to planning, mobilization, of resources
India and Self-reliance – A brief History
Context: In the wake of COVID-19 pandemic, Prime Minister emphasised the necessity of a self-reliant India.
India during Early days of Independence – Self-reliance losing way to License Raj
- Self-reliance in state-run heavy industries and strategic sectors in the decades following independence 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 in a protected market.
- Little effort was made to modernise light industries or develop contemporary consumer products.
- The industrial ecosystem was kept hostage to Licence-Permit-Quota system which stifled innovation. As a result, self-reliance gave way to corruption & import dependence
Consequence of these policy measures
- India’s industrial ecosystem was thus characterised by low productivity, poor quality and low technology, and was globally uncompetitive.
- India completely missed out on the ‘third industrial revolution’ comprising electronic goods, micro-processors, personal computer etc.
- Today, India is the world’s second largest smartphone market. However, it does not make any of these phones itself
India at the turn of 1990s
- India embarked on liberalisation, privatisation and globalisation, shunning previous restrictive industrial policies
- The very concept of self-reliance was rubbished; in the belief that advanced technologies could simply be bought from outside at lower costs
- Two related ideas have prevailed since then, and neither delivered the desired results
- First is ignoring Public Sector Units
- PSUs were considered inefficient and sluggish for the competitive globalised scenario.
- Hence, no effort was made to engender either real autonomy or a transition to new technological directions.
- Instead, PSUs were undermined or abandoned, along with many nascent research and development (R&D) efforts
- On the other hand, 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.
- Second is inviting Foreign Direct Investment
- This was envisaged to bring new technologies into India’s industrial ecosystem, removing the need for indigenous efforts towards self-reliance.
- However, mere setting up of foreign manufacturing facilities in India is no guarantee of absorption of technologies (the ability to independently take them to higher levels).
Consequences of above two ideas – Inequitable Growth
- Meagre technology transfer: Foreign majors jealously guarded commercially significant or strategic technologies in off-shore manufacturing bases.
- Outlier among Asian Countries: Japan, South Korea, Taiwan, Singapore and Hong Kong strengthened their self-reliant capabilities though planned state investments in R&D including basic research (3-5% of GDP), technology and policy support to private corporations, infrastructure, education and skill development (4-6% of GDP).
- Dwarfed by China: Both India and China were on similar levels during first four decades of Independence. However, China now is self-reliant S&T and industrial capability and has set itself a target of becoming a world leader by 2035 in 5G, supercomputing, Internet of Things, artificial intelligence (AI)
- Inactive Private sector in R&D: Most R&D in India is conducted by PSUs, with little efforts from private players as they prioritized short-term profits over innovations
- Widened Inequality: Privatization and FDI benefits were largely reaped by already wealthy sections of society which led to increased gap between rich & poor
Way Ahead – Self-Reliance requires enhanced R&D
- State-funded R&D, including in basic research, by PSUs, research institutions and universities needs to be scaled-up significantly, well above the dismal 1% of GDP currently.
- Private sector delivery-oriented R&D needs to be supported through policy & fiscal measures
- India’s meagre public expenditure on education needs to be substantially ramped up (as against current trends of privatisation which would only shrink access)
Connecting the dots:
- Globalisation in the wake of COVID-19 pandemic