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India and Self-reliance – A brief History

  • IASbaba
  • May 30, 2020
  • 0
UPSC Articles
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GOVERNANCE/ ECONOMY

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:

  • Neoliberalism
  • Globalisation in the wake of COVID-19 pandemic

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