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 industrialrevolution’ 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)
