Advanced industrial economies are at the forefront of global technology. China is emerging as a competitor to the United States in developing new technologies. In 1991, it was on a similar level to China, but it has yet to make its presence felt. Indeed, it is impossible to say that Indians are less talented or capable. Their success in the United States is well known.
Additionally, India is home to a number of technology and design development centers for leading global companies, helping these companies stay competitive.
When the Indian economy was closed to foreign investment, Indian companies entered into licensing agreements for production using technology developed in other countries. This is no longer the case. Multinational companies now prefer to serve the Indian market from factories they have set up or in countries with which they have an FTA (free trade agreement), where import duties on their products are zero.
Japanese companies found the FTA with Thailand convenient for selling in India from their existing factories in Thailand. Korean companies have established factories in India and have a large share of the Indian domestic market. In the 1990s, the Tatas realized that no established car manufacturer would provide their technology. They had to struggle to successfully develop and sell their cars.
But now, a vibrant startup ecosystem is emerging. We are trying to make the most of the opportunity for Western countries that want to reduce their dependence on China by increasing their share in global supply chains.
We have had exemplary success with Apple. The global giant is rapidly expanding production and exports and is becoming one of India’s biggest job creators.
But if Indian companies have to climb the technology ladder, is there anything they can do other than encourage them to spend more on research and development? Are there any policy tools that can help? Currently, multinational companies are producing and selling in India, so raising import duties makes no sense. The Production-Linked Investment (PLI) scheme provides funds to compensate for the cost disadvantages of producing in India. It does not differentiate between foreign and Indian companies. Apple is a major beneficiary and its success in manufacturing in India is an example of PLI’s success.
Unconventional measures will therefore be needed to bring Indian companies to the forefront of technology. Regarding this parameter, market forces have not yet given a positive result. Therefore, the government must take responsibility. India should be confident that this can be achieved. After all, this country managed to reach the frontiers of the world in the fields of nuclear energy and space.
The main feature that made this possible was that the government gave confidence to technology developers by providing funding to the extent necessary. The Ministry of Atomic Energy and ISRO have collaborated with private vendors to develop technology for components and subassemblies with new stringent performance parameters and to produce them for use in complex nuclear power plants and space satellites. This required practice in search and selection, along with price negotiation. Under the current guidelines, where you cannot buy anything without bidding on specifications, speedy technology development is not possible.
defensive progress
We have also made progress in the field of defense. Offers for the development and procurement of parts and subassemblies are being solicited through an open challenge process. Those selected will be provided with development funds. Private companies such as Bharat Forge and L&T have successfully developed artillery and tanks, which are being purchased by the Army.
The big leap needed is for the government to fund technology development by Indian companies in both the private and public sectors. A successful technology in the market needs to reside within the enterprise, not in an IIT or CSIR lab that becomes a partner in the development process. How can this be done in a fair and transparent manner? One way is to make decisions through an expert committee made up of honest experts, including NRIs. And there needs to be a standard template for governments to benefit from if successful. The easiest way is to enter into an initial contract that pays a percentage of sales revenue (say 2 to 4 percent) for technology developed with government funds.
It would be preferable to work on some big projects in some sunrise areas at first. One success propels us to the frontiers of the world. For example, governments can build zero-carbon green steel factories. A consortium of Indian companies could do this by purchasing all the steel produced for use in their projects, with government funding to the extent necessary.
Development of a medium-range commercial aircraft by a consortium of Indian companies and government funding should be viable and could ultimately yield significant profits, given the growing size of the domestic market. There is sex. Similarly, the government should actively fund the design and development of products such as smartphones and medical devices by Indian startups and companies that have promising projects but cannot get funding from the market. be.
The author is a former director of DIPP
