India at 75 | Looking back, looking ahead...

Self-reliance in India and the 4IR

The route to the EV revolution

The route to the EV revolution | Photo Credit: AFP

India, and the world, stand at the cusp of what is termed the Fourth Industrial Revolution (4IR), in which new generation technologies such as 5G, AI, Internet of Things (IoT), quantum computing, bio-pharma, robotics, autonomous vehicles on land, sea or air, “green” energy sources including fuel cells and “green hydrogen,” related batteries or other storage systems, are expected to dominate the global economy over the next few decades. Countries which possess related know how and industrial capability will doubtless be the major players. Regrettably, despite its much-touted claims of being among the leading economies of the world, India is poorly placed with respect to most 4IR technologies, and may well find itself dependent on other countries and multinational companies (MNCs) even while providing among the largest markets for them. To avoid this fate, determined, goal-oriented and adequately funded measures would be required to urgently develop and build self-reliant capabilities in at least some of these technologies.

It is distressing that, in this 75th year of Independence, we feel the need to call for the revival and revitalisation of newly independent India’s foundational policy of self-reliance in science, technology (S&T) and industry. Unfortunately, under the influence of the neo-liberal policy paradigm since the 1990s, self-reliance has been mistakenly shunned, initially as an obsolete idea of autarky and reinventing the wheel, and later under the present dispensation as also a relic of “Nehruvian socialism.” Neither characterisation is correct, as India’s own history and the policy responses of comparable capitalist economies show.

Self-reliance is best conceptualised as autonomous S&T capability, enabling further indigenous advancement of S&T and related industry. Self-reliance would enable greater economic benefits through higher domestic value added, and strategic benefits by reducing dependence on external entities and positioning the country higher up the value-chain in the international division of labour.

India embarked on this path of self-reliance, with a lead role for PSUs in “core” sectors and state investment in industrial R&D through the CSIR laboratories, in frontier areas such as space, nuclear energy and defence, as well as in human resource development at IITs, IISc, etc. By the 1970s, India emerged as a leading nation among developing countries, at par with if not ahead of China and other East Asian countries except Japan. Notably, these policies were fully backed by private sector leaders in their Bombay Plan of 1948 on the grounds of their own lack of capital and capabilities.

Era of liberalisation

However, with decreasing state support for PSUs and inability of the latter to upgrade their technologies in the 1980s, self-reliance was set on a declining trajectory. It was fondly believed that liberalisation in the 1990s would bring in new technologies into India. Whereas foreign companies established themselves in the large Indian market, there is little evidence of Indian companies having absorbed the new technologies and acquired autonomous capability to upgrade to the next generation. The private sector in India showed little interest in R&D, earlier in a protected domestic market and has later been content in collaborations with foreign OEMs on the latter’s terms. India thus completely missed out on the Third Industrial Revolution characterised by semiconductors, mass manufacturing, electronics, white goods, etc. Years of enticing foreign defence majors to set up shop in India with the same goal have also come to nought. No foreign company or country parts with advanced technologies, and no serious effort was made by India to absorb them.

The path adopted by the East Asian “Tiger” economies in the 1970s onwards was starkly different, consciously built around self-reliance. Following the Japanese example of indigenous development in electronics, optics, domestic appliances, automobiles, etc. earlier, South Korea took up S&T development in these sectors, through planned R&D and establishment of industrial capability through an active partnership with the famous Korean chaebols or conglomerates, established globally leading brands and products, and acquired advanced S&T knowhow. The U.S. had argued against such state-led planned industrial development in favour of a market-led approach, but the South Koreans like the Japanese determinedly followed what some have termed the “Asian model” of capitalism. Taiwan has similarly specialised in semiconductor chips and robotics. These countries are well placed in several areas of 4IR.

China always needs separate discussion, for which however we have no space. Here we will only note that Starting as an outsourced manufacturer of everything, China made a conscious effort to absorb technologies through reverse-engineering, conducting R&D, developing its own globally known products and brands, and moving on to high-tech sectors. More recently, China has decided to shift from low-end manufacturing and work to establish global leadership in 4IR by 2035, investing hundreds of billions of dollars in R&D, already visible in 5G, EVs, batteries, etc.

Even the U.S. which, over the decades, continually ceded space to other mostly Asian nations by embracing outsourcing, based solely on costs and profits, is now reversing course in several critical areas, so as to maintain technological leadership, compete with overseas rivals, overcome supply chain disruptions globally seen during COVID-19, and generate domestic employment. The U.S. has recently announced an investment of $52 billion to “re-shore” domestic chip manufacturing. The recent U.S. climate Bill provides billions of dollars in incentives for domestic manufacture of renewable energy equipment, EVs, “green” hydrogen, carbon capture and sequestration technologies, etc.

Lack of clarity

India remains stuck in a fossilised neo-liberal paradigm. The present dispensation is unable to distinguish between domestic manufacture with foreign collaboration and self-reliant indigenous production along with R&D to support continuous upgradation and new technologies.

A unit of Foxconn, the major contract manufacturer of cellphones, in Tamil Nadu ran into trouble after food poisoning cases in its dormitories for women workers and poor working conditions. Electronics manufacture may seem like a modern, hi-tech sector, but may not be more than modern “sweat-shops,” low down the value chain. In other countries, Foxconn has also laid off thousands of workers as it modernises through robots, etc., so even the employment expected in such industries is not likely to fructify. Several projects coming up under the government’s programme to incentivise domestic manufacturing in semiconductors, including crucial chip-making foundries, are foreign collaborations, with little sign of R&D. Will these projects lead to self-reliance?

EV volumes are growing in India, with batteries being roughly 60% of total cost. However, there are very few battery manufacturers in India. Some automobile makers have formed a consortium to assemble batteries at least for their own consumption, but using imported cells. A few industrialists are flirting with the idea of setting up battery-making units in India, some even acquiring foreign firms with new technology patents. Will any Indian firm also conduct R&D, as all global battery manufacturers do, and must, to survive given the rapid technological changes afoot in EV batteries? Will any state-sector laboratory conduct such R&D, if needed with a private sector partner? Or will India only transition from an oil importer to a battery importer?

Declining R&D expenditure

India’s R&D expenditure has declined steadily since 2005-6, and is stagnant since 2014 at an average 0.65% of GDP, compared to 1.5-3% in most top-10 economies. Despite cutbacks in government research funding to PSUs and CSIR labs, state-support for R&D is around 63% of total R&D spend, while private sector R&D expenditure has risen from 14% in 1991-2, much of it by MNCs using cheaper Indian S&T workforce. But there is little information on how much of this “R&D” is adaptation, customisation, incremental improvements, etc.

The Economic Survey of 2021 bemoaned this low level of R&D, and called for an increase to 2% of GDP but, following neo-liberal ideology, engaged in wishful thinking and called for a sharp increase in private sector R&D rather than “ jugaad” innovation. The Economic Survey 2022 avoided the subject of R&D altogether. In this year’s Budget speech, the Finance Minister spoke of support for R&D in “sunrise sectors” such as AI, drones, genomics, pharma, semiconductors, green energy and mobility systems, but did not provide any additional or earmarked funds for this.

Clearly, India cannot spend lavishly on R&D like China. But India can and should identify specific sectors for mission-mode R&D covering the entire spectrum from knowledge creation to technology or product development to manufacturing. The state should invest in R&D especially in state-sector labs, research institutions and PSUs and, where necessary, bring in private sector entities with autonomous R&D and manufacturing capabilities, with willingness to make significant collaborative investments.

Lastly, a special effort must be made to build and promote an R&D ecosystem in the country, including in human resources, and a research-oriented culture in industry, academia and scientific institutions. Unfortunately, neither the STIP nor the NEP, with its over-emphasis on distance learning and commercialisation, show the required recognition of the need for, or realistic approach to, such necessary transformations.

D. Raghunandan is with the Delhi Science Forum, affiliated to the All India Peoples Science Network

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Printable version | Aug 15, 2022 4:13:11 am |