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SELF-RELIANT INDIA : A WAY FORWARD AND LESSONS TO LEARN FROM CHINA

Author: Ritwik Mehta, III year of B.E Electrical Engineering from Thapar Institute of Engineering and Technology.


How can India and China collaborate both in terms of policy and practice in science and technology, including emerging technologies? What are the implying undercurrents and how can India leverage to enhance its global positioning in science and technology and emerging technologies?


Executive Summary

China follows a model in which the State directs the market reforms. China’s greatest advantage is built on its robust manufacturing sector, questions of ownership and institutional frameworks aside - and focused State direction of its reforms. Focus on reviving the manufacturing sector is the key to success. Attracting more FDI, generating larger exports and pushing through labour reforms will help the manufacturing sector grow more.


A strategy based on the following reforms will create a very dynamic, low-cost economics capable of very rapid growth:

a) Privatisation

b) Labour reforms

c) Power sector reforms

d) Infrastructure investment in public transportation systems, roads, airports, ports, railways, education and health

e) Property market reforms

f) Government deficit reduction and

g) An export oriented economy attracting higher FDI inflows


India should support the privatisation programme, otherwise the only companies which will win shares in the Indian market-place will be foreign, as is happening in China. It is not a contradiction to simultaneously desire high FDI inflows through this route.


Not privatising will leave weak companies in the foreign competition and the domestic sector will be swallowed up.

India can become self-reliant by building up a hardware industry and implementing power sector reforms.


Importance of establishing Data Centres in India: The pandemic has accelerated the fourth industrial revolution – the digital transformation of the world, and India’s story of the the data revolution will be like that of Loudoun County, USA, or a much better version of it, through which 70% of the world's internet traffic passes. A country with a population of 1.3 Bn people having 696.77 million internet users presents a lucrative market for global investors and data centre operators to expand in India. A perfect combination of government policies and power infrastructure, international best practice in data centre deployment from the UK, Europe and North America and Building Information Modelling (BIM) throughout the data center lifecycle can encourage the establishment of data centres in India.

China has also followed policies restricting foreigners’ access to sell in the domestic market. India can emulate many of these features in its foreign trade and foreign investment policies, but most of all it needs to rise above a compartmentalized approach to FDI or foreign trade promotion.


Introduction

Zizhu chuangxin which roughly translates to indigenous innovation in China, caricatured as ‘Aatma Nirbhar Bharat’ is the new buzzword in India’s industrial paradigm for pushing the development of Indian domestic standards and technologies. While the Indian government has just now started focusing aggressively on this policy, China in its 2006 National Medium and Long-Term Program for Science and Technology Development (2006-2020) (MLP), made indeginous development as its national strategy. China’s model of demand and supply-side industrial policies is what distinguishes it from India. Increasing the number of R&D grants and subsidies is the vital feature of China’s strategy.


Those grants and subsidies given are further strategically used with the use of public procurement to prop up local companies. Example: China made it compulsory for government-funded organizations to buy NEVs (the New Energy Vehicles) more than 30% of their buses and cars, and failing to do so will lead to reduction in their fuel subsidies. Even in the projects involving foreign vendors, China ensured complete technology transfer and supported technology localisation through grants and subsidies. Thus, it led to exponential decrease in the share of European and Japanese firms in China's public procurement.


Background

Though India has Science, Technology and Innovation (STI) policy 2013 that focuses on public procurement, it lacks specific instruments like innovation accreditation systems like China. The schemes rolled out by India’s Science and Technology Department are not efficiently backed up by financial capacity. Talking about the ICT industry, India has been left behind because of failure to invest in chip-manufacturing capability. India can kick start the process with the help from the US, South Korea, or Taiwan.


Policy Implications

The seriousness about innovation can be seen from the fact that China spends around $496 billion on R&D while India spends only $50 billion (PPP figures, 2017). India’s national security should be supported only by the national technological and economical strength.


The evidence of biggest-lucana in trade policy is that still today tenders and contracts are taken up by the BIg 4/foreign OEMs; foreign companies receive largesse undr the Universal Service Obligation Fund (USOF) while our local high-tech firms are straightway rejected.


These steps can be backed up with another scathing fact that India’s high tech manufacturing sector has shrunk by 14% between 2011 and 2015. The first practical step would be to allow the top R&D intensive domestic companies for priority procurement, tax incentives, grants or low-interest loans.


The government must ponder on implementing a No-Cost-Full-Commitment (NCFC) procurement model. As of now, the R&D grants are just being given to academic institutes and not to companies.

India Needs DARPA (A Defence Advanced Research Projects Agency). We need to move towards the American model of the networked science state.


Power Sector Reforms: Jack Welch aptly quoted when he visited India that if you think to digitise India, you will require an enormous amount of power.


Mass Use of IT: It can be achieved in two ways – the Enactment of Convergence Bill and E-governance. The current drive on e-governance must be extended across all areas of economic activity, including agriculture, so that IT is brought to the masses.


Reforms Required in the Telecom Sector

China in order to support the top 10 domestic mobile phone manufacturers, banned any new foreign investment in mobile phone production. Big names in sophisticated, high technology products are Huawei, with revenues exceeding US$1 billion, whose R & D facilities are located in a hi-tech industrial park in the Shenzhen Special Economic Zone. China’s further aim is to install 82% of optical fibres from now on and locally produce around 2000 of them.


What India can Do ?: Strategic alliance between State firms, such as a VSNL- BSNL - MTNL merger so they can leverage their huge clout in the market, or between private and public sectors should be encouraged. Adopt Proactive Policies to Encourage an Electronics Hardware Manufacturing Base. Attract More Foreign Investment in Production.


Recommendations

1) India’s FDI policy has not imposed any WTO-compatible performance requirements or technology transfer obligations on MNCs. In this way, India’s dependence on Big Tech companies stifles our learning trajectory. Indian companies have developed world-class, 5G technologies. But they lack funds to develop them. On the other hand, Systems Integrators are reluctant to help SMEs roll out their technology unless they win a tender first. But they cannot win the tender unless they have demonstrated capability. It is a chicken and egg situation. We have world class abilities but not the will, ecosystem or funding to activate them. Hence, we will forever remain prey to predatory foreign companies and their enablers in our country.


2) Skill students through industry-vocational academia partnerships are crucial for an R&D-intensive economy. Germany and Switzerland are the top innovators because of this policy.


3) Rather than creating new institutions, the focus should be to re-model and re-engineer the older ones on the lines of best international practices.


4) Private sector should not be burdened with compliance requirements like setting up STI offices in their premises. This has forced companies to spend more on bureaucracy rather than R&D.


5) India must start incentivizing its best people to return and do the research just like China does. China incentivized ist best people to return from America and started its semiconductor industry. Our Indians have made great contributions to advanced chip-design, but the IP is owned by FOEMs. India just needs to stop this brain drain.


6) There should be proper auditing of the funds transferred to Academia. It has been found that a lot of funds go to waste and do not increase the Nation’s S&T capabilities. Funding should be passed through to fund R&D in firms.


Conclusion

India’s STI policy should focus on long-term basic research in the field of manufacturing and R&D priority areas such as IT, electronics, pharmaceuticals and agriculture. Pumping of R&D investments only in specific areas helped China become a global leader in areas such as super computing, nanotechnology and clean energy.