Much Ground Work Required To Push Modi’s Dream Of Development

By GovernanceToday
In Cover Story
November 3, 2014
0 Comments
463 Views

Even as India created history by becoming the only country in the world to successfully enter the Mars orbit in its first attempt itself, it in no way shows that we are the leaders in scientific development or technological innovation. At best it is just a start.

MANGALYANHe success of mom has given some tooth to the capabilities of india’s skill and given an impetus to prime minister narendra modi’s ambitious “make in india” campaign. However, our manufacturing industry has been languishing for years and has shown negative or single digit growth. To become a manufacturing hub of the world, India needs to invest aggressively in Research and Development for science and technology. India spends about 0.8 per cent of its $1.87 trillion economy in scientific R&D, while China, the world’s biggest manufacturer spends 1.98 per cent of
its $9.182 trillion economy in the same. Meanwhile, other manufacturing powerhouses such as Germany and United States of America spend nearly 3 per cent of their GDP, which is much larger than our, in R&D.

According to a paper published by the ministry of science and technology in 2013, access to science-based innovations, technologies and engineering would determine the global competitiveness of nations. Currently the global investments into Research and Development are estimated at $1.2 trillion, of these, the private sector is the major investor. In developed and emerging economies, the private: public investments into R&D are generally in the range of 2:1. On the other hand, in India private investments into R&D are estimated at only half of
that of the public sector.

Stimulus needed
In countries where private sector engagement into R&D is large, time to commercialisation of technologies is shorter. The extent of commercialisation of outputs from public funded research is generally lower. Hence, it is in the national interest of India to stimulate the private sector engagement into R&D and aim at Public : Private sector investments into R&D at levels of 1:1 by 2017.

The government is concerned that the private sector investment into R&D is less than optimum levels in comparison to the current trends in global best practices. A 400 per cent increase in investment by private players is required to reach government’s aim of equal investment by private players by 2017. Currently this does not look achievable as the economy has turned to sub-5 per cent growth in the last two fiscals from its heady days of 8 per cent plus rate of growth, forcing companies to lower their investments in R&D activities.

India 0.8 %

Economy Of World’s Biggest Manufacturer 1.98%

Meanwhile, other manufacturing powerhouses such as Germany and United States of America spend nearly 3 per cent of their GDP, which is much larger than ours, in R&D.

However, Narendra Modi’s call is for foreign investors to put in investment and take advantage of one of the youngest populations in the world and a market which holds nearly a sixth of the world’s population.

But the country lacks skilled labour and research and development classrooms. We have to start by investing in the process of education and only then foreign biggies such as GE and Toyota would start considering India seriously as their manufacturing hub.

Right now, India’s services contribute most to the nation’s GDP against about 17 per cent contribution from manufacturing which is dismal  when compared with China’s where manufacturing contributes over 50 per cent to it economy.

We need a host of reformation even before we start competing in manufacturing against leading nations. Reform special economic zone policy, labour laws, taxation policy, and land acquisition policy are the basic places Narendra Modi can at least make top executives’ heads turn towards India.

Second is developing a market that has the power to buy. We might be the world’s second most populous nation in the world, but we are not one of those countries with the highest purchasing powers in the world. We have a huge unemployment ratio making the market less attractive for global businesses to think it as a market that has ready customers.

Better late than never
All this does not augur too well for what our PM wants. But atleast a thought process has started and its a welldone sign. “As mentioned by the Prime Minister, the purchasing power of the people can be enhanced and demand created only if they have employment opportunities,” CII President Ajay S Shriram said in a statement more recently. He added that ease of doing business that the PM talks about is heartening and could be the key to attract manufacturers as a second alternative to China.

Narendra Modi’s call is for foreign investors to invest and take advantage of one of the youngest populations in the world and a market which holds nearly a sixth of the world population.

FICCI, another popular industry body, said that India is unarguably an attractive investment destination given its rich demographics that feed into the intrinsic demand and supply elements of businesses. The potential, however, has remained mostly untapped for want of a truly enabling environment required for businesses to flourish. It said the government needs to focus on improving business environment through ease of doing business and an encouraging fiscal framework, encouraging manufacturing set-up by providing a conducive eco-system that supports factor advantage, nurtures innovation and strengthens inter-linkages with other industries and institutions.

Though the Prime Minister, Narendra Modi is being very inspiring, but ground work should be a simultaneous process and encouraging investment in scientific knowledge is the right place to start.