Context

Every time a technology giant chooses an India-born techie as its leader, there is a justifiable swelling of pride in the country, but also some disappointment.

Why is India still not a major player in technology?

• Inability to use opportunities: The popular narrative is that India’s failures are linked to its inability to make use of market-driven growth opportunities.
• Brain drain: Indeed, as of 2019, there were 2.7 million Indian immigrants in the U.S.
• They are among the most educated and professionally accomplished communities in that country.

Role of the state

• Example of the US: An invisible hand of the US government has been there to prop up each of the so-called triumphs of enterprise and the free market in the US.
• Introduction of new generation technologies: Research by Mariana Mazzucato shows that the state has been crucial to the introduction of the new generation of technologies, including the computers, the Internet, and the nanotech industry.
• Public funding: Public sector funding developed the algorithm that eventually led to Google’s success and helped discover the molecular antibodies that provided the foundation for biotechnology.
• The role of the government has been even more prominent in shaping the economic growth of China, which is racing with the U.S. for supremacy in technology.
• Even while being hailed as the ‘factory of the world’, China had been stuck at the low value-adding segments of the global production networks, earning only a fraction of the price of the goods it manufactured.
• However, as part of a 2011 government plan, it has made successful forays into ‘new strategic industries’ such as alternative fuel cars and renewable energy.
• China’s achievements came not because it turned ‘capitalist’, but instead by combining the strengths of the public sector, markets and globalisation.
• China’s state-owned enterprises (SOEs) were seen as inefficient and bureaucratic.
• However, rather than privatising them or letting them weaken with neglect, the Chinese state restructured the SOEs.
• On the other, SOEs strengthened their presence in strategically important sectors such as petrochemicals and telecommunication as well as in technologically dynamic industries such as electronics and machinery.

What went wrong in India’s case?

• When India inaugurated planning and industrialisation in the early 1950s.
• Public sector funding of the latest technologies of the time including space and atomic research and the establishment of institutions such as the Indian Institutes of Technology (IITs) were among the hallmarks of that effort.
• Many of these institutions have over the years attained world-class standards.
• The growth of information technology and pharmaceutical industries has been the fastest in Bengaluru and Hyderabad.
• Poor education: However, the roadblocks to progress have been many, including India’s poor achievements in school education.
• Missed opportunity to strengthen technological capabilities: In 1991, when India embraced markets and globalisation, it should have redoubled efforts to strengthen its technological capabilities.
• Low spending on research and development: Instead, the spending on research and development as a proportion of GDP declined in India from 0.85% in 1990-91 to 0.65% in 2018.
• In contrast, this proportion increased over the years in China and South Korea to reach 2.1% and 4.5%, respectively, by 2018.

Positives for India

• Higher enrollment for tertiary education: The number of persons enrolled for tertiary education in India (35.2 million in 2019) is way ahead of the corresponding numbers in all other countries except China.
• More graduates from STEM: Further, graduates from STEM (Science, Technology, Engineering and Mathematics) programmes as a proportion of all graduates was 32.2% for India in 2019, one of the highest among all countries (UNESCO data).

Way forward

• Increase spending on education: India needs to sharply increase its public spending to improve the quality of and access to higher education.
• An overwhelming proportion of tertiary students in India are enrolled in private institutions: it was 60% for those enrolled for a bachelor’s degree in 2017, while the average for G20 countries was 33%, according to OECD.
• Improve technological capabilities: The ‘Make in India’ initiative will have to go beyond increasing the ‘ease of business’ for private industry.
• Indian industry needs to deepen and broaden its technological capabilities.
• India — which will soon have twice the number of Internet users as in the U.S. — is a large market for all kinds of new technologies.
• While this presents a huge opportunity, the domestic industry has not yet managed to derive the benefits.
• This will happen only if universities and public institutions in the country are strengthened and emboldened to enter areas of technology development for which the private sector may have neither the resources nor the patience.
• Strengthen the public sector: PSUs should be valued for their potential long-term contributions to economic growth, the technologies they can create, and the strategic and knowledge assets they can build.
• A strengthened public sector will create more opportunities for private businesses and widen the entrepreneurial base. Small and medium entrepreneurs will flourish when there are mechanisms for the diffusion of publicly created technologies, along with greater availability of bank credit and other forms of assistance.

Conclusion

The next big story about Indian prowess does not have to be from the U.S., but could come from thousands of such entrepreneurs in far-flung corners of the country.

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