SELECT
SPEECHES
Science, Technology and
Development
- I am grateful to the Indian Institute of
Science, unique Institute committed to advanced research and education on Science and
Technology for asking me to deliver this lecture in the memory of Sir Vithal N.
Chandravarkar. As a non-scientist, I feel specially privileged to be invited to address
this distinguished audience in this famous institution. Sir Vithal Chandravarkar, a
barrister by profession, was a towering personality in Indian public life. The University
of Bombay and the Indian Institute of Science, Bangalore were among the two major
educational institutions with which he was closely associated. I am happy to join you in
the tribute we are today paying to the memory of a truly dedicated and inspiring
personality.
- My subject today is "Science,
Technology and Development". Obviously, this is too vast an area to be covered in a
single lecture. I will, therefore, have to be necessarily selective in dealing with only
some aspects which seem to me to be of particular relevance at the present juncture in the
development of our country. I hope you will forgive me if I have neglected some other
aspects which may be of equal or even greater importance to some of you.
Introduction
- The ultimate purpose of science is
social. Its relevance lies in its contribution to the well being of the society. Science
performs this role in many ways. In an intellectual sphere, science perhaps embodies a way
of life - a rational thinking process. But in the material sphere its societal
contribution is primarily transmitted through its application to the production of goods
and services. In this process the scientific knowledge is transformed into applied
technology. Technology, by changing the production techniques, results in improved
productivity and it is through this increase in productivity that societies have achieved
rapid strides in economic growth.
- History has shown that modern economic
growth has been inspired by a rapid and persistent upgradation of technology and
scientific know-how. It is estimated that from one-third to one-half of the growth
experienced by the industrially advanced countries has come from technological progress.
Thus, technology has emerged as the principal driving force for long-term economic growth.
Economic growth results both from slow and steady improvements in technology and from
knowledge embodied in physical and human capital as well as from the
"breakthrough" inventions. Breakthrough inventions are, however, unpredictable
and such inventions may at times change the direction of the entire industrial structure.
- What is the relation between science and
technology? How do they influence growth trajectories of the world economy and well being
of the people? What should be the relative roles of state and market in ensuring the
blooming of scientific knowledge and its culmination into technological know-how? What do
the successful country experiences teach us in this regard? Today I would like to share
with you some thoughts on some such questions that concern us all.
Relation between Science and Technology:
Invention, Innovation and Diffusion
Invention and Innovation: A
Schumpeterian Paradigm
- From an economist's viewpoint, the
relation between science and technology reminds me immediately of the great twentieth
century Austrian economist Joseph Schunmpeter. Schumpeter made a fundamental distinction
between the invention, which is the discovery of new techniques, and innovation, which
consists of the practical application of an invention in production for the market.
Invention is performed by the inventor while innovation is the task of the entrepreneur.
- The classic example of this is perhaps
the 18th Century industrial revolution in Britain. The success of the then Britain did not
merely lie in the invention of scientific tools, which may be primitive by modern
standards, but also in their commercial adoption. Thus James Watt is not only remembered
as the inventor of steam engine but also as one who put it to commercial use. It is this
commercial adoption that Schumpeter referred to as innovation. Many of the inventors of
modern software too fall into this combined category of inventor-innovator rolled into
one. Bill Gates is often portrayed as not only the pioneer of MS-DOS and Windows but as
one who marketed it successfully. However, often the entities of innovator and inventor
are distinct, and in such normal situations it is the intimate interlink between invention
and innovation that marks the interrelationship between science and technology.
- In Schumpeter's analytical structure
there is a third stage of the twin process of invention-innovation, viz., diffusion, which
occurs only when the scientist and the entrepreneur join hands. The invention and initial
innovation of any product or process may be the property or outcome of an individual or
company effort. But how are they made popular? What ensures their cost-reduction and
universal adoption? It is only through proper diffusion of the scientific knowledge
embodied in the marketable form of a particular product or process that it gets
universalised. Technological history is full of examples of such diffusions, or knowledge
spillovers.
Inter-link
between Science and Technology: The Question of Basic vis-à-vis Applied Research
- Once we recognise the interlink between
science and technology as the prime force behind economic progress, the question comes
about the optimal mode of inter play between them. Put differently, often the question
arises what kind of research is more necessary: pure or applied? The issue becomes all the
more important in the context of funding science programmes. However, like many of the
fundamental choice problems of human life, there is no standard model that can be
universally pursued. At a conceptual level, nevertheless, one can have a two-way
classification of the agencies involved with scientific research, viz., knowledge
generation agencies and knowledge application/diffusion agencies. While the former
includes universities or technical schools, big science national networks like CSIR or
various corporations are examples of the latter. A related question would be: what kind of
research we need more? Would the research paradigm of the scientific pursuit be dictated
solely by utilitarian consideration and accordingly subjected to social controls?
- All economies in the world faced this
dilemma at some time or the other. In fact, the issue can be traced earliest in a public
debate that took place in Great Britain during the 1930's between Michael Polayani and
J.D. Bernal. Polyani stressed the need for autonomy and self-governance for the scientific
community, while Bernal expressed his preference in favour of societal and government
regulation over research agenda. Thus, often one finds a tension between, what is called
an 'open' science with an 'appropriable' science'. Such dichotomy, in my opinion, arises
from a confusion between private and social rate of return of scientific pursuit. The
immediate social rate of return out of an otherwise esoteric research programme may be low
- but over the longer run it could have the potential of being appropriable. The
contribution to science and technology comes from both these two kinds of research and
often the degrees of success in the field of technical capabilities depend on the degree
of cohesion that these two kinds of scientific paradigms have. In this regard, it may be
noted that in many fields of today's world of scientific research, like modern biology,
the distinction between basic and applied science is increasingly getting blurred. One is,
in fact, reminded of Louis Pasteur, who used to say, "There is nothing like basic
research and applied science. There is only science and its application". The
distinction, developed by the European Commission is instructive in this respect. They
have adopted a three-way classification of knowledge-based research, viz., a) fundamental
research, b) basic industrial research, and c) applied research and development (R&D).
It is my firm belief that India, as nation needs all the three kinds of research and makes
an endeavour to maintain a symbiotic relation between them.
Impact of Science and Technology on
Development
- Enhanced labour, capital and technical
progress are the three principal sources of economic growth of nations. The distinction
between capital and technical progress in economist's terminology is often a matter of
degree. While increase in capital is interpreted as the quantitative change in the
existing capital stock of any country, technical progress refers to qualitative changes in
the production technique. However, the term 'capital' needs to be taken in a rather broad
sense, so that it encompasses the three distinct kinds of capital viz., physical,
financial and human. Accordingly, the domain of the concept 'technical progress' gets
extended to all these three kinds of capital. This basic broad definition of capital is
central to our understanding of the impact of science and technology on economic well
being. Moreover, the contribution of science and technology on economic growth comes both
in the form of capital and technical progress.
Relation between Technology and Growth:
Schumpeter's notion of creative destruction
- What is the process through which these
technological innovations get transmitted to higher growth trajectory? Let me turn to
Schumpeter once more. Schumpeter describes this process as one of creative destruction; in
his own words,
"The fundamental impulse that sets
and keeps the capitalist engine in motion comes from the new...goods, the new methods of
production or transportation, the new markets, the new form of industrial organization the
capitalist enterprise create...(These) illustrate the same process of industrial mutation
that incessantly revolutionizes the economic structure from within, incessantly,
destroying the old one, incessantly creating a new one. This process of Creative
Destruction is the essential fact about capitalism.1
- Recent theories of endogenous growth
stress two facts of innovation. First, it is the engine of growth, and secondly, it is
endogenously generated by competing profit-seeking firms. The key feature of the process
is that knowledge acts as a public good and creates economy-wide increasing returns. The
public stock of knowledge that has accumulated from the spillover of the previous
inventions is a crucial input in the technology to generate new ideas. Recent empirical
findings establish that while the rate of knowledge obsolescence rose from 2-3 per cent
early in the century to about 10-12 per cent per year at the end of the 1980s, the rate of
knowledge diffusion was even faster. In fact a study for U.S.A. found that 70 per cent of
product innovations were known and understood by rivals within 12 months of the
innovation, and only 17 per cent took larger than 18 months. There is also evidence of
increasing patent-research input ratio (as measured by R&D expenditure) for a number
of developed countries.
Growth,
Total Factor Productivity and Incremental Capital Output Ratio (ICOR)
- However, the crucial impact that science
and technology imparts on the economic growth of a nation is through the kind of
broad-based technical progress that I have referred to earlier. Traditionally this is done
through growth accounting in which the total growth of a nation is decomposed into
relative contributions of labour, capital and technical progress. The influence of
technical progress in growth process of any economy is referred to as total factor
productivity growth (TFPG). There have been various studies on growth accounting in a
number of countries. A recent contribution for the G-7 countries and the Netherlands, for
the period 1947-73, finds that the annual growth rates for TFP for these countries were
substantial ranging from 1.4 per cent in the U.S.A. to 4.0 per cent in Japan.2
TFPG accounts for over one-third of the overall growth rate in all these countries.
Interestingly, the same study finds a rather low growth of TFP in the high growth nations
of East Asia, where capital contributed the lions share to the growth process. There is,
however, no riddle in this finding; after all from measurement standpoint a small
variation from earlier technique may still be defined as one of change of capital. As
already mentioned much of the technological capabilities of the East Asian countries came
either from technological licensing agreements or from foreign direct investment.
- Let me now turn to the Indian
performance in the productivity front. Because of inherent measurement problems of TFPG,
estimates by different researchers differ quite substantially in Indian context. As for
example, Professor B. N. Goldar of Delhi University estimated TFPG for 1960-80 to be 1.3
per cent per annum for India.3 On the contrary, Professor I. J. Ahluwalia of
Centre of Policy Research, New Delhi found that there were considerable inter-industry
differences insofar as TFPG was concerned; in fact, her calculations indicated that TFPG
for India was in the range of (-)0.6 - (+)0.3 per cent per annum during the sixties and
the seventies.4 Nevertheless, researchers found a positive turnaround in Indian
TFPG since the early eighties.
- Productivity performance may
alternatively be measured by how much incremental output investment has generated in
different time-periods. This, in economists' tool-kit, is termed as 'incremental capital
output ratio" (ICOR). The ICOR that exhibited an ever-increasing path during the
first three decades of post-independence period started reducing since the early eighties.
During the post-liberalisation period (i.e., 1992/93 - 1996/97) there had been further
decreasing trend in it, indicating some productivity gains in the Indian economy in recent
years.
Employment Potential
of Technology-induced Growth
- An important issue governing the impact
of science and technology on the well being of a nation is the employment potential of any
technology. An oft-expressed fear associated with the emergence of any technological
innovation is that it is labour displacing. The crucial issue in this context is the
employment elasticity of an innovation-induced growth. Though per se the innovation of a
new technology may be labour saving, but the development of ancillaries or related
products may give rise to newer employment opportunities; it is the net employment
absorption that determines the employment-elasticity of growth. There is strong evidence
that so long as technology helps to widen the resource base of the production system of
the economy, there is no a priori reason for technological innovation to be employment
reducing in an aggregate sense. East Asian example is a case worth considering on this
issue. It is now widely accepted that notwithstanding the proportions of
factor-utilisation of any production process, there has to be ample emphasis on labour for
ensuring the welfare of the working class. East Asian governments used many such policies
- land reform in Korea and Taiwan, housing subsidies in Hong Kong and Singapore, credit
targeting for small business and investment in rural infrastructure in Indonesia and
Malaysia. Accordingly despite varied degree tolerance of labour unions, wages increased as
fast as GDP and unemployment decline in all of the East Asian countries.
Policy framework to foster innovation and
Technology Development
Options in Technology Upgradation
- International experience is full of
success stories with different kinds of innovation. In fact, internationally there are
four different forms of technology transfer, viz.,
- acquisition of a share of the equity of
the technology producing firm,
- license agreement,
- outright purchase of equipment, know-how
or blue print, and
- flow of human resources.
There are success stories in all these
modes of technology upgradation. As for example, countries like Japan, acquired patents
from outside, and then took recourse to their indegenous assimilation, and further
development, so as to finally export them. Similarly, many of the high-growth East Asian
countries have little original technological inventions - bulk of the technological
capabilities came from licensing agreements or direct foreign investment.
- Technological activity in developing
countries, accordingly, tends to be almost of the "incremental type" rather than
of "Schumpetarian-frontier-moving-type". Numerous case studies of such
experiments can be cited from the Indian experience. Some examples include adopting
imported designs of power plant equipment to suit local quality of coal and changes in the
designs of tractors, vehicles and a variety of consumer durable to suit local conditions
of production of components.
- It must, however, be recognised that
success stories of "in-country research" leading to output growth are exceptions
rather than the rule. We have had our constraints. The time lag between 'effort' and
'results' in any innovation activity is large. An economy has to "afford" it.
And an economy, that is pursuing a pattern of investment (such as infrastructure
development), where projects have long gestation periods, may not find it very easy to
allocate large resources to innovative activities where gestation lags are even larger
than these infrastructure projects. Besides, there are the risks associated with
innovation effort.
- Thus, the principal elements that should
be taken into account in drawing up a framework of policies to facilitate science and
technology development effort are:
- the trade option in technology,
- the time lag between 'efforts' and
'results' and the associated risks,
- the areas/industries to be given
priority,
- the institutional framework the role of
public sector, particularly the governments in,
- facilitating innovation,
- the direct role of Government in R &
D effort, and
- the institutional set-up for science and
technology.
- Looking at science and technology in the
context of its contribution to production of goods and provision of services to the
people, the objective is maximisation of output. If the needs of the society are to be
fulfilled at the lowest cost, the 'make' versus 'buy' issues become important i.e., the
trade option has to be kept in view. While the commodity markets may tend to be 'perfect',
technology markets, even if they exist, are characterised by their 'imperfectness' marked
by inadequate information and exclusive rights acquired through patents or otherwise. In
the Indian situation, we are frequently compelled to acquire technology through imports.
Firms trade in 'technology' not as a commodity but as a 'perceived' economic advantage for
a stream of returns in the future. International political considerations cannot also be
ruled out in technology trade. Licensing by governments of developed countries is a common
feature. However, when it comes to bargaining regarding technology transfer, the issue of
indigenous availability often becomes extremely important. As for example, it has been
observed in India that the prices quoted by foreign firms for capital goods and equipment
drop when a distinct alternative supply possibility emerges. This has been the experience
in a number of industries like electric power equipment, telephone exchange equipment and
machine tools. Hence, to appropriate the benefits of the trade option in technology, the
nation needs some effort at technology development, which generates a supply alternative.
Consequently, the efforts towards development of indigenous technological capabilities
make immense commercial sense and makes the path of getting the right kind of technology
at a right price in an otherwise global village.
Financing of Innovation Activities
- There are two fundamental issues that
are central to any policy governing science and technology. First, what is the funding
process of innovation activities? Secondly, if the diffusion of technological innovation
is indeed fast what is the incentive of the innovator? Often there is a wedge between the
commercial successes of a new innovation and the profits appropriated by the innovator -
the problem becomes all the more important in view of the fact that in a number of cases
innovative activity have substantial fixed cost. A number of solutions are practised in
different degrees in various countries. Use of subsidies or tax-concessions for R&D
expenditure, adoption of co-operative R&D venture and national champions, and detailed
patent laws are the major policy instruments adopted in this regard. I shall take up the
issue of patent later; for the present let me look into the funding process.
Some Cross-Country Trends in R&D
Expenditure
- As regards funding of R&D
expenditure is concerned, considerable differences exist even among the advanced
economics. While both Japan and U.S.A. spent 2.8 per cent of their GDP on R&D in 1989,
20 per cent of total Japanese R&D come from Government as against 50 per cent in
U.S.A. Nevertheless, public expenditure on technology development for civilian industrial
application accounts for a small share of public R&D budgets in the industrial
economies. Interestingly, a number of studies found that effects of direct government
funding on the productivity performance of the recipient firms are smaller than privately
financed R&D investment.
- How does Indian expenditure on R&D
compare against these statistics for developed countries? Based on official statistics,
released by Department of Scientific and Industrial Research (DSIR), it had been pointed
out that India spends roughly 0.7 per cent of her GDP to R&D. Furthermore, it was
observed that the ratio had shown remarkable stability over the years. However, it needs
to be noted that these statistics cover only those industrial units who chose to get
registered with DSIR. Considering the fact that, over the nineties there had been
substantial reduction in the number of units registered with DSIR, Professor Y.K. Alagh
hinted at the presence of some underestimation in these numbers.5
Interestingly, out of this rather meagre amount of R&D spending, more than
three-fourth comes from government; thus, the possibility of underestimating R&D
expenditure could be present only in the rest one-fourth. Hence, even if we had accounted
for the extent of underestimation, Indian R&D spending would hover around 1 per cent
of her GDP. On the other hand, in the Reserve Bank of India sample of 1,720 public limited companies, there
had been some marginal increase in the proportion of R&D expenditure to total
expenditure - from 0.23 per cent in 1992-93, it became 0.24 per cent in 1993-94 and
finally to 0.27 per cent in 1994-95. However, these numbers do not tell the full story.
After all, one should not forget that presently in India there are 200 universities,
nearly 400 national laboratories, and 1300 in-house R&D units of industries.
Venture Capital
- Financing of innovative activities with
private sector initiative, as I have already pointed out, is indeed problematic. Gone are
the days of individual entrepreneurs, capable of financing uncertain, risky but full of
profitable potential, new technological innovations. On the other hand, stock markets also
may not be forthcoming in financing these high growth but risky ventures. To get rid of
this finance constraint 'venture capital' comes in, which is essentially equity investment
in companies that are not mature enough to get access to capital market but have high
growth potentials to compensate for the uncertainties inherent in such ventures. There are
a number of success stories of such venture capital financing in the developed world;
successful corporations like Apple Computers or Genetech producing bio-medical products
would not have born without active venture capital participation.
- The guidelines on 'venture capital'
issued by the Reserve Bank of India in 1988 recognised their role in the Indian conditions. A number of
venture capital institutions came up in due course - the Technology Development and
Investment Corporation of India (set up by ICICI). Technology Development Fund (set up by
IDBI), Equity Development Scheme (set up by SBI Caps and Canara Bank), to name a few. For
the year ending December 1997 the number of active members of the Indian Venture Capital
Association (IVCA) went up to thirty-three. From Rs. 317 crore in 1993, the investments of
various venture capital funds became more than double at Rs. 673 crore in 1996. Despite
this growth, we still have a long way to go in the field of venture capital. However,
since IVCA does not have the foreign equity companies as their members, the actual
investment by venture capital firms may be somewhat higher than the quoted figures. The
nature of the venture capital has an element of country specificity. It depends on the
state of development of an economy. In this context the recent Draft Regulation for
Venture Capital Funds issued by SEBI is expected to go a long way.
Science and Technology: The Indian Policy
Environment
Indian Technology Policies: The
Early Era
- Nationalist leaders recognised the
importance of science and technology in national development in as early as 1939, when a
National Planning Committee was constituted under the chairmanship of Jawarharlal Nehru.
Indian Science and Technology Policy was greatly influenced by Pandit Nehru's vision, who
from early days had an abiding interest in application of science and technology to
development. Commenting on his interest in science, Nehru said,
"Though I have long been a slave
driven in the chariot of Indian politics, with little leisure for other thoughts, my mind
has often wandered to the days when as a student I haunted the laboratories of that home
of science, Cambridge. And though circumstances made me part company with science, my
thoughts tuned to it with longing. In later years, through devious processes, I arrived
again at science, when I realised that science was not only a pleasant diversion and
abstraction, but was of the very texture of life, without which of modern world would
vanish away. Politics led me to economics, and this led me inevitably to science and the
scientific approach to all our problems and to life itself."6
Scientific Policy Resolution, 1958
- India was perhaps one of the first
countries of the world to create a ministry of Scientific Research and Natural Resources
in 1951 for organising and directing scientific research for national development. The
Scientific Policy Resolution presented in March 1958 stressed the following objectives of
Indian Scientific Policy:
- to foster, promote and sustain, by all
appropriate means, the cultivation of science, and scientific research in all its aspects
- pure, applied and educational;
- to ensure an adequate supply, within the
country, of research scientists of the highest quality, and to recognise their work as an
important component of the strength of the nation;
- to encourage, and initiate, with all
possible speed, programmes for the training of scientific and technical personnel, on a
scale adequate to fulfil the country's needs in science and education, agriculture and
industry, and defence;
- to ensure that the creative talent of
men and women is encouraged and finds full scope in scientific activity;
- to encourage individual initiative for
the acquisition and dissemination of knowledge, and for the discovery of new knowledge, in
an atmosphere of academic freedom;and,
- in general, to secure for the people of
the country all the benefits that can accrue from the acquisition and application of
scientific knowledge.
Technology Policy in Indian Science
Congress at Tirupati, 1983
- Active pursuit of these policies bore
fruits and educational institutions and scientific laboratories were established so as to
reap the benefits of scientific progress. The next major landmark in the policy domain was
announcement of the technology policy of the Government of India at the Indian Science
Congress, Tirupati held in January 1983. Apart from reinforcing the above objectives, the
resolution specifically called for developing internationally competitive technologies
with export potential, energy saving technologies and technologies, which will recycle
waste material. As far as the priorities of technology policies are concerned, it called
for special consideration to be given aspects like employment, energy, efficiency of
activities, and environment. In the field of acquisition of technology, though it called
for a selective role for import of technology and foreign investment, it specifically
stressed the need for absorption, adaptation and subsequent development of imported
know-how through adequate investment in R&D to which importers of technology were
expected to contribute.
CSIR:
Some Policy Issues
- In the context of the efficiency of the
invention-innovation process, the role of CSIR is of paramount importance. Much has been
written on the strengths and weaknesses of the CSIR. In this context, I found the Report
of the CSIR Review Committee (1986, Chairman: Shri Abid Hussain) to be highly interesting.
The Report found that presence of multiple objectives, sub-optimal scale of operation,
lack of sustained and meaningful interaction between the CSIR and its actual and potential
users, and lack of suitable incentive support had in the past limited the usefulness of
CSIR in the Indian economy. Nevertheless there were exogenous factors, beyond the control
of such scientific institutions, that were responsible for its limited usefulness. Lack of
industry support and a regulatory regime had hindered their proper functioning. Often the
reasons for lack of smooth functioning of institutions like CSIR were interactive and
consequently the responsibility became collective. In future, the objectives of such
science-technology interaction would be a proper blend of different situation-specific
modes, like technology missions, technology programmes, sponsored research, basic research
and societal science programmes.
- In this context, it is encouraging that
CSIR has recently issued a White Paper, CSIR 2001: Vision and Strategy. Among other
things, it set up the goal to achieve self-sufficiency in financing by 2001, primarily
through development of some niche areas in globally competitive technologies, holding of
patent bank, and releasing 10 per cent of operational expenditure from intellectual
property licensing. Moreover, as a strategy for achieving these goals, it has called for
development of an effective marketing system and adoption of a stimulating intellectual
property oriented outlook.
Recent
Changes
- The major changes in the industrial
sector initiated in July 1991 introduced a new policy for technology transfers. Automatic
approval for foreign technological agreement to high priority industries up to a lump sum
payment of Rs. 1 crore was granted. The automatic approval was also granted to other
industries provided they did not require the spending of free foreign exchange. For hiring
foreign technicians and foreign testing of indigenously developed technologies, all prior
clearance have been done away with.
- In recent past, Indian Government, apart
from giving a number of tax concessions for R&D purposes, has undertaken a number of
policy measures with far reaching significance in the field of science and technology. A
Technology Development Board has been established in 1996 with a three-fold strategy,
viz., (a) felicitating development of new technologies, (b) assimilation and adaptation of
imported technologies, and (c) providing catalytic support to industries and R&D
institutions to work together. In the Budget for 1994-95, a new fund called Fund for
Technology Development and Application was created wherein 5 per cent cess on payment for
royalty for imported technologies was credited. The Budget for 1996-97 strengthened this
fund further and released Rs. 30 crore. Furthermore this proposed a matching one-time
grant for the modernisation of laboratories of CSIR and ICAR. Every commercial rupee that
the CSIR and ICAR earn incrementally will be matched by another rupee from the Budget.
- Recently released Draft Ninth Five Year
Plan Document has emphasised the role of science and technology in Indian development
process to a great extent and proposed the adoption of a multifaceted approach. Among the
specific issues that have been raised in the Draft Ninth Plan, which call for closer
attention are:
- Creation of a conducive environment in
the R&D institutions for minimising hierarchical bureaucracy;
- Emphasis on human resource development
and motivation as an element of qualitative growth; Maintenance of proper balance between
fundamental research and applied research;
- Development of a 'consortia approach' in
which one of scientific laboratories acting as 'nodal' institution forms a consortium with
the industry and other departments;
- Effective implementation of science and
technology for societal development.
Realisation of this vision through
adoption of operationally viable strategies, I am sure, will go a long way to enhance
Indian technological capabilities.
Trends in Indian Technological
Capabilities
Composition of Capital Formation in
India
- In the post-independence period India
followed a fairly broad-based technological development. The sectoral composition of gross
fixed capital formation (GFCF) at constant prices may illustrate our evolution of
technological capabilities. The share of 'machinery and equipment' in GFCF has gone up
substantially, with a per contra reduction in the share of 'construction'. During the
first five year plan period (i.e., 1951-52 to 1955-56), 'construction' occupied a share of
nearly 62 per cent of GFCF as against 'manufacturing and equipment's share of 38 per cent.
On the contrary, in the nineties the trend is just the reverse, with a 35 per cent share
of 'construction' in GFCF as against the share of 'machinery and equipment' at 65 per
cent.
Some Examples of Indian
Technological Capability
- Some examples of the benefits obtained
from "technological change", in our own country during the past three decades,
illustrate the impact of science on growth. The sharp increase in "agricultural
productivity" experienced in the last two decades can be ascribed mainly to the shift
to high yielding varieties. Agricultural scientists working in laboratory condition no
doubt developed these. But their successful adoption was supported by simultaneous efforts
utilised for infrastructure development. The sharp improvement in the life expectancy
since the forties reflects a successful effort at improved health care service realised
largely through control of epidemics using modern medicine. Many other examples from the
areas of transportation and energy exist.
- India has had a long history of 30 to 40
years of manufacturing capital goods. Both kinds of capital goods, the special purpose
equipment for the process plants (for chemicals, metals, minerals, consumption goods,
electric power, etc.) and the general purpose machines amenable to mass production
(machine tools, transport equipment, consumer durable) have been produced in our
factories. In the process of vertical integration of manufacture - from assembly stage
backward to individual components - a wide production base has been created. However, the
capabilities to design and further improve upon the product have not been developed for
many kinds of capital goods. In the case of some equipment, our domestic market compares
well with those of developed countries. Examples are - consumer durable (two wheelers,
refrigerators etc.), tractors, machine tools, power generation equipment and textile
machinery. Some capabilities have been developed in light commercial vehicles, and two
wheelers. Such instances are, however, 'firm specific' and not general across the
industry. The lack of designing capability has inhibited the ability to adjust the designs
to changes in the requirements of the customers and industrial user, resulting in the
import of product designs frequently. In the case of capital goods used in the processing
plants, such design know-how is built through the designing of 'processes'. However, in
India the 'process design capabilities' have not grown. The initial effort in certain
areas was promising. In the fertiliser industry, the then FCI and FACT and in steel
industry, the then Hindustan Steel had their in-house engineering and design
establishments but later as independent companies, competed for jobs in their own mother
companies against the international process consultancy companies, and were generally
unsuccessful. More recently, the successful design work done on an experimental high
voltage direct current (HVDC) project, under the BHEL, and in telecommunication, under
C-DoT have been widely quoted. But these still await contracts by the user sectors. In
recent years, the 'process consultants' have generally been foreign firms, and they have
sourced their equipment supply, frequently, abroad. The technology for the capital goods
production can, therefore, mature only in exceptional cases. Such instances are found in
products and processes where technologies have stabilised but the product markets have
lacked dynamism. A successful capital goods manufacturing structure can thrive only on a
sturdy base of designing capabilities.
- Technology helps to widen the resource
base of the production system of the economy. In India, the major areas where this has
taken place are the energy and agriculture sectors. This has occurred also in relation to
the provision of certain basic needs such as drinking water. The successful shift in the
technology of oil exploration from on-shore to offshore opened up vast resources of oil
and natural gas for use. At present 63 per cent of our oil production comes from offshore
operations which did not exist 15 years ago. The utilisation of natural gas for
fertilisers and petro-chemicals has been possible only because of the shift to offshore
production. Natural gas today supports more than 40 per cent of nitrogenous fertiliser
output and about 50 per cent of petro-chemicals. The latter in turn has enabled a shift in
the material base in terms of common usage, from timber and metals towards plastic based
materials. Thanks to our technological advancement in some industries like catalysts and
pharmaceuticals, India could become a net exporter. Electrification of villages enabled
the exploitation of ground water potential for agriculture. The period of 80's when value
added in production in agriculture increased at about 3 per cent per annum was associated
with a sharp growth in electricity consumption by agriculture. It is largely through the
shift in water lifting technology that paddy could be produced in the north and
north-west. Even the changes in simple techniques of lifting the ground water have helped
to solve drinking water problems in water scarce villages. The technology mission on
drinking water owes its success to a considerable extent to the new types of deep well
hand-pumps introduced in the country some 15 years ago. Besides, our achievements in
space, defence and atomic energy have indeed been momentous.
Challenges for The Future And Possible Policy
Directions
- What is the future of science and
technology in India? Against the above background, let me now turn to some of the
challenges and burning questions of the future. From rather long menu of issues, I shall
largely deal with two issues in particular.
Effective Patent Laws and Intellectual
Property Rights
- I have already pointed out that
innovative activities often turn out to be risky from the standpoint of the financier.
Existence of an effective and speedy patent-legal framework goes a long way to solve the
incentive problem associated with any innovative venture. Though the Indian Patent Act,
1970 was indeed a breakthrough from the earlier archaic Indian Patent and Design Act of
1911, still much needs to be done. The following example may illustrate the point. During
1994, whereas in India 4,000 patents were filed, China in the same year had 70,000
patents.7 After all, a slow process of patenting not only hurts the interests
of the innovator but also discourages the potential ones. Existence of loose patent laws
or its violation, like those prevalent in software piracy, thus, makes me extremely
anxious.
- Nevertheless, as a far-reaching
extension to above argument, the global regime represented by trade-related-intellectual
property rights (TRIPs) tilted the balance of benefits of innovation in favour of the
private innovator. As a signatory to the 1994 Uruguay Round of Multilateral trade
negotiation of the then General Agreement of Tariff and Trade (GATT), India is bound by
the regulatory framework of the recently created World Trade Organisation (WTO). This may
have consequences on the oft-adopted modes of industrial research in India like imitative
research or reverse engineering. We need only to stress more innovative research but also
to develop the intermediaries like patent agents and patent attorneys, who will bridge the
gap between the market and the scientists. This apart, as the Draft Ninth Plan pointed
out, we need to take new initiatives to, "secure a more favourable deal at the
impending review of the TRIPs agreement in the WTO" (p. 1059). This is going to be a
serious challenge of the future.
The
Role of the State in Technological Development
- What is the role of Government in
advancement of science and technology upgradation in a liberalised market-friendly
atmosphere? At this point of time, the issue may apparently seem to be old-fashioned.
Often in popular parlance, liberalisation in equated to a withdrawal of state from the
economic domain. However, science and technology is a field where such popular notion may
turn out to be fallacious. It is widely argued that there are three sources of market
failure, viz., indivisibility, uncertainty and externalities. Knowledge generating
activities like R&D suffer from all three types of market failure. Moreover, when
there is a wedge between private and social profitability, like that existent in pure
research, private finance may not be forthcoming. Thus, even in a deregulated regime the
state will have three specific and selective roles in fostering science and technology,
viz., financier of fundamental research, provider of infrastructure, and regulator of
property rights. The Approach Paper to the Ninth Five Year Plan (1997-2002) rightly
pointed out,
"Experience of many developing and
industrialised countries suggests that a rapid acceleration of industrial technology
development call for a deliberate 'strategy', in the sense that it requires the government
to coordinate and guide an essentially market-driven process. Free markets suffer from
various kinds of 'market failures', they may not throw up the appropriate amounts of
infrastructure, skill, information and institutional support, and mere exposure to market
forces, while getting rid of inefficient policies, may not suffice to create the
technological dynamism that continued industrial growth needs" (p.37).
Epilogue
- During the fifty years of independence,
India has come a long way in her quest for scientific pursuit, both in material and
intellectual sphere. The winds of change that have been blowing in India since the last
few years has changed the scenario a great deal. It has posed new challenges and opened up
newer opportunities. True, there is still much to be done in the policy and legal sphere.
But the directional indications are right. In the liberal environment, let thousand ideas
of science and technology bloom and let these be transcreated into innovative ventures by
our entrepreneurs. India has the talent, the skills and the resources to be in the
forefront of technological revolution that is taking place in the new sectors of growth in
the global economy. The future is truly exciting and we in the scientific, industrial and
financial community must make it possible for our young men and women to take maximum
advantage of the opportunities that lie ahead.
- 1 J.Schumpeter: Capitalism,
Socialism and Democracy, New York: Harper.
- 2 Robert Barro and Xavier
Sala-i-Martin: Economic Growth, New York:Mc.Graw Hill, 1995.
- 3 B.N.Goldar: Productivity
Growth in Indian Industry, New Delhi: Allied, 1986.
- 4 I.J.Ahluwalia: Productivity
and Growth in Indian Manufacturing,New Delhi: Oxford University Press, 1991.
- 5 Y.K.Alagh,
"Technological Change in Indian Industry", Economic and Political Weekly,
January 24, 1998, pp.181-184.
- 6 Nehru's address to Indian
Science Congress - quoted from Dorothy Norman (ed), Nehru: The First Sixty Years, New
York: The John Day Company, 1965, Vol.I,p.550.
- 7 R.A.Mashelkar, Making
Economic Sense of Science: The Emerging Indian Challenge, foundation Day Lecture at Inter
University Centre for Astronomy and Astrophysics, Pune, December 29, 1995.
I would like to acknowledge with thanks
the help given to me by Shri Pratha Roy of the Reserve Bank of India in the preparation of
the lecture, and to Dr.R.H.Mashelkar, Director General, CSIR for his helpful comments on
an earlier draft.
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