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GATT and the technology base in India
Technovation,
14(9) (1994) 613-620
GATT and the technology India Pawan
base in
Sikka*
Department
of Science
& Technology,
New Delhi 110 016, India
Abstract Research and development are essential for generating a technology base in a country. Ever since independence, efforts have been made to strengthen the science base in India, but very little efforts were made to develop a technology base in the country, although this is essential for producing quality goods as well as for creating new products. The industrial base did develop here to some extent because of self-reliance being an objective before the industry. Selfreliance eroded the spirit of competition, which is essential for long-term success. As a result, exports have suffered because of the poor quality of Indian products. Now, with the introduction of GATT implications, let us see how far these will strengthen or weaken the already existing technology base in India by encouraging the leap-frogging of certain technologies in the country.
1.
Introduction
Recognizing the importance of science and technology (S&T) as a major force in industrial and economic growth, Pandit Nehru laid the foundation of scientific developments in India. The Government of India, as a chief patron since independence (1947), has provided a great thrust for the promotion of science in the country. Towards this purpose, the Government has, during the past 47 years, adopted several promotional measures, such as: l
Provision of enhanced budget allocations for S&T programmes in basic and applied areas,
* The opinions expressed in this article are the personal views of the author, and do not in any way represent the policies of his organization.
Technovation
Vol. 14 No. 9
from Rs.20 crores (200 million rupees) in 1950-55 to Rs. 8245 crores in 1985-90. Enunciation of policy statements on science, technology, industry, education,. environment etc., both at the sectoral and the national levels. Development of S&T infrastructure, R&D laboratories, technical institutions, in-house R&D units in industry. Establishment of industries in small, medium and large scale industries. Creation of a free environment - conducive to the growth of science, technology and industry. Simultaneously, steps were taken to generate, adopt and adapt imported technology to speed up the process of industrial development in India. It was expected that the two streams, viz. one of creating S&T infrastructure, and the other of creating an industrial base, would contribute together to the overall economic development of
0166-4972/94/US$O7.00
0
1994 Elsevier
Science Ltd
613
P. Sikka
the nation. It was, however, noticed later that industry was in general not keen on the indigenous R&D base and increasingly tended to depend upon foreign technologies. Industrial firms were of course influenced by their perceptions of what their competitors were doing, so that the market system shaped R&D in the industrial sector. A striking feature of Indian economic development has been the progress of industrialization. The process of industrialization was launched as a conscious and deliberate poiicy in the early 1950s. In pursuance of this policy, Iarge investments were made in building up capacity over a wide spectrum of industries. Industrial production has made strides in terms of variety, quantity and quality. There has been a substantial diversification of the industrial base during this period, with the consequent ability to produce a very broad range of indust~al goods. Self-reliance has been achieved in basic and capital goods. Indigenous capabilities have now been established to the point of virtual self-sufficiency, so that further expansion in various sectors such as mining, irrigation, power, chemicals, transport and communication can be based primarily on indigenous equipment. The process of industrialization has also fostered entrepreneurship and development of a wide variety of technical, managerial and operative skills. Today, India is in a position to provide consultancy services as well as managers, technicians and skilled workers for setting up industrial projects abroad.
2. Policies for science, technology industry
and
The Government of India has enacted various policy measures, from time to time, in tune with the changing situations in the world. The real thrust actually came in 1958 with the adoption of the Scientific Policy Resolution (SPR). This clearly reflected the direction which provided a broad political ethos for support of S&T activities to meet social requirements. It aimed at promoting scientific research in all its aspects (pure, applied and educational) and creating a body of high
614
quality research scientists in India. The SPR, in particular, enunciated a broad approach towards generating S&T manpower and utilizing S&T for human needs. It clearly states that the key to national prosperity, apart from the spirit of the people, lies in the effective combination of three factors - technology; raw materials and capital, of which the first is perhaps the most important. A Technology Policy Statement (TPS) was enunciated in 1983, to provide policy backing for the growth of indigenous technology. The basic objectives of TPS are the development of indigenous technology and the adaptation of imported technology, as appropriate to national priorities and resources. The Government of India had set up in its ZndustrialPolicy Resolutions (IPRs), dated 6 April 1948 and 30 April 1956, the policy approach it proposed to pursue in the industrial field. The IPR of 1948 emphasized the importance of the economy for securing a continuous increase in production and equitable distribution, and laid emphasis on the States’ programmes by encouraging their active role in the development of industries. It realized the role of cottage and small-scale industries in the overall economic development of the country. The revised policy of 1956 gave a more precise direction towards accelerating the rate of economic growth and speeding up industrialization, in particular expanding the public sector and building up a large and growing cooperative sector. The Industrial Policy Statementof 1973, inter alia, identified high priority industries where investment from large industrial houses and foreign companies would be permitted. In 1977 however, it laid emphasis on decentralization and on the role of small-scale, tiny and cottage industries. In 1980 it focused attention on the need for promoting competition in the domestic market, technological upgrading and modernization. The policy laid the foundation for an increasingly competitive export base and for encouraging foreign investment in high technology areas. A liberalized policy was announced in 1990 for the promotion of smallscale and agro-based industries and to change
Technovation
Vol. 14 No. 9
GATT and the technology
procedures for the grant of industrial approvals, foreign investments and collaborations, local policy, capital goods imports and environmental clearances. These policies created a climate for rapid industrial growth in the country. Many procedural and routine changes were also made in industrial policy during the last four decades but 1956,1969,1977,1980 and 1990 are distinguishable as they were all determined by the political forces operating in the country. The Government, therefore, took interest, greater responsibility and control over the pattern and pace of industrial development in India. On 24 July 1991 the Government of India announced bold measures in view of the adverse balance of payments situation being faced by the Indian economy. It took a series of initiatives in respect of the policy for (a) (b) (c) (d) (e) (f)
industrial licensing; foreign investment; foreign technology agreement; public sector policy; the MRTP Act; and small and tiny industries.
This policy announced the delicensing of most of the industries irrespective of the level of investment. The MRTP Act was amended to remove the threshold limits of assets in respect of MRTP companies and dominant undertakings. It also paved the way for liberal foreign investments in India.
3.
R&D in industry
R&D in the industrial sector is essential for generating the know-how necessary for producing quality goods, promoting efficient exports and the self-reliance needed in the country as well as absorption, adaptation and upgrading of imported know-how. It aids in the generation of a technology base. The Government of India has recognized the importance of R&D in industry as a major factor in bringing out technological developments in the
Technovation
Vol. 14 No. 9
base in India
country. Keeping in view the ever-increasing investments made in the field of education and scientific research in academic, industrial and R&D institutions and laboratories, several promotional measures were introduced to enhance R&D in India, such as: Recognition of in-house R&D units, provision of tax incentives, etc. A technology absorption and adaptation scheme. National awards for excellence in R&D in industry. Consultancy services. A ‘Pass Book Scheme’ for the liberal import of equipment/spares, chemicals etc. An R&D Cess Act was approved by the Government in 1986, to provide for the levy and collection of a cess on all payments made for the import of technology for the purpose of encouraging the commercial application of indigenously developed technology and for adapting imported technology to wider domestic applications and for matters connected therewith or incidental thereto. The health of industrial R&D in India is now a matter of great concern to the policy planners. Financial and human resources devoted to industrial R&D activities constitute the principal inputs to R&D programmes and can be used as indicators of the commitment of industry to innovation. The industrial sector investment in R&D was about Rs. 1000 crores during 1991-92, out of which 54.2% was invested by the private sector while 45.8% was by the public sector. The industrial sector accounted for 23.2% of the total investment in R&D, thus contributing very little towards the generation of the technology base in India. About 50000 scientific personnel were employed in about 1200 industrial sector R&D units, out of which about 32000 were engaged directly in R&D activities. This was 29.6% of the total R&D personnel employed in all the R&D establishments in India. About 2600 are PhDs, 9000 are postgraduates, 20000 are graduates and 22 000 are other qualified personnel. The in-house R&D system
615
P. Sikka
TABLE
1.
National
R&D expenditure
by objectives,
4.
1992-93 Percentage
Objective Development of agriculture, forestry and fishing Defence Promotion of industrial development General advancement of knowledge Space Development of transport and communication Production, conservation and distribution of energy Development of health services Protection of environment Others
17.6 19.2 16.4 5.4 9.6 6.7 7.9 5.5 4.6 7.1
TOTAL
100.0
has made significant contributions in technology absorption and technology development. Some of the R&D centres have developed innovative technologies, many of which have been commercialized. Tables 1 and 2 classify the national expenditure on R&D for 1990-91 by objectives and by sector, respectively. A breakdown of R&D expenditure by leading industrial groups is shown in Fig. 1.
TABLE 2. Per unit industrial R&D and by industry group, 1992-93 Industry
group
Defence industries Fuels Transportation Earth-moving machinery Boilers & steam generating plant Prime movers Soaps, cosmetics, toilet preparations Fertilizers Rubber goods Cement and gypsum products Telecommunications Photographic raw film and paper Other groups OVERALL
616
expenditure
classified
by sector
Per unit R&D expenditure (Rs. lakhs) Public sector
Private sector
Industrial sector
2594.6 504.3 499.6 776.0 7cnl.o _
80.0 62.8 263.6 18.3 90.5 177.5 197.5 130.6 140.6 122.0 48.6 17.0 54.0
2280.3 357.1 286.6 270.9 212.4 177.9 176.5 163.4 140.6 108.6 106.3 98.5 72.3
66.3
106.9
9.0 177.9 15.0 210.5 180.0 ---263.5 331.5
The global kaleidoscope
The world has indeed come to be transformed into a global village, due to the rapid developments in science and technology. India’s participation in the implementation of GATT (General Agreement on Trade and Tariffs) will open up new frontiers in world trade. India’s benefit through Intellectual Property Rights (IPR) would be: All new R&D products will be introduced in India without any delay, to the discoverer’s original standards and quality. The drug industry will attract fresh investment and expansion from within and abroad. India will gain by inflow of the best technology. There will be ample co-licensing opportunities for t.he Indian sector and, equally, the ancillary sector will grow. There will be better utilization and employment of scientific manpower, checking the brain drain. With the availability of original quality drugs, there will be an automatic check on spurious and substandard products and an overall upgrading of GMP/QC in the industry. Finally, with incentives for basic research and enhanced exports, India can be in the top world ranking in the pharmaceutical industry. In spite of the above, there are several implications for Indian science. Recently, the Prime Minister sounded a note of caution on how the country may be deprived of certain technologies as a consequence. At the 81st session of the Indian Science Congress at Jaipur on 3 January 1994, he said that “Worries have been expressed by scientists and certain sectors of trade that indigenous R&D may be jeopardized as a consequence of the recently concluded GATT negotiations. While GATT addresses several issues, the more important areas impacted by S&T and R&D are: E/) (iii)
Textile and clothing Agriculture Trade Related Intellectual Rights (TRIPS) and
Technovation
Property
Vol. 14 No. 9
GATT and the technology
base in India
R&D EXPENDITURE BY LEADING INDUSTRY GROUPS, 1992-93 INDUSTRY
GROUPS
Elec. & EteotronkB Chemkak Trmaport*tion lWu98 & Phuva. Me t*lhw9i~l Fuel8 Induatrkl Machkory Maohino Took Rubber Qood8 Food Prooee#ing
m
Fig. 1.
(iv) Services,
including
R&D
Expenditure
Vol. 14 No. 9
PUBLIC
SECTOR
on research and development,
Services.
“In every one of the above sectors, India can clearly delineate areas of significant opportunities. In doing so we have to tune our choices to suit our characteristics. India is a large country with substantial natural resources and a massive agricultural base and is enormously endowed in terms of biodiversity, climate diversity and skilled manpower. These strengths of the country should now be pooled and harnessed to address identified areas of opportunities. It Ls clear to me that S&T and R&D will be of paramount importance in the post-GATT liberalized environment. Most manufactured goodr in the country will not only need to meet quality specifications of the international market but shall have to compete in terms of costs. india with her vast reservoir of S&T personnel and comparatively lower manpower costs is entirely capable of meeting this challenge through appropriate R&D inputs. GATT ensures further opening up of national economies and our S&T special-
Technovation
180 90 120 150 60 EXPENDITURE 0?s.Croreo)
SO MD
0
ml
PRIWTE
SECTOR
1992-93.
ists and industry leaders will have an enlarged arena to play their part. ”
5.
Critical analysis
Research and development (R&D) is an essential facet of any industrial activity, especially in the wake of growing competition. It is observed that the following factors have impeded the development of technology and its upgrading in India: (1) Policies, strategies and structure for S&T have been evolved in India, under a planned development approach, since 1950. The Government of India became the chief patron of scientific developments by supporting about 80% of the R&D expenditure in the country. All efforts were in fact made to promote the growth of a ‘science base’ by way of creating various scientific institutions, creating various technical colleges in the academic sector, generating qualified manpower in the academic sector, etc. But very little efforts were made to strengthen the technology base in
617
P. Sikka
the country, i.e. to develop a know-why culture while transfe~ing the knew-how from the advanced countries. And industrial progress so far has occurred due to the individual initiatives of the entrepreneurs, as there exists poor coordination or linkages (both backward and forward) among the academic, R&D and industrial sectors in India. (2) A Technology Policy Statement was introduced in 1983, about 25 years after the enunciation of the Scientific Policy Resolution (1958) by the Government of India, but with the basic objective of developing the indigenous technology appropriate to national priorities and resources, thus leading to self-reliant economy in the country. Unfortunately, this teGhnology policy had little success in promoting technological developments in Indian industry, as it was based on the premise that imported technology and indigenously generated ones are substitutes for one another. But it was not so. Import restrictions on technology do not produce import-replacing technology. Free import of technology would channel local R&D directions where imported technology is not available and where returns are high. A draft paper for a new Technology Policy Statement was released in 1993 to further strengthen the Indian economy and to assist the nation in fulfilling its role in the global economic environment with confidence and a sense of urgency. This has not yet been finalized. (3) Achievement of self-reliance has been the motto before India, which, after gaining independence, had adopted an economic policy that aimed at achieving economic growth through the medium of mixed economy where private and public sector co-exist. Since then, the aim of developmental strategies was only import substitution. Export promotion was given a backward seat. Thus, the import substituting model led (i) to inefficiencies through (a) restricting entry and competitive pressure, and (b) not pe~itting technologically dynamic firms to develop their full potential, i.e. MRTP controls; and (ii) to a poor technological level of industry through restricting imports of disembodied technologies.
618
The Indian policy framework for industrial growth changed dramatically during 1980-90 in order to face global competition. India adopted an inward-looking approach for self-reliance which created, to some extent, an industrial base instead of the desired technology base in the country. Today there is a need to look beyond selfreliance because the industrial scenario demands international competition and an outward looking economy (which can be termed as export oriented), significant in at least a few areas of science and technology. This would require the inculcation of ~~~w-w~y culture among the S&T personnel in the country. India should pronounce a national policy on quality control. (4) India missed the industrial revolution. The reasons may be diverse, including the fact that India was a colonized nation. Besides, it involves fostering and promoting the development and growth of S&T infrastructure, as well as needing a coordinated and orchestrated mechanism to utilize our scientific capabilities in a planned manner, in areas related to local needs, and in the overall interest of national welfare. The planning of industrial infrastructure was promoted in the form of steel plants and other industrial ventures and there was a simultaneous but isolated effort to build a chain of national laboratories, which were referred as ‘modern temples’ of Indian science. During this period, the growth industrial infrastructure was not matched by the growth of technical capabilities in R&D laboratories - a lacuna which unfortunately still persists even after more than four decades of independence. (5) The output of the academic sector, i.e. technical manpower and research findings, forms the input for R&D establishments and industry. There exist poor relations between the academic, R&D units, and industry in India. There is an urgent need to forge linkages among the trinity so as to act as a springboard for the industrial and economic development of India.
Technovation
Vol. 14 No. 9
GATT and the technology
6.
Future prospects
Modernization, technology upgrading, increasing competitiveness in the global market, gearing itself not only to meeting domestic needs but also to multiplying exports etc., are the major challenges ahead for Indian industry. The health of industrial R&D is a matter of great concern today. Although over 1000 R&D units exist in both public and private sectors, only 0.7% of sales turnover is invested in R&D, most of it by the Central Government. The establishment of R&D units in the private sector has, in most cases, been triggered by tax concessions offered by the Government rather than by an intrinsic feeling of need for R&D. There is a need for creating a technology base by coordinating the scientific, technological and industrial policies and programmes in the country. Scientific and technological efforts intended to support industry may compete, to some extent, for resources with S&T efforts set for other purposes such as defence. New technologies resulting from scientific research for industry may improve the country’s international trading position, improve its balance of payments and also increase its gains from trade, resulting in quick benefits of the trinity science, technology, and industry - to society. The creation of the Technology Information Forecasting and Assessment Council (TIFAC) and the Technology Development Fund (TDF) are major steps forward. These should aid in promoting industrial R&D culture and inducing industry to make more use of science and technology. New areas should be explored where the strength of India lies such as solar energy, herbaYayurvedic medicine, new seed varieties in agriculture etc. Considering the limited materials and financial resources, it is important to rely on India’s potentially most vulnerable resource, viz. S&T knowledge. Knowledge-based industry such as software production presents certain advantages in the Indian context, since the usage of primary resource is low but t,hat of human resource is high. Finally, the state of application of S&T to industry would improve only when we can understand and
Technovation
Vol. 14 No. 9
base in India
stimulate these factors which will kindle the innovative instinct and force the R&D through competition, market pressure etc. Thus when the S&T capabilities are about to crystallize, the conditions of GATT have been imposed on India to claim the rights of the developed world on R&D in all areas of economic sectors. So India should either pay royalty towards the use of their R&D or allow the multinationals to set up their own ventures in the country which will enable the country to leapfrog and absorb certain technologies, go for sub-contracting, produce export quality goods and compete in the world market. This may curb the spirit of research and development but would expose India to newer fields of science and technology. Accordingly, this may either strengthen or weaken the technology base in India before its crystallization. It is now very difficult to predict how far the new strategies of GATT would help India in gaining its own identity with S&T strength in the world. India is aspiring to entering the global business arena in a big way, but first it has to attain world standards of performance in manufacturing and trade. This can be achieved only when there is a strong technology base in the country. Besides inviting capital and technology from abroad, it has to demonstrate that it is capable of imbibing these and that its political and economic systems are stable enough to ensure an atmosphere conducive to growth and crystallization. India now has to devote more funds to R&D with a view to strengthening the technology base and creating more and more innovation in the wake of the arrival of liberal foreign technology and investments. This will be an essential step to absorb, adapt and upgrade the imported technology, otherwise a higher and higher cost would have to be paid, every time, for its importation. This will also, in turn, enable the technical manpower of India to equip itself to new technologies and suit the job requirements of the foreign companies who would be planning to explore their global market potential in this part of the world in the near future. The challenge of GATT and its effect on the Indian economy is going to be a great one, in all aspects of her socio-economic growth.
619
P. Sikka
Bibliography P. Sikka, Forty years of Indian Science & Public Policy, 17(l)
science. Journal
of
(1990) 45-53.
P. Sikka, Strategies for technology development in India. Technovation, ll(7) (1991). Government of India, Department of Science & Technology, Research and Development Statistics, 1992-93. New Delhi, 1994. C.N.R. Rao (ed.), Perspective in Science and Technology for 2001 AD. Science Advisory Council to the Prime Minister, Vikas Publications, New Delhi, 1990. Department of Scientific & Industrial Research, Goverment of India, New Industrial Policy. New Delhi, July 1991. Government of India, Ministry of Scientific Research and Cultural Affairs, Scientific Policy Resolution No. 1311CFiS7. New Delhi, 4 March 1958. Government of India, Department of Science & Technology, Technology Policy Statement of India. New Delhi, January 1983. P. Sikka, New industrial policy of India - Some reflections on science and technology. Inventions Zntelligence (New Delhi) (May 1992) 140-144. Asian Pacific Centre for the Transfer of Technology, Technology Policies and Planning in India. Bangalore, 1986. G. Alam, India’s technology policy and its influence on technology imports and technology development. Economic & Political Weekly (New Delhi), 20 (199) 2073-2080. V.V. Subba Rao, Globalisation: role of in-house R&D. 7th National Conference on In-house R&D in Industry, New Delhi, 2627 November 1993. P. Sikka and V. Gupta, An integrated approach to science policy in India. Journal of Scientific & Industrial Research (New Delhi), 50 (March 1991), 212-221. S. Lal, India’s technological capacity. In: Transman and K. King (eds.), Technological Capabihty in the Third World. Macmillan, London, 1984. S. Lal, Learning to Zndustrialise. Macmillan, London, 1988. H. Kartak, Import of technological efforts of Indian enterprises. World Development, 18(3), (1990) 371-381. SK. Srivastava and K.V. Swaminathan, National policies towards R&D system in India. In: P.J. Lavakare
620
and J.-G. Waardenburg (edited) Science Policy in International Perspectives. Pp 45-58, Pinter Publishers, London 1989. S. Jacobsson, Government policy and performance of Indian engineering industry. Research Policy, 20 (1991) 45-56.
R.K. Iyengar, Journal
New directions
for industrial
of Scientific & Industrial Research,
R&D. 50 (July
1991) 17-29. P.S. Shankar and R.N. Sharma, The technology policy in relation to industrial and science policy. Journal of Scientific & Industrial Research, 42 (1983) 51-67.
M.G.K. Menon, Excellence and accountability in Indian science. In: P.N. Srivastava (ed.), Science in India - Excellence vs. Accountability. Angkor Publishers, New Delhi, January 1994, pp. 232-240. P.V. Narasimha Rao, Inaugural address. 81st Session of Indian Science Congress, Jaipur, 3 January 1994. P. Sikka, A Critical Study on the Management of Science in India. DSc Thesis, Meerut University, Meerut, July 1993. P. Sikka, Management of science in India. The Hindu (25 January 1994). P. Sikka, New thrust in technical education. University News (New Delhi) (25 July 1994) 3-5. P. Sikka, Indian science policy - peeping into 21st century. Invention Intelligence (New Delhi) (October 1994) 503-509. Pawan Sikka is a Director
(Technology Assessment and Forecasting) with the Department of Science & TechGovernment of nology, India, New Delhi. He has a PhD in the Physics of Amorphous Semiconducting Materials and a DSc in the Management of Science in India. He was Visiting Fellow to the Queen Elizabeth House, Oxford University, UK, during 1984-85 and worked on the transfer of technology, comparing the strategies adopted by Japan, Korea, China and India. He was associated with the Apex science advisory bodies in India. Dr Sikka has published several technical articles concerning science policy and planning issues, in various national and international journals.
Technovation
Vol. 14 No. 9
14(9) (1994) 613-620
GATT and the technology India Pawan
base in
Sikka*
Department
of Science
& Technology,
New Delhi 110 016, India
Abstract Research and development are essential for generating a technology base in a country. Ever since independence, efforts have been made to strengthen the science base in India, but very little efforts were made to develop a technology base in the country, although this is essential for producing quality goods as well as for creating new products. The industrial base did develop here to some extent because of self-reliance being an objective before the industry. Selfreliance eroded the spirit of competition, which is essential for long-term success. As a result, exports have suffered because of the poor quality of Indian products. Now, with the introduction of GATT implications, let us see how far these will strengthen or weaken the already existing technology base in India by encouraging the leap-frogging of certain technologies in the country.
1.
Introduction
Recognizing the importance of science and technology (S&T) as a major force in industrial and economic growth, Pandit Nehru laid the foundation of scientific developments in India. The Government of India, as a chief patron since independence (1947), has provided a great thrust for the promotion of science in the country. Towards this purpose, the Government has, during the past 47 years, adopted several promotional measures, such as: l
Provision of enhanced budget allocations for S&T programmes in basic and applied areas,
* The opinions expressed in this article are the personal views of the author, and do not in any way represent the policies of his organization.
Technovation
Vol. 14 No. 9
from Rs.20 crores (200 million rupees) in 1950-55 to Rs. 8245 crores in 1985-90. Enunciation of policy statements on science, technology, industry, education,. environment etc., both at the sectoral and the national levels. Development of S&T infrastructure, R&D laboratories, technical institutions, in-house R&D units in industry. Establishment of industries in small, medium and large scale industries. Creation of a free environment - conducive to the growth of science, technology and industry. Simultaneously, steps were taken to generate, adopt and adapt imported technology to speed up the process of industrial development in India. It was expected that the two streams, viz. one of creating S&T infrastructure, and the other of creating an industrial base, would contribute together to the overall economic development of
0166-4972/94/US$O7.00
0
1994 Elsevier
Science Ltd
613
P. Sikka
the nation. It was, however, noticed later that industry was in general not keen on the indigenous R&D base and increasingly tended to depend upon foreign technologies. Industrial firms were of course influenced by their perceptions of what their competitors were doing, so that the market system shaped R&D in the industrial sector. A striking feature of Indian economic development has been the progress of industrialization. The process of industrialization was launched as a conscious and deliberate poiicy in the early 1950s. In pursuance of this policy, Iarge investments were made in building up capacity over a wide spectrum of industries. Industrial production has made strides in terms of variety, quantity and quality. There has been a substantial diversification of the industrial base during this period, with the consequent ability to produce a very broad range of indust~al goods. Self-reliance has been achieved in basic and capital goods. Indigenous capabilities have now been established to the point of virtual self-sufficiency, so that further expansion in various sectors such as mining, irrigation, power, chemicals, transport and communication can be based primarily on indigenous equipment. The process of industrialization has also fostered entrepreneurship and development of a wide variety of technical, managerial and operative skills. Today, India is in a position to provide consultancy services as well as managers, technicians and skilled workers for setting up industrial projects abroad.
2. Policies for science, technology industry
and
The Government of India has enacted various policy measures, from time to time, in tune with the changing situations in the world. The real thrust actually came in 1958 with the adoption of the Scientific Policy Resolution (SPR). This clearly reflected the direction which provided a broad political ethos for support of S&T activities to meet social requirements. It aimed at promoting scientific research in all its aspects (pure, applied and educational) and creating a body of high
614
quality research scientists in India. The SPR, in particular, enunciated a broad approach towards generating S&T manpower and utilizing S&T for human needs. It clearly states that the key to national prosperity, apart from the spirit of the people, lies in the effective combination of three factors - technology; raw materials and capital, of which the first is perhaps the most important. A Technology Policy Statement (TPS) was enunciated in 1983, to provide policy backing for the growth of indigenous technology. The basic objectives of TPS are the development of indigenous technology and the adaptation of imported technology, as appropriate to national priorities and resources. The Government of India had set up in its ZndustrialPolicy Resolutions (IPRs), dated 6 April 1948 and 30 April 1956, the policy approach it proposed to pursue in the industrial field. The IPR of 1948 emphasized the importance of the economy for securing a continuous increase in production and equitable distribution, and laid emphasis on the States’ programmes by encouraging their active role in the development of industries. It realized the role of cottage and small-scale industries in the overall economic development of the country. The revised policy of 1956 gave a more precise direction towards accelerating the rate of economic growth and speeding up industrialization, in particular expanding the public sector and building up a large and growing cooperative sector. The Industrial Policy Statementof 1973, inter alia, identified high priority industries where investment from large industrial houses and foreign companies would be permitted. In 1977 however, it laid emphasis on decentralization and on the role of small-scale, tiny and cottage industries. In 1980 it focused attention on the need for promoting competition in the domestic market, technological upgrading and modernization. The policy laid the foundation for an increasingly competitive export base and for encouraging foreign investment in high technology areas. A liberalized policy was announced in 1990 for the promotion of smallscale and agro-based industries and to change
Technovation
Vol. 14 No. 9
GATT and the technology
procedures for the grant of industrial approvals, foreign investments and collaborations, local policy, capital goods imports and environmental clearances. These policies created a climate for rapid industrial growth in the country. Many procedural and routine changes were also made in industrial policy during the last four decades but 1956,1969,1977,1980 and 1990 are distinguishable as they were all determined by the political forces operating in the country. The Government, therefore, took interest, greater responsibility and control over the pattern and pace of industrial development in India. On 24 July 1991 the Government of India announced bold measures in view of the adverse balance of payments situation being faced by the Indian economy. It took a series of initiatives in respect of the policy for (a) (b) (c) (d) (e) (f)
industrial licensing; foreign investment; foreign technology agreement; public sector policy; the MRTP Act; and small and tiny industries.
This policy announced the delicensing of most of the industries irrespective of the level of investment. The MRTP Act was amended to remove the threshold limits of assets in respect of MRTP companies and dominant undertakings. It also paved the way for liberal foreign investments in India.
3.
R&D in industry
R&D in the industrial sector is essential for generating the know-how necessary for producing quality goods, promoting efficient exports and the self-reliance needed in the country as well as absorption, adaptation and upgrading of imported know-how. It aids in the generation of a technology base. The Government of India has recognized the importance of R&D in industry as a major factor in bringing out technological developments in the
Technovation
Vol. 14 No. 9
base in India
country. Keeping in view the ever-increasing investments made in the field of education and scientific research in academic, industrial and R&D institutions and laboratories, several promotional measures were introduced to enhance R&D in India, such as: Recognition of in-house R&D units, provision of tax incentives, etc. A technology absorption and adaptation scheme. National awards for excellence in R&D in industry. Consultancy services. A ‘Pass Book Scheme’ for the liberal import of equipment/spares, chemicals etc. An R&D Cess Act was approved by the Government in 1986, to provide for the levy and collection of a cess on all payments made for the import of technology for the purpose of encouraging the commercial application of indigenously developed technology and for adapting imported technology to wider domestic applications and for matters connected therewith or incidental thereto. The health of industrial R&D in India is now a matter of great concern to the policy planners. Financial and human resources devoted to industrial R&D activities constitute the principal inputs to R&D programmes and can be used as indicators of the commitment of industry to innovation. The industrial sector investment in R&D was about Rs. 1000 crores during 1991-92, out of which 54.2% was invested by the private sector while 45.8% was by the public sector. The industrial sector accounted for 23.2% of the total investment in R&D, thus contributing very little towards the generation of the technology base in India. About 50000 scientific personnel were employed in about 1200 industrial sector R&D units, out of which about 32000 were engaged directly in R&D activities. This was 29.6% of the total R&D personnel employed in all the R&D establishments in India. About 2600 are PhDs, 9000 are postgraduates, 20000 are graduates and 22 000 are other qualified personnel. The in-house R&D system
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TABLE
1.
National
R&D expenditure
by objectives,
4.
1992-93 Percentage
Objective Development of agriculture, forestry and fishing Defence Promotion of industrial development General advancement of knowledge Space Development of transport and communication Production, conservation and distribution of energy Development of health services Protection of environment Others
17.6 19.2 16.4 5.4 9.6 6.7 7.9 5.5 4.6 7.1
TOTAL
100.0
has made significant contributions in technology absorption and technology development. Some of the R&D centres have developed innovative technologies, many of which have been commercialized. Tables 1 and 2 classify the national expenditure on R&D for 1990-91 by objectives and by sector, respectively. A breakdown of R&D expenditure by leading industrial groups is shown in Fig. 1.
TABLE 2. Per unit industrial R&D and by industry group, 1992-93 Industry
group
Defence industries Fuels Transportation Earth-moving machinery Boilers & steam generating plant Prime movers Soaps, cosmetics, toilet preparations Fertilizers Rubber goods Cement and gypsum products Telecommunications Photographic raw film and paper Other groups OVERALL
616
expenditure
classified
by sector
Per unit R&D expenditure (Rs. lakhs) Public sector
Private sector
Industrial sector
2594.6 504.3 499.6 776.0 7cnl.o _
80.0 62.8 263.6 18.3 90.5 177.5 197.5 130.6 140.6 122.0 48.6 17.0 54.0
2280.3 357.1 286.6 270.9 212.4 177.9 176.5 163.4 140.6 108.6 106.3 98.5 72.3
66.3
106.9
9.0 177.9 15.0 210.5 180.0 ---263.5 331.5
The global kaleidoscope
The world has indeed come to be transformed into a global village, due to the rapid developments in science and technology. India’s participation in the implementation of GATT (General Agreement on Trade and Tariffs) will open up new frontiers in world trade. India’s benefit through Intellectual Property Rights (IPR) would be: All new R&D products will be introduced in India without any delay, to the discoverer’s original standards and quality. The drug industry will attract fresh investment and expansion from within and abroad. India will gain by inflow of the best technology. There will be ample co-licensing opportunities for t.he Indian sector and, equally, the ancillary sector will grow. There will be better utilization and employment of scientific manpower, checking the brain drain. With the availability of original quality drugs, there will be an automatic check on spurious and substandard products and an overall upgrading of GMP/QC in the industry. Finally, with incentives for basic research and enhanced exports, India can be in the top world ranking in the pharmaceutical industry. In spite of the above, there are several implications for Indian science. Recently, the Prime Minister sounded a note of caution on how the country may be deprived of certain technologies as a consequence. At the 81st session of the Indian Science Congress at Jaipur on 3 January 1994, he said that “Worries have been expressed by scientists and certain sectors of trade that indigenous R&D may be jeopardized as a consequence of the recently concluded GATT negotiations. While GATT addresses several issues, the more important areas impacted by S&T and R&D are: E/) (iii)
Textile and clothing Agriculture Trade Related Intellectual Rights (TRIPS) and
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Property
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GATT and the technology
base in India
R&D EXPENDITURE BY LEADING INDUSTRY GROUPS, 1992-93 INDUSTRY
GROUPS
Elec. & EteotronkB Chemkak Trmaport*tion lWu98 & Phuva. Me t*lhw9i~l Fuel8 Induatrkl Machkory Maohino Took Rubber Qood8 Food Prooee#ing
m
Fig. 1.
(iv) Services,
including
R&D
Expenditure
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PUBLIC
SECTOR
on research and development,
Services.
“In every one of the above sectors, India can clearly delineate areas of significant opportunities. In doing so we have to tune our choices to suit our characteristics. India is a large country with substantial natural resources and a massive agricultural base and is enormously endowed in terms of biodiversity, climate diversity and skilled manpower. These strengths of the country should now be pooled and harnessed to address identified areas of opportunities. It Ls clear to me that S&T and R&D will be of paramount importance in the post-GATT liberalized environment. Most manufactured goodr in the country will not only need to meet quality specifications of the international market but shall have to compete in terms of costs. india with her vast reservoir of S&T personnel and comparatively lower manpower costs is entirely capable of meeting this challenge through appropriate R&D inputs. GATT ensures further opening up of national economies and our S&T special-
Technovation
180 90 120 150 60 EXPENDITURE 0?s.Croreo)
SO MD
0
ml
PRIWTE
SECTOR
1992-93.
ists and industry leaders will have an enlarged arena to play their part. ”
5.
Critical analysis
Research and development (R&D) is an essential facet of any industrial activity, especially in the wake of growing competition. It is observed that the following factors have impeded the development of technology and its upgrading in India: (1) Policies, strategies and structure for S&T have been evolved in India, under a planned development approach, since 1950. The Government of India became the chief patron of scientific developments by supporting about 80% of the R&D expenditure in the country. All efforts were in fact made to promote the growth of a ‘science base’ by way of creating various scientific institutions, creating various technical colleges in the academic sector, generating qualified manpower in the academic sector, etc. But very little efforts were made to strengthen the technology base in
617
P. Sikka
the country, i.e. to develop a know-why culture while transfe~ing the knew-how from the advanced countries. And industrial progress so far has occurred due to the individual initiatives of the entrepreneurs, as there exists poor coordination or linkages (both backward and forward) among the academic, R&D and industrial sectors in India. (2) A Technology Policy Statement was introduced in 1983, about 25 years after the enunciation of the Scientific Policy Resolution (1958) by the Government of India, but with the basic objective of developing the indigenous technology appropriate to national priorities and resources, thus leading to self-reliant economy in the country. Unfortunately, this teGhnology policy had little success in promoting technological developments in Indian industry, as it was based on the premise that imported technology and indigenously generated ones are substitutes for one another. But it was not so. Import restrictions on technology do not produce import-replacing technology. Free import of technology would channel local R&D directions where imported technology is not available and where returns are high. A draft paper for a new Technology Policy Statement was released in 1993 to further strengthen the Indian economy and to assist the nation in fulfilling its role in the global economic environment with confidence and a sense of urgency. This has not yet been finalized. (3) Achievement of self-reliance has been the motto before India, which, after gaining independence, had adopted an economic policy that aimed at achieving economic growth through the medium of mixed economy where private and public sector co-exist. Since then, the aim of developmental strategies was only import substitution. Export promotion was given a backward seat. Thus, the import substituting model led (i) to inefficiencies through (a) restricting entry and competitive pressure, and (b) not pe~itting technologically dynamic firms to develop their full potential, i.e. MRTP controls; and (ii) to a poor technological level of industry through restricting imports of disembodied technologies.
618
The Indian policy framework for industrial growth changed dramatically during 1980-90 in order to face global competition. India adopted an inward-looking approach for self-reliance which created, to some extent, an industrial base instead of the desired technology base in the country. Today there is a need to look beyond selfreliance because the industrial scenario demands international competition and an outward looking economy (which can be termed as export oriented), significant in at least a few areas of science and technology. This would require the inculcation of ~~~w-w~y culture among the S&T personnel in the country. India should pronounce a national policy on quality control. (4) India missed the industrial revolution. The reasons may be diverse, including the fact that India was a colonized nation. Besides, it involves fostering and promoting the development and growth of S&T infrastructure, as well as needing a coordinated and orchestrated mechanism to utilize our scientific capabilities in a planned manner, in areas related to local needs, and in the overall interest of national welfare. The planning of industrial infrastructure was promoted in the form of steel plants and other industrial ventures and there was a simultaneous but isolated effort to build a chain of national laboratories, which were referred as ‘modern temples’ of Indian science. During this period, the growth industrial infrastructure was not matched by the growth of technical capabilities in R&D laboratories - a lacuna which unfortunately still persists even after more than four decades of independence. (5) The output of the academic sector, i.e. technical manpower and research findings, forms the input for R&D establishments and industry. There exist poor relations between the academic, R&D units, and industry in India. There is an urgent need to forge linkages among the trinity so as to act as a springboard for the industrial and economic development of India.
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GATT and the technology
6.
Future prospects
Modernization, technology upgrading, increasing competitiveness in the global market, gearing itself not only to meeting domestic needs but also to multiplying exports etc., are the major challenges ahead for Indian industry. The health of industrial R&D is a matter of great concern today. Although over 1000 R&D units exist in both public and private sectors, only 0.7% of sales turnover is invested in R&D, most of it by the Central Government. The establishment of R&D units in the private sector has, in most cases, been triggered by tax concessions offered by the Government rather than by an intrinsic feeling of need for R&D. There is a need for creating a technology base by coordinating the scientific, technological and industrial policies and programmes in the country. Scientific and technological efforts intended to support industry may compete, to some extent, for resources with S&T efforts set for other purposes such as defence. New technologies resulting from scientific research for industry may improve the country’s international trading position, improve its balance of payments and also increase its gains from trade, resulting in quick benefits of the trinity science, technology, and industry - to society. The creation of the Technology Information Forecasting and Assessment Council (TIFAC) and the Technology Development Fund (TDF) are major steps forward. These should aid in promoting industrial R&D culture and inducing industry to make more use of science and technology. New areas should be explored where the strength of India lies such as solar energy, herbaYayurvedic medicine, new seed varieties in agriculture etc. Considering the limited materials and financial resources, it is important to rely on India’s potentially most vulnerable resource, viz. S&T knowledge. Knowledge-based industry such as software production presents certain advantages in the Indian context, since the usage of primary resource is low but t,hat of human resource is high. Finally, the state of application of S&T to industry would improve only when we can understand and
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base in India
stimulate these factors which will kindle the innovative instinct and force the R&D through competition, market pressure etc. Thus when the S&T capabilities are about to crystallize, the conditions of GATT have been imposed on India to claim the rights of the developed world on R&D in all areas of economic sectors. So India should either pay royalty towards the use of their R&D or allow the multinationals to set up their own ventures in the country which will enable the country to leapfrog and absorb certain technologies, go for sub-contracting, produce export quality goods and compete in the world market. This may curb the spirit of research and development but would expose India to newer fields of science and technology. Accordingly, this may either strengthen or weaken the technology base in India before its crystallization. It is now very difficult to predict how far the new strategies of GATT would help India in gaining its own identity with S&T strength in the world. India is aspiring to entering the global business arena in a big way, but first it has to attain world standards of performance in manufacturing and trade. This can be achieved only when there is a strong technology base in the country. Besides inviting capital and technology from abroad, it has to demonstrate that it is capable of imbibing these and that its political and economic systems are stable enough to ensure an atmosphere conducive to growth and crystallization. India now has to devote more funds to R&D with a view to strengthening the technology base and creating more and more innovation in the wake of the arrival of liberal foreign technology and investments. This will be an essential step to absorb, adapt and upgrade the imported technology, otherwise a higher and higher cost would have to be paid, every time, for its importation. This will also, in turn, enable the technical manpower of India to equip itself to new technologies and suit the job requirements of the foreign companies who would be planning to explore their global market potential in this part of the world in the near future. The challenge of GATT and its effect on the Indian economy is going to be a great one, in all aspects of her socio-economic growth.
619
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M.G.K. Menon, Excellence and accountability in Indian science. In: P.N. Srivastava (ed.), Science in India - Excellence vs. Accountability. Angkor Publishers, New Delhi, January 1994, pp. 232-240. P.V. Narasimha Rao, Inaugural address. 81st Session of Indian Science Congress, Jaipur, 3 January 1994. P. Sikka, A Critical Study on the Management of Science in India. DSc Thesis, Meerut University, Meerut, July 1993. P. Sikka, Management of science in India. The Hindu (25 January 1994). P. Sikka, New thrust in technical education. University News (New Delhi) (25 July 1994) 3-5. P. Sikka, Indian science policy - peeping into 21st century. Invention Intelligence (New Delhi) (October 1994) 503-509. Pawan Sikka is a Director
(Technology Assessment and Forecasting) with the Department of Science & TechGovernment of nology, India, New Delhi. He has a PhD in the Physics of Amorphous Semiconducting Materials and a DSc in the Management of Science in India. He was Visiting Fellow to the Queen Elizabeth House, Oxford University, UK, during 1984-85 and worked on the transfer of technology, comparing the strategies adopted by Japan, Korea, China and India. He was associated with the Apex science advisory bodies in India. Dr Sikka has published several technical articles concerning science policy and planning issues, in various national and international journals.
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