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Developed India by 2020? Here’s a reality check

By K.S. Jayaraman, IANS

Bangalore : Former president A.P.J. Abdul Kalam used to dream of a developed India by 2020. But a comparison of the country’s growth path with Japan and South Korea shows it may remain just that – a dream.
Pradosh Nath, an analyst at the National Institute of Science, Technology and Development Studies in New Delhi has listed 13 reasons why it will be difficult for India to catch up with developed countries.

“Catch-up requires rapid generation of wealth in sectors that offer the scope of increasing returns to scale, which in turn is achieved through technological innovations,” says Nath.

“Emphasis on generation of wealth led both Japan and (South) Korea to the development of technological might within a span of a decade,” says Nath. “India missed this perspective because of overemphasis on distribution of wealth (in the erstwhile USSR pattern) that overshadowed the importance of generation of wealth.”

Nath’s study, published in Current Science, says Japan and South Korea climbed up the development ladder by following this accepted strategy: increase productivity, strengthen the competitiveness of the produce in the world market, and boost exports.

India, however, had followed a strong import substitution regime mainly aimed at protecting domestic industries, without matching commitment towards becoming internationally competitive. “Technology leadership in the chosen production activities had never been a policy option among Indian planners,” says Nath.

“Licensing and other monetary and fiscal instruments that worked wonders in Japan and Korea made Indian enterprises laggards.”

The best example of this, he says, is the Indian automobile industry that rolled out its first car in 1948 and Japan in 1952. Both began with borrowed technology but Japan swept the US market by 1971 and South Korea that began making cars in 1962 emerged as an important player in the world auto market by 1980.

Global market and technological competitiveness were never the driving factors of government intervention in India, Nath says. In-house research and development (R&D) was not aggressive enough. As far as government-funded industrial R&D is concerned, the laboratories were not groomed to match the gruelling work culture that characterised industrial research.

The study points out that in early 15th century, a poor country like England could quickly change its fortune and catch up with the Italian economy by choosing the downstream production activities of manufacturing wool and woollen clothes, gradually replacing the age-old practice of export of raw wool and import of woollen products.

“Japan and later Korea followed the English wisdom only with more extensive and intensive drives, where the government played the most critical role through a series of policy initiatives,” the study says.

If government intervention alone is the core of catching up, India had that in place much before Japan and Korea. In fact, says Nath, India had a Planning Commission even before Japan and Korea visualized a planned economy.

In the case of India, however, the importance of the manufacturing sector was lost in the confusion between small-scale and large enterprises. The heavy industries under government ownership began with a bang with foreign technological collaborations.

“But in the absence of any action plan for determined technological catch-up, most of them became technologically obsolete. The same was the fate of many large-scale private sector enterprises that survived through repeated import of technologies.”

Instead of being the guide or complementary to private enterprise, the Indian government turned out to be a competitor of the private sector.

Apart from tax benefits and low interest loans for key industries, Japan was heavily investing in the development of infrastructure and revamping its education system, Nath points out.

“All these were in addition to purpose-specific R&D institutes set up by the government to address technological issues in the targeted industries.”

For South Korea, this was the period of heavy investment in infrastructure development. Says Nath: “In Korea, the government held the wheel and supplied the fuel, while private firms functioned as engines.

“The result was restructured economies of Japan and Korea with quick economic growth that caught up with the developed world and also caught the fancy of the rest of the world.”

By 1975, the export of machinery and transport equipment from Japan rose from a paltry 8.8 to 49 percent. India’s share of technology export in total export is 16.6 percent (against 80.8 percent for Japan).

“If the experience of Japan and Korea is to be emulated, India has to revamp its infrastructure, and human resource development initiatives,” the study cautions. “The latter would require a rejuvenated education and health system.”