Building economy strength should be our top priority

Knowledge is the new currency of international trade and commerce. Neo-classical economic theory attributed growth in output to increase in the factors of production, namely, labour and capital. The new paradigm is that the economic power, increasingly seen as the basis of new political clout, arises out of a strong technology muscle of the nation.

A nation’s advantage in trade no longer flows merely out of its natural endowments, e g, raw materials, labour, capital and land. Over-whelming empirical evidence shows that the per capita economic growth of the industrialised countries has been driven by innovation resulting in technological progress, and not by aggregate capital investment per se. Recent experience of nations shows that the contribution of raw materials, and in many cases of labour, has steadily declined in providing the competitive edge to the products.

This is perhaps best exemplified in micro-processor technology where the raw material content has steadily fallen to an insignificant proportion of its price. The big strides of the Asian ‘tigers’ are not because of their natural resources. Malaysia’s prosperity is no longer based on tin and rubber. Countries rich in natural resources, on the other hand, for example oil producing countries of Middle East, are not great economic powers. Technology supremacy is the key to success. Increasingly, the contribution comes from value addition through technology. While the market for capital is becoming freer with nearly $400 billion moving across the globe every day, technology is highly guarded and hardly ever transferred.

A dramatic example of how nations compete on their technological edge is given by the well-established Swiss watch industry. The base of their technical excellence was rendered obsolete virtually overnight with the advent of the electronic quartz watches. The precision of the quartz watches could not be met by that of the best mechanical watches. They were also cheaper to produce. The irony in this case is that the concept of new technology of quartz watch had emanated from Switzerland itself!. They were unable to identify its potential. Many Swiss watchmaking companies were forced out of market. Faced with technological threat, several ailing companies of this industry got together and subsequently used technology as a competitive weapon. The new firm, ETA, created “Swatch”. The revolutionary product design was backed by an unconventional manufacturing and assembly process. They resorted to new technologies such as the micro-injection of plastic under pressure, the use of polymethylemetracrylate to obtain an extremely resistant glass, a new technique for welding the glass and case together to make the watch totally water-proof, etc.

We will witness similar examples in a number of our industries. The traditional sports goods industry in Jalandhar, for example, faces threat as new materials and manufacturing processes lead to improved quality at lower costs. The tennis racket industry in Sialkot has faced extinction with the advent of carbon fibres and vastly improved production engineering.

A large number of industries, particularly the Small and Medium Enterprises (SMEs) in the country face growing technological obsolescence. Punjab, for example, has the highest intensity of SMEs in the country – some 2,00,000. Their technological upgradation is not even on the state government’s agenda. Regional R&D institutes, once at par with world standards, have run down in quality. They have become simply irrelevant to industry. In agriculture, too, productivity has plateaued at levels 30-50 per cent below world standards. Indian industry is far too dependent on imported technology. Even very large companies, which enjoyed market dominance and economies of scale in the protective, truly ‘Swadeshi’, days, did not upgrade their products. When they need even marginal improvements on earlier technologies, they fall back on import of further knowhow. The position has hardly changed. They are happy to walk on the crutches of foreign technology.

 There is a certain degree of inevitability in the change process relating to technology. Four broad phases of economic development can be identified: Phase I witnesses gradual liberalisation to integrate the country’s insulated economy with that of the world’s. This phase is marked by hesitation and advocacy of protectionism from certain sectors of industry in the name of giving more time to ‘adjust’.

While many forge ahead to take advantage of emerging technologies to meet with global competition, some seek protection behind high fences of tariffs. In India there are repeated calls again of ‘level playing field’ ‘Swadeshi’, and now ‘calibrated globalisation’. Clearly, economic liberalisation is not an unmitigated advantage. This phase witnesses extensive restructuring take-overs and mergers and selective privatisation. 50 years after independence, we are still in Phase I.

Phase II is marked by accelerating changes and institution building. The emphasis is on generating knowledge and creating manpower skills. The emphasis is away from import substitution and on developing technology, which is contemporary.

In Phase III economy is fully liberalised, high growth rates are witnessed and the country becomes a global player.  

Phase IV is marked by sustained generation and creating wealth and exploiting new knowledge.

The need for indigenous technology development at the national level and in our companies is going to be a greatly pressing one. Much of the impact of recent changes on technology is actually not visible. How?

Firstly, liberalisation has led to low tariff walls, freer imports and liberal foreign direct investment regime. Companies abroad, therefore, now prefer to export finished goods to India rather than transfer technology to manufacture them locally.

Secondly, it is lot easier now to manufacture by setting up companies with majority foreign equity holding, often 100%. Rather than give the know-how to partners, technology will come ‘sealed’ in 100% equity companies. This has been witnessed in a number of sectors.

Thirdly, as India grows competitive and as the industrial muscle grows, we shall increasingly be perceived as a threat. We have witnessed growing restrictions on export of products and technologies to India. This is just the beginning. Its full implications have not been grasped.

The new technological order leaves India with no choice but to create and improve on technologies. There is no other way to survive in an environment where commodity prices decline and factors of production, such as labour and raw materials, face a rapidly reducing advantage. It is no surprise that nations invest heavily in their R&D. The distribution of global R&D is highly concentrated in the developed economies. About two-thirds of the world-wide R&D efforts are found within the Triad of the US, Japan and Western Europe. The Third World, by the most generous estimates, accounts for only about 5% of global R&D and it is declining, especially in the heavily indebted countries. Only in the “four tigers” (South Korea, Taiwan, Singapore, Hongkong) and also in China and some other East Asian countries is there a rapid rise of R&D. Their R&D expenditures have been growing rapidly. Taiwan and Singapore now have a level of R&D intensity comparable to that of many european countries.  

There is a new urgency to technology development by the Indian industry. It is time our Chief Executives in industry, Research Laboratories and the Government took charge of the cycle that embraces improving design competence through innovation and invention, right to the point of commercialising. New products are not created at a single point. Theyfollow the well-recognised process of (A) basic research when no applicable technology is right (B) Developmental work where possible end use is visible (C) Proto-typing and testing. Commercial feasibility at this stage is not clear. (D) Full scale installlation of new process. Technological risks are minimum. (E) Commercial launch. Business risks dominate. The driving force in technology is desire to excel.

Mere market forces do not supply the motivation. Technology development does not evolve by itself. It is not a natural law. It has to be willed. Societies everywhere have shown that technological achievements are driven by strong social economic and political commitments. When the Egyptians built pyramids, they created the tallest structures : 400,000 people employed for 20 years moving 4 million tones of sandstone. That was the state-of-art technology then. They created the tallest structures in the world.

They remained unchallenged for next 4000 years, even though the knowledge and skills existed to surpass them, till the new masts and skyscrapers, cathedrals and Eiffel Tower came. That happened not because the technology was simply waiting to be converted into structures. Materials were available, joining techniques were known. The real feat of Eiffel Tower is that there was a will to do it. When the societies lose will, when industries lose interest, technology development declines. There is no such thing as a technology base from which developments spring up on their own.

When the US pride was hurt by launch of the ‘Sputnik’ by the Soviet Union in 1956, it took them 10 years and as many workers as the Egyptians did for Pyramids to put man on the moon in 1968. In both cases, the accomplishments grew out of a ‘will to do’. Where is our will?

Let us, therefore, put technology on our agendas and make it an area of concern. We have to reward engineering knowledge - making sure it is no less remunerative than marketing or finance. Design and manufacturers must find a preference with our youth. The excitement with chartered accountancy and commercial courses must be matched with that of science and technology. We have to change salary structures in our companies to help improve the contribution of technology in industry.

All changes require champions. The freedom movement needed a Gandhi. But great ideas also require their singers and poets to carry the message, to enthuse people. The freedom movement also needed a Tagore. The message of technology has to spread.

India’s might will, in the end, come from its economic strength. A nuclear test here and there, even build-up of an arsenal and a delivery system cannot bring India the stature and its rightful role in the world affairs. It has to be backed by a strong industrial base. It is essential that we pursue science which is contemporary, not second rate, and develop technology which answers the social and economic needs of the country. To change this into reality,

we need champions. We need them to carry the message across, enthuse people with technology and make them believe that not only it is within our reach but that, without it, we are not going to be able to have our voice heard. Technology cannot stay a neglected agenda much longer.