There are many sayings that demonstrate the power of small seeds that could grow into massive trees. After all, nature is all about free fall of seeds in fertile lands turning into bountiful forests, duly aided by rain and shine. In a nation’s life too, industrial and economic growth tends to be based on seeds of innovation and manufacture. A few ideological moves (eg., heavy engineering thrust) or a few individual initiatives (eg., Sanjay Gandhi’s small car passion) could turn out to be major transformational revolutions years later. The drivers of development are simple and straightforward in many cases; however, only perceptive administrations at least register them while the perceptive and proactive administrations lead such transformations. Very few economies of the world are blessed with these twin capabilities; the vast majority of others need not despair, however. Not being in the forefront of revolutionary changes in the past does not mean that the country cannot be a leader in future, provided that the nation has learnt from the past as to how to visualize and develop the future!
India, despite its hoary history, had to take the bow of modern industrialization only from the time of its independence in August 1947. Indian administration’s cognitive skills, including those related to conceptualization and analysis of industrial development, have started evolving in the 1950s and started laying the developmental pathways for industrial development from the 1960s. All through the period, there have been opportunities to witness and interpret as well as absorb and implement how other nations pursued their growth. India followed a mixed economy model, and achieved mixed results until a crisis of sorts stared at the economy in the 1990s. This period of liberalization was a period of enlightenment for economic and industrial planning. That said, it cannot be denied that some of the important foundations were laid prior to liberalization while far more could have been done after liberalization. Whether a nation merely views such transformational movements as products of time or leads such transformations proactively is a resultant of many factors. This blog post reviews five ‘seed to tree’ developments in India to examine if some lessons can be read out of them.
Engineering of the 1960s
For the global industrial economy, the 1960s represented the heydays of modernization and expansion of traditional industries that represented the bulwark of a developed economy. A technologically resurgent Japan brought in new efficiencies to industries such as steel, automobiles and capital goods, and also laid the foundations of a globally networked production-consumption structure, which is based more on competitiveness than on national origin. For India, that period had coincided with the goal of self-reliance for some of the industries in the list such as steel, medium commercial vehicles and capital goods became a preferred choice, albeit with a heavy dependence on imports from countries such as Russia, UK and Germany. Unfortunately, the socialistic dogma of the Pandit Jawaharlal Nehru government served to shut out the development of other important growth engines such as automobiles and white goods.
The 1960s were notable for two concepts of indigenous development – that new cities and economies could be built around new industries, and that more industries meant more economic power to States in India’s federal development paradigm. Cities such as Bhilai, Rourkela, Bokaro, Jamshedpur, Dhanbad and Durgapur stand testimony to the first concept. The now flourishing steel plants in far-flung Southern cities such as Visakhapatnam and Salem stand as living examples of the struggles by the States to get such steel plants. Youngsters were offered only three core engineering educational streams such as mechanical, electrical and civil at that stage, keeping in view such perspectives. But, that was also the time when in other developed countries of USA, Europe and Japan transistor radios and other electronics devices began to be manufactured in billions. Even as India built a solid traditional engineering infrastructure, the emerging electronics age got ignored by the country.
Electronics of the 1970s
The 1970s were verily the electronics age of computers, audio-video devices, home appliances and a host of electronics systems that provided better accuracy and repeatability to traditional capital goods. The 1970s also saw the emergence of software coding, from the punched card readers to machine languages to FORTRAN and such other languages for man-machine interface. The Indian ministers and bureaucrats probably knew that they were wrong in giving the global electronics revolution a miss in terms of indigenization but did little to correct. When IIT Madras imported IBM 1401 mainframe computer in 1974 to support development of indigenous technologies, C Subramaniam, the learned Union Minister for Industrial Development remarked that imports of such sophisticated technologies was probably not the best way to develop the indigenous industry. In fact, the governments of that time allowed the free import of second hand or aged equipment to promote industrialization (import of Innocenti scooter plant to set up Scooters India in Lucknow was one example!).
If China has, over the years, become the great manufacturing workshop of the world and the preferred manufacturing outsourcing destination, the seeds of that industrial amazon were sown in the late1970s, when the concepts of market economy were first embraced in the late 1970s, and the foundations of mass consumer electronics industry began to be laid. While India started to introduce electronics and telecommunications as well as other diversified engineering courses, the country saw the flight of technical talent to USA and Europe which offered the new-age electro-mechanical and mechatronic industrial development. Continuing the inward looking traditional industrial policies, the socialistic ideologues and governments of the 1970s began to add computers, consumer electronics and home appliances to the list of “luxury goods” that only automobiles represented till then! Full four decades later, even in 2015, the country is still not sure of being an electronics-driven industrial powerhouse like China has been from the 1980s.
Automobiles of the 1980s
Amidst the lag of India’s industrial and economic competitiveness, something that was absolutely maverick happened in the 1980s – the establishment of Maruti Suzuki India Limited in 1981 by the Government of India in 50:50 joint venture partnership with Suzuki Motor Corporation of Japan! Maruti Suzuki verily ushered in an automobile revolution in India with an unprecedented influx of new passenger car models and light commercial vehicles, mostly with Japanese technologies and their subsequent indigenization. This has led to the creation of four Detroits in India, one in the traditionally automobile oriented Chennai region, the second in the Northern Gurgaon region where Maruti Suzuki established itself, the third in the Western Pune region and now in the North-Western Sanand region. There were, of course, large two-wheeler facilities in Pune, Aurangabad and certain other parts of the country but the role of the automobile industry of the 1980s in starting a new manufacturing revolution in India cannot be minimized.
With a production level close to 22 million vehicles per year, India is one of the largest producers of automobiles in the world. In terms of two-wheelers, India is globally the largest with an output of 17 million vehicles. India is also the only large and structured player globally in the unique and ubiquitous three wheeler segment with an output of one million vehicles per annum. In cars (and utility vehicles) also, India is no longer a trailing country. From a meagre production of 30,000 till the late 1970s, India now clocks an output of 3.2 million! Commercial vehicles are also highly diversified and expanded with an annual output of one million. Performance on the export front has, however, been less than desirable. The only notable bright spot on the automotive export front has been the export of two million two wheelers, constituting about 12 percent of the total two wheeler output while all others have had insignificant (low single digit percentage) export levels.
Software of the 1990s
Even as automobiles began representing the new hardware of Indian industry from the 1980s, software emerged as the first driver of India’s global competitiveness. The 1980s saw maturing of Tata Consultancy Services from punching to coding, and the founding of India’s future software industry bellwether, Infosys. This phase represented the start of another type of migration of talent within India, from manufacturing to software! With the foundations laid in the 1980s, in the 1990s, software came to be associated with a larger canvas of information technology (IT), emphatically transforming the way the world looked at India and IT. The sector also established that India’s global delivery model could provide leadership not merely in terms of talent cost advantage but more in terms of seamless turnaround of systems development and transactions. IT has also laid the foundations of a new youthful middle class society that began embracing consumer economy and driving products and services typical of such economy.
India’s IT sector has been notable for a massive investment in in-house training and development, in terms of more up to date coding skills and multi-country linguistic and cultural approaches. The industry has perfected a model of twin recruitment and development engines driving scale and globalization. After its global success, the IT industry has been trying to move up the value system by offering consultancy services and also through vertical specializations. These are, however, logical steps and do not constitute any strategic redefinition. A major failing of the Indian IT sector has been in terms of its disinclination towards strong inorganic growth and diffidence towards developing its own product platforms. It has taken a Sikka to try to add a strong product direction to Infosys. Not many IT majors, however, seem inclined to commit resources for product investments. The future of the IT industry is as strong as ever but probably below the potential.
Internet of the 2000s
The Internet has done wonders for globalization and communication. The Internet of People connects people and organizations across the globe through a host of devices such as computers, tablets and smart phones, connected by a telecommunications backbone. Many things that are done physically, from retailing to movie screening, began to be conducted by remote management through the Internet, in an increasing measure. After digital book publishing and reading, electronic commerce and mobile wallets have become the new platforms. This has resulted in a huge shift in how business is conducted in various fields, and the future potential. IRCTC, the eTicketing platform of Indian Railways logs between 0.5 to 1.0 million tickets per day which is still a fraction of 22 million passengers moving on any day over the Indian railway network. There could be an explosion of the Internet of People in India with better and universal broadband and wifi connectivity, lowering of tariffs for data transmission and availability of additional spectrum.
It is now getting evident that the next revolution in the Internet could be more profound. The Internet of Things could connect devices and environments in multiple ways, revolutionizing how people live on a day to day basis. Healthcare, travel, home life, retailing are all set to become more real time and inclusive. RFIDs, sensors, scanners, software, analytics, processors and telecommunications would determine if product and industrial structures would undergo a metamorphosis. Unfortunately, the greater the input of technological change the greater is also the level of waste. For example, as opposed to replacing normal electric bulbs or refrigerators after their useful life, technologically connected appliances may seek replacement every year as new technology arrives. The e-waste generated by smart phones and tablets is indicative of the waste that could occur across all product categories in the Internet of Things.
The choice of just five sectors as above to describe India’s industrial development of the last decade is by no means comprehensive (for example, pharmaceuticals was not covered!) but is certainly illustrative. The seeds of India’s industrial development have been from trees that have grown elsewhere. Even in respect of IT where India has become a global leader, not a single computer language or operating system has been developed in India (may have been developed elsewhere partially with Indian talent, however). The transhipped seeds, and in some cases the transplanted trees themselves, grew in the eager markets of India. Over the last several decades, there have been gallant efforts to indigenize design and manufacture; yet even the new NDA government’s current manufacturing paradigm of ‘Make in India’ seems to require overseas seeds. The past experience suggests that financial investments, technologies, equipment and components come in bundles each with a cycle of cautious investment, domestic consumption, limited exports and capital repatriation with a very specific time span in mind. Every time industrial renewal is desired, the cycle of imported seeds et al repeats itself.
With the Modi government firmly committed to a policy of India’s economic growth equating with India’s self-respect, a different seeding programme for industrial and economic growth is required. India now has the option of staging the next manufacturing revolution following the previous model or improving upon it to make it a self-perpetuating cycle of indigenous development. For this to happen, a new genre of seeds is required. The past industrial revolutions were hamstrung by limited scientific and technological educational streams which came into existence only after the development of physical industrial infrastructure. This has resulted in talent bottlenecks and skill gaps. A bolder India must create educational disciplines far in advance of the sighting of new industrial infrastructure. If necessary, to cut the developmental times short, the vast Indian diaspora which is enthralled by the prospect of a new India must be encouraged to come on two to three year sabbatical to seed their talents in Indian industry, research laboratories and educational institutions. More importantly, ‘Make in India’ paradigm must be supplemented by ‘Research in India’ and ‘Design in India’ paradigms. And, as the costly lesson of missing the electronics revolution shows, no sunrise sector should be ignored by India in this phase.
Posted by Dr CB Rao on April 14, 2015