New Delhi: India plummeting to abysmal depths in global competitiveness index (GCI) ranking – 68th - is neither shocking nor unexpected since there have hardly been any efforts in the country – by ruling political establishments, the bureaucracy, the industry, and the research institutions – to inculcate the culture of innovation and invention.
Today, seven decades since Independence, India has very few products or inventions that it can claim as its own, or indigenous. “Make in India or ‘Made in India’ and all such clichés have been confined to sloganeering and hype with no semblance of implementation.
This is reflected in the fact that apart from GCI, India is also positioned many rungs down the ladder in Global Innovation Index (GII). The industries in India always prefer to be in the comfort zone of replication of outsourced or existing technologies - like the pharma sector – seldom indicating an inclination to innovate.
An eloquent narrative of this culture is evident from the pittance- ranging from a decimal point to less than a single digit - that is infused into research and development, both by the government and the industry.
India’s incompetence in innovation and even in cloning products – specifically in the manufacturing sector - is taking a heavy toll on the country’s economy. For instance, India is paying a heavy price due to the dearth of import substitutes. Consequently, the country has been incurring huge expenditure on imports.
The total value of imports has only been scaling up every year. India’s imports from the world increased by 42% from around $ 357 billion in 2016 to $ 508 billion in 2018. Apart from fuel and natural pearls, manufactured products comprising electrical machinery, equipment and accessories, mechanical appliances, organic chemicals, fertilisers, plastic products and Iron and Steel comprised a major chunk of India’s imports, accounting for around $164 billion i.e. 32.2% out of total imports of all products valued at $ 508 billion during 2018-19 (April-March).
China is the biggest source of imports for India. Despite the consistently varying degrees of diplomatic relationship between India and China, one persisting constant was the ubiquitous presence of Chinese brands in the Indian markets. Irrespective of the relationship – cordial, acrimonious or smoldering – the fascination for Chinese products ranging from simple household appliances, electronic products and mobile phones to complex machinery and equipment has ruled the Indian markets.
The fancy is reflected in an analysis according to which imports from China were valued at around 4,000 rupees worth of goods for every Indian. China’s share in India’s total imports from the world was around 12.5% at $ 64 billion during 2018-19.
Electrical machinery and mechanical appliances, organic chemicals, plastic products, iron, and steel appliances and products, vehicle parts and accessories contributed a major chunk of China’s exports to India amounting to a cumulative value of $ 52 billion and accounting for almost one-third i.e. 32% of the total imports of the same products from the world at $ 164 billion. In addition, China also garnered a lion share- $ 3 billion during 2018-19 in India’s imports of Telecommunication equipment, specifically smartphones, and accessories.
While the huge dependence on imports of specifically manufactured products have proved to be a bane on the economic development and strain on the country’s financial prospects, India’s exports have failed to offset the imbalance in trade by innovating and increasing its range of products.
An evaluation of India’s exports substantiates this factor. India’s share in exports vis-à-vis world exports has been languishing at an average of 1.7% during 2014-18. India’s total exports to the world were around $ 323 billion i.e. 63.5% of its total imports valued at $ 508 billion which also indicates an overall trade deficit of $ 185 billion in 2018. India’s exports to China were $16 billion – i.e. only one-fourth of its imports from that country. India’s trade chasm or deficit with China was a whopping $ 59 billion.
An evaluation of colossal trade deficit, stagnating exports across all sectors and ever-increasing imports, points to India’s deficiencies in the in research, innovation and value addition of products that could facilitate not just import substitution – to meet India’s needs - but also enable the country to position its products in the highly competitive and quality savvy global arena.
Except for Pharma – for which India is a leading exporter – other manufacturing sectors have been languishing due to lack of impetus to raise the level of quality, performance and productivity and marketability. Lack of competitive and innovative culture can be attributed to industry's management being content with the status quo in production standards and the governments’ slumbering over priorities for promoting research and innovation.
The intention is explicit in India’s R&D spending which is a ridiculous 1 percent. Japan, China, South Korea countries are high on the innovation and competitiveness index, and, also on the exports list, due to the top priority, they accord to research and development. India should learn lessons and replicate this culture if it has to halve or considerably reduce the imports and augment import substitution. This objective can be achieved by introspecting deficiencies and prioritizing focus on sector-specific research and development through policies and adequate funding.
