Adapting to Technological Innovation is Key to India’s Economic Growth
Humanity’s spectacular growth historically has been driven by cycles of innovation where we are now leading our sophisticated life on Earth. Australian political economist Joseph Schumpeter developed this idea of the innovation cycle. He looked at the vital role of technological innovation in long waves of economic cycles. It is estimated that we are nearing the conclusion of the fifth long wave, where information technology is at its peak and the sixth wave is at its commencement. The sixth wave is anticipated to focus primarily on biotechnology in the medical field, impressive innovation in artificial intelligence, and, most crucially, a massive leap in clean technology.
Although science and technology have leapfrogged, since 2020 the world has faced an unprecedented situation in all dimensions leading to an enfeebled economy and uncertain trade environment. All countries impacted by the pandemic are compelled towards innovative thoughts and strategies to change the diminishing economic growth to a progressive one. The pandemic has struck India worse than most, putting the Indian economy in unchartered territory. Good economics shapes the contours of a country’s influence in the international community. To rise to the changing dynamics India needs to engage in economic dialogues and implement pragmatic steps, otherwise it faces the risk of getting dwarfed by changing geoeconomics conditions.
The slow pace in India’s economic growth should attract the attention of policy makers to address the structural inefficiencies as India aspires to become a $5 trillion economy[i]. Thus, the intersection of politics and economics should be prioritized in the post-pandemic era, which should be in sync for greater preparedness. Worldwide experts have identified sectors where significant reforms and new strategies can increase the economy's growth post-pandemic era. Improvement in health care infrastructure is placed as top priority, encompassing advancement in industrial and scientific research and development, as well as big data analysis. India needs to buckle up in developing in these sectors so that it contributes to GDP growth.
Given the last three years India’s economy is not performing well with the latest trade deficit recorded in February 2021 stood at US$ 12.6 percent[ii]. To reverse the situation of having high imports because India lacks competitiveness (electronics/machineries), emphasis should be given on manufacturing which can in reality enable the idea of ‘Atmanirbhar Bharat’(Self-reliant India). India until now has struggled to set up a manufacturing base which is also connected to deficiencies in the foreign direct investment (FDI) manufacturing economic system. Since multinational companies are pulling out of China and looking for new destinations India should cash in on the opportunity[iii]. If the government of India pushes and charts out a structure of attracting those ventures by improving its infrastructure (water supply, power supply), and flexible ease of policies of doing business in India could ensure India to be in a steady supply chain[iv]. If not, within the next ten decades the high chances are that neighboring economies Vietnam, Bangladesh, Malaysia will outperform India in economic growth.
What is in India’s favor is the human capital which if utilized properly would be a boon, if not can become a bane. India should prioritize and fund education to build a research-oriented environment and output in results. Pandemic unveiled that India's digital divide (rural-urban) is one of the major obstacles in getting a skilled workforce[v]. A substantial number of students in rural areas who were not exposed to online curricula saw opportunities completely wiped out from getting (higher) education during the pandemic. This poses a risk to the next generation of innovators as well as a momentous hit to the industry's demand for skilled human labor. Post-pandemic era setting up of skill centers and capacity building programmes will complement providing a skilled workforce and incentivizing the development of technologies. If Indian talents have expertise in computer, data sciences, and machine learning--that contributes to the incorporation of software with India’s under-represented hardware sector. It will entice tech businesses to extend their workspaces. steering the Indian economy's IT sector to thrive. A noticeable feature in advanced (Germany) and developing economies (Indonesia, South Africa) have been technology transfer legislation—it entails that university know-how should be transferred to the private sector for commercialization[vi]. India does not have such legislation but should consider having it to establish a partnership between research labs/ academia and industry.
Keeping up with the digital ecosystem and the world production-supply chain’s reliability on semiconductor industry could be India’s niche area to boost its economic growth by adapting to the new market demands globally. To India’s benefit, TATA group (India’s multinational corporation) announced embracing the semiconductor chip manufacturing market[vii]. It started its construction on a high-tech chip processing plant in Hosur, which would be the first of its kind in India. The global supply chain comprises more value to upstream industry prior to assembling of the final product. If TATA becomes the foundry in India of chip fabrication, it opens the possibility of shedding dependence on foreign companies. It will work as a symbiotic relationship—by generating employment because chip making factories need R&D and constant upgrading. On top of that the economic benefit would be 6-23 times the investment[viii]. If India capitalizes on such an opportunity, then R&D will play a functional role because semiconductor giants TSMC and Samsung are rapidly progressing toward 3nm technology nodes. To replicate this seems an arduous job but definitely an area that India should consider embarking upon.
Concerning the technological advancement, other countries have progressed in and the level of progression they are looking for, India (policy makers, researchers) should be giving attention to highly advanced scientific areas-- quantum computing technology, large-scale simulation for weather forecasting, Internet of things (IoT) implementation in public sectors and consumer electronics, and implementation of artificial intelligence (AI), drones, and robots in the healthcare, agriculture, and public sectors. However, the prospect relies upon if effective interactions and collaborations between national research laboratories and top enterprises happen. India will play a crucial role in the forthcoming long economic innovation cycle if it can ensure technologically based developments. To achieve the desired results clean and sustainable routes should be chosen to avoid facing climate change issues or becoming a hindrance in India’s long-term economic objectives.
 She graduated from Presidency University, Kolkata, India. Currently, she is a Ph.D. Candidate at National Chung Hsing University, and also a regular contributor at Taiwan Report.
[i] Government Sticks to $5 Trillion Economy Target; Emphasis on Infra Aimed at Achieving Goal: DEA Secretary’, The Economic Times, February 4, 2021, https://economictimes.indiatimes.com/news/economy/policy/govt-sticks-to-usd-5-trillion-economy-target-emphasis-on-infra-aimed-at-achieving-goal-dea-secretary/articleshow/80686511.cms?from=mdr
[ii] Mishra, Ranjan. Asit, ‘India Feb Trade Deficit at $12.6 Billion as Export Contracts,’ Mint, March 15, 2021, https://www.livemint.com/news/india/indias-feb-exports-marginally-up-by-0-67-trade-deficit-widens-to-12-62-bn-11615812921404.html
[iii] Inani, Rohit, ‘Despite the ‘Make in India’ push, the share of manufacturing sector in the GDP has stayed stagnant,’ Scroll.in, April 13, 2021, https://scroll.in/article/992066/despite-the-make-in-india-push-the-share-of-manufacturing-sector-in-the-gdp-has-stayed-stagnant
[iv] ‘Why Has the World Not Warmed up to Make in India,’ Business Line, July 28, 2021, https://www.thehindubusinessline.com/opinion/why-has-the-world-not-warmed-up-to-make-in-india/article35576816.ece
[v] ‘Education in time of Covid: Pandemic amplifies rural-urban digital divide,’ Financial Express, July 24, 2020, https://www.financialexpress.com/education-2/education-in-time-of-covid-pandemic-amplifies-rural-urban-digital-divide/2033459/
[vi] Goddar, Heinz, ‘Germany: Aims of Technology Transfer In The 21st Century,’ Mondaq, April 02, 2001, https://www.mondaq.com/germany/it-internet/10690/aims-of-technology-transfer-in-the-21st-century
[vii] Chatterjee, Dev, Tata group is looking to enter semiconductor manufacturing: Chandrasekaran,’ Business Standard, August 10, 2021, https://www.business-standard.com/article/companies/tata-group-is-looking-to-enter-semiconductor-manufacturing-chandrasekaran-121081000066_1.html
[viii] Mannem, Nandan. Vasuki, ‘Why India Must Manufacture Microchips,’ Business Line, July 19, 2020, https://www.thehindubusinessline.com/opinion/why-india-must-manufacture-microchips/article32131506.ece
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