Happy 2021. Break out the innovation

Business Standard     1st January 2021     Save    

Context: Indian industry must drive our economic recovery through innovation and exports

Some impacts of COVID 19 pandemic

  • Economic Impacts: Global economy shrinkage of 5 %l Indian Economy shrinkage of 7.5 %.
  • Labour supply: labour-force participation rate (LPR) of less than 50%; female LPR is below 21%.
  • Worsened the plight of farmers: Pressure on agriculture increased as migrants returned home from higher productivity urban jobs to lower productivity farming.

Steps taken by government: for economic recovery driven industry and Innovation.

  • Atmanirbhar (AN) or self-reliance programme:
    • It aims to deepen technical capability within the Indian industry and is supplemented by a production-linked incentive (PLI) scheme. (aims to provide a subsidy of Rs 2 trillion over five years).
    • Increased protection of Indian industry.
    • Aim to build a more competitive and globally robust Indian industry.

Way forward: for strengthening Indian industry

  • Create a stronger export-oriented stance: by
    • Removing tariff protection. (e.g. within 5 years)
    • Creating a pro-trade policy with free-trade agreements.
    • Shedding misplaced preference for a strong rupee.
    • Tie paying the PLI subsidy to the fulfilment of export commitments.
  • Aggressive investment strategy by industries: for technology and international markets by increasing In-house Research & Development (R&D) investment because,
    • At present, it accounts for 0.3 % of Gross Domestic Product (GDP), compared with 1.5 % for the world, while India has no presence in top 5 Industrial sectors.
  • Government should revise its investment priorities:  Move our public research funding from the state autonomous R&D institutes to higher education because,
  • At present, public research in our higher education sector accounts for 0.05 % of GDP, compared with 0.4 % worldwide.
  • E.g. Replicate the success of Institute of Chemical Technology in Mumbai in producing fine research output for decades.