Someone Call Tech Support

Context: The challenges in economic recovery requires investment in technological advancements that has slowed down in recent times.

Challenges to India’s economic recovery:

• Dysfunctional banks and equity markets:
  • Despite sounder financial situation (improved debt ratios, provision coverage and return on capital and assets) banks are not able to lend, due to -
    • Defaulting nature of their potential borrowers;
    • Weak financial position of rest of the borrowers.
  • New issue market lacks vitality as the Securities and Exchange Board of India (SEBI) does not even issue summary statistics for it.
• Dominance of real estate construction and trading: Real estate construction, trading and speculation are the largest economic sector accounting for over a sixth of GDP.
  • A sixth of its GDP comes from agriculture and three-tenths from the industry. Manufacturing produces even less value-added than agriculture.
  • While the banks have generously lent to the real estate in the past, they are unlikely to finance another boom, at least for the present.
• Slow-down in technological advancement: India’s technological advancement is driven majorly by importing technology and human capital migration.
  • However, these technological advances are now stagnating in the US and Europe.
  • Historically, countries got rich by advancing technically, i.e. by learning to produce better things at lower prices like China. However, India failed to learn from China due to its complex nature.