In his speech announcing the vision of Atmanirbhar Bharat, Prime Minister Narendra Modi talked about India becoming a manufacturing hub and a part of the global supply chain —something that is opposite of the traditional meaning of ‘self-reliance’ and ‘swadeshi’.
But a country’s manufacturing prowess and export competitiveness crucially depend on the research and development (R&D) and innovation it generates. With the increasing technological intensity of production and frequent technological disruptions, the task has become ever more difficult for developing countries like India. The generation of new ideas and knowledge is central to economic growth, meaning growth depends on the number of researchers engaged in R&D and their productivity.
Although the number of researchers has been rising steadily, their productivity has been declining. In the United States, for example, the number of researchers has grown by 20 times as compared to 1930 but their productivity has declined by the factor greater than 40. It can be understood by the ‘Apple Tree Model’. From the late 18th century until the 1950s, the stock of knowledge was at low levels and new ideas and breakthroughs were relatively easier to achieve. Inventions such as the steam engine, electricity, penicillin led to rapidly increasing productivity gains. But once all the low hanging apples were plucked, fresh apples became more difficult to farm.
Recent research on the geography of innovation in India shows that researchers are concentrated in metropolitan centres. Cities such as Mumbai, Bengaluru, Pune, Hyderabad, Ahmedabad, Chennai, and Kolkata together accounted for 65 per cent of all patent applications. And the spillover effect of knowledge creation fades away after a 500 km radius of these centres. Out of 626 districts, 370 have zero patents in India. This means the focus on local and village economies as vehicle of growth and the declared goal of integration into global supply chains are contradictory. Villages and small towns cannot become the hub of innovation and manufacturing, which is necessary to compete globally. They can at best be integrated into the backward supply chains, but to expect them to drive the manufacturing is misplaced optimism.
Collaborative research published in Nature Human Behaviour has also concluded the same while focusing on the complexity of innovation and its spatial dimension. Knowledge complexity is defined as the difficulty to recombine different pieces of knowledge to produce something new. Using the historical patent data for the US, starting from 1790, the researchers empirically showed that the knowledge we produce today is ever more complex. They measured the complexity of each patent using the “NK Model”, according to which the complexity of a patent depends on “N”, which is the number of already existing patents needed to be combined and “K”, which is a measure of how easy or difficult it is to recombine the already existing patents. The ratio N/K captures the complexity. Innovation now requires recombining many already existing ideas (high N) that have not been combined earlier, making it an extraordinarily complex process.
Increased complexity means technological development now depends on a complex web of collaboration between experts scattered across different sectors. This also means that innovation today is highly concentrated in big cities where such collaborations and cross-pollination is possible. One way to think of cities is as engines of technological development which minimise the cost of interaction and collaboration between thousands of researchers across different fields.
The policy focus
What does it imply for the policy focus? India must drop its decades-old delusion of becoming the exporter of machinery and high-tech commodities and instead focus on lower-end products, especially encouraging assembly-end products. Since the Nehruvian era, we have distorted our domestic and trade policies to achieve the former at the expense of the later. It is in the low-skill labour-intensive global production networks that India can find a foothold and slowly move up the value-chain via learning by doing. Despite the challenges posed by fourth industrial revolution, there still is considerable scope for India in sectors like garments, toys, furniture, assembly of electronic products like mobile, dying of fur etc.
But achieving this needs much more than the labour reforms we are seeing today. It needs massive intervention in basic education and health. In India 59 per cent children are anaemic, 38 per cent children are stunted and 23 per cent are wasted. Chronic malnourishment has severe implications for the cognitive ability and productivity of the labour force. Companies are not attracted to uneducated and malnourished labour force just because of weak labour laws.
Engaging the academia
Universities and laboratories form the bedrock of the economic growth in this technology-intensive era. We must rethink the old gurukul idea of the university as an island. Instead, given the effects of knowledge spillover, the need for constant reskilling of both blue and white-collar workforce and importance of the industry-university linkages in driving the production process mean they must be located in the heart of urban centres and in close vicinity to each other. Instead of sprawling campuses in faraway locations, the concentration of the high number of smaller campuses, labs, and other institutions will foster greater knowledge production, which is central to economic growth. It also means, making urban governance and growth a priority of the national policy. Promoting new urban centres, empowering cities, both politically and administratively, and heavy investment in urban physical and social infrastructure is crucial for economic growth.
Abhinav Prakash Singh and Aasheerwad Dwivedi are Assistant Professor at Shri Ram College of Commerce, Delhi University. Views are personal.