One size does not fit all An analysis of the importance of industry-specific vertical policies for growing high technology industries in India
金 志映 E-mail：Jiyoung_Kim
雷 蕾 E-mail：Lei_Lei
長田 紀之 E-mail：Noriyuki_Osada
2016年6月23日 (木曜) 12時00分～13時00分
Extended Abstract: India, currently (c2015) is one of the fastest growing countries in the world. But this growth is largely driven by its services sector. From around 2006 or so, the country has been striving to industrialize through the manufacturing route as growth driven by the manufacturing sector has a number of long lasting economic benefits. First of all manufacturing sector has much more linkages with the other two sectors of the economy, namely the primary and tertiary sectors. Second most of the innovations that are used in the primary and tertiary sectors emanate from the manufacturing sector. For these reasons and more countries across the world including that of India are on a conscious drive to increase the size and technical content of its manufacturing sector. The manufacturing sector in turn consists of a number of disparate industries. One way of grouping them is in terms of their respective employment content and another way is to group them according to their technology content. Although the manufacturing sector in most developing countries are supposed to be dominated by labour-intensive or low technology industries, the current emphasis is on growing the share of high technology industries. This emphasis on high technology manufacturing is for three specific reasons at least. First, high technology industries have very high levels of productivity, both capital and labour. So even if their share is small, their contribution to GDP of the country is expected to be much larger. Second, high technology industries have much better linkages with downstream and upstream industries as most high technology manufactured products are based on an assembly of components. So their multiplier effects on growth in the region where they are located is supposed to be much higher. Third, world trade in manufactured products is dominated by high technology products (Mani, 2004, Lall, (1998)) and if a country wants to increase its share of exports, it must encourage the production of high technology manufactures. Given the capital-intensive nature of production, use of very often-proprietary technology, high failure rates etc., the role of the state in high technology production is very well accepted. Even in advanced countries such as the USA or Japan, where the market is perceived to be more efficient in the allocation of resources, high technology production has been supported through concerted state intervention. For instance, the role of the state in the SEMATECH project in the USA or the VLSI one in Japan is now very well accepted as the main reason for the supremacy of both the USA and Japan in semiconductor production. Having successfully achieved its original target, the programme is now moving towards the development of other high technology industries such as biomedicine, cyber security and alternative energy. The specific way in which the state intervenes in the development of high technology industries can vary in terms of its content. There are at least three ways in which the state intervenes. The first mode is a direct one in which the state establishes a state owned-enterprise (SOE) which then manufactures the high technology product. The second mode is for the state to establish a public R&D programme either exclusively or in partnership with the market, develop the high technology and then transfer it to production enterprises whether owned by the state or the private sector. The third mode is for the state to craft the eco system for high technology production by having explicit policies and instruments for this to be developed by both public and private sector enterprises. Most industrializing countries such as India has actually used all the three modes. Modes 1 and 2 were very popular in the pre liberalization phase while Mode 3 is the preferred one in the post liberalisation phase characterised by a paring down of state intervention in economic activities.
In the context, the purpose of the study is to analyse the growth of high technology manufacturing industries in India. Our hypothesis is that whichever mode is employed, each high technology industry requires a specific policy that is crucial for its sustained growth. In short, one size rarely fit all. Let us consider two different high technology manufacturing industries, namely aerospace and pharmaceutical. For the aerospace industry the most important instrument for its promotion will be public technology procurement, which manifests itself in the form of an offset policy. Such a policy assures a certain amount of demand for the new product, which encourages the manufacturers to be venturesome. On the contrary, for the pharmaceutical industry, the most important policy is the one on patents as patents are extremely important for chemical industries in general and pharma in particular . However a policy for financing R&D and policies on increasing the quantity and quality of science and engineering human resource is important for both the industries. We refer to the former set of specific policies as vertical policies (VP) and the latter set as horizontal policies (HP). The study proposes to verify the hypothesis of the crucial importance of VP by taking three successful cases and one unsuccessful case from India’s manufacturing industry. The three successful cases are aerospace, pharmaceutical and automotive industries, and the one unsuccessful case is the telecommunications equipment industry.
Rest of the paper is structured into three sections. Section 11 maps out the growing importance of high technology products in India’s commodity export basket. Section III identifies four high technology products that are important contributors to India’s high technology exports, namely aerospace, pharmaceutical, and automotive and telecommunications equipments and identify the key policies that have contributed to the growth performance of these high technology sectors. Of these four, telecommunications is a failure in as much as that India is very much dependent on imports for its requirement, while in the other three India has a growing positive trade balance and innovative activity by domestic enterprises. The fourth and final section sums up the main findings of the paper and identifies the key policies that are responsible for the growth performance of each of these chosen four high technology industries.
Sunil Mani (Visiting Professor, National Graduate Institute for Policy Studies and Centre for Development Studie)