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A. Vasudevan

If India is to compete in the international markets for goods and services, it must give top priority to high quality advanced education in science and technology with a sharp focus on research and development. Only that can help meet the choices of goods and services that consumers exercise. In this effort, the private sector and the government must supplement each other with investments and incentives, says A. Vasudevan.

If India is to achieve the 10 per cent target growth rate, top priority must be given to high-quality advanced education in science and technology with sharp focus on research and development.

AN INDIAN visitor to any department store or higher-end electronic mall in the United States would wonder why goods manufactured in India are hardly seen while goods `Made in China' can be located on almost all the shelves. This is in contrast to the flattering observations that the visitor is treated to about India's growing exports of information technology and many other services.

While the record of export of services is good, it must be recognised that, in general, India's presence is not prominent at the cutting edges of `knowledge'. It would not be surprising if India faces severe competition in services exports from countries such as China and Korea.

India's exports of any good, consumer or capital, or a specialised electronic product, have not been striking, essentially because of uncompetitive pricing, low quality and absence of features that cater to consumer preferences. But it is imperative that India competes in the international markets for goods and services if the latent growth potential, marked at 10 per cent by the Prime Minister (on November 30), is to be tapped.

Achieving this objective would require that top priority is given to high-quality advanced education in science and technology with sharp focus on research and development (R&D). This would be in line with the endogenous growth theory.

This calls for a sharp shift in policy thinking on higher education as a subject, even if it is not politically attractive. The policy literature in India on higher education (see, for example, the Central Advisory Board of Education's two reports on the autonomy of higher education institutions and on financing of higher and technical education that came into public domain in June) seems to be concerned more with access and equity than with relevance and quality — the critical elements for knowledge development to take place continuously.

An impression is given that higher education pursued in public and private colleges and universities should concentrate on generating graduates or double-degree holders (engineering plus management) and to enable them to get white-collar jobs in India or abroad. There are no concrete strategies to promote and energise quality research by individuals or institutions in science and technology. The few privately- or even government-funded research institutions in pure sciences, including mathematics, that are in existence have been facing an enormous resource crunch.

It is necessary to recognise that diversification and expansion of science knowledge and R&D in science and technology would help meet the choices of goods and services that consumers exercise. If consumers show a high preference for certain products over others within the same category, it would be because of several reasons, such as better quality and after-sale service, special features or the lower price of the preferred product.

Unfortunately, the average Indian consumer hardly exercises preferences, partly because of relatively low incomes and partly because the number of products or brands under each commodity category is limited. Whatever little R&D that happens in Indian industry is largely in the form of mimicking products already available abroad, without any particular deference to quality control and/or cost minimisation.

Indian industry knows that the market will take what is provided. And the market absorption will happen faster if asset prices go up and give Indian consumers in the middle to upper income brackets a sense of being wealthy. In turn, the wealth effect generates consumption and restricts the growth of domestic saving.

The data for recent years show that saving rates of households have, in general, hovered within a small margin, notwithstanding increases in nominal income. Whether this situation can be changed by allowing foreign direct investment in the retail sector is not clear but if retail FDI does take place, Indian goods will have to compete hard to retain their share in the market.

Since international markets throw up a wide array of consumer preferences, it is necessary for Indian industry to closely examine the consumer (including the producer-consumer) behaviour in these markets and bring about the requisite technological adaptations. But this cannot be left to the initiative of private industry alone. It is best to pitch for close collaborative effort between policy-makers and corporate planners. They could chalk out a definitive plan of action with concrete steps for implementation. Among such steps, mention may be made of the following:

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