Technology manufacturing and India

India has repeatedly missed the bus for setting up high end technology manufacturing units in the country – ST Micro and IBM are the only approved players at present (2014), while globally there are umpteen players who can enter the market. The question that bothers me is – why are we so reluctant to get high end players to enter the market? Our domestic oriented policy (read Aakash tablets) are pathetic to say the least. We see countries like Taiwan, China, Malaysia leap ahead of us and yet we lay mute. The answer for all the above problems lies with the attitude of our political masters. Our political members have been reluctant to engage with technology. They see it as a threat to the traditional livelihood and their personal fiefdom. But if India is to break into the league of developed nations, it will have to unshackle itself from these knd of ideologies. Thankfully, the new Prime Minister, Mr. Narendra Modi has a technology bent and understands that manufacturing will need to be the backbone of our economy. The positive externalities emerging from being a technology manufacturing hub are – skill development for a large section of society, higher income and employment levels.

The prime minister has his task cut out when he has to attract capital and industries that will set up base in our country. China and South East Asia have a competitive advantage in terms of incumbency. But a few policy tweaks (tax benefits, subsidy) would help set in motion the development of such a base. Further, he should engage with all states

Along with reforms in the manufacturing sector, we would need a reforms in the financial sector. India’s corporate bond market has no depth and the equity market is driven by FII flows. This would need to change if we want a strong manufacturing base. FDI flows as well as equity investment by Indians should be encouraged, while a healthy corporate bond market should be encouraged to allow capital flow within the country. This will reduce the burden on the banks and encourage participation of the citizens in the economy.

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