The advanced industrial economies are on the global technology frontiers. China is emerging as a competitor to the US in developing new technologies. While in 1991 we were broadly on a par with China, we are yet to make our presence felt. Certainly, it cannot be the case that Indians have less talent or ability. Their success in the US is well known.

Then there are such a large number of technology and design development centres of leading global companies in India, which help these firms in maintaining their competitiveness.

When the Indian economy was closed to foreign investment, Indian firms used to get into licensing arrangements for production using technologies developed elsewhere. This is no longer the case. A transnational corporation now prefers to serve the Indian market from a plant which it sets up on its own or from a plant in a country with whom we have an FTA (free trade agreement), from where the import duty for its products is zero.

Japanese firms found our FTA with Thailand convenient to sell in India from their existing plants in Thailand. Korean firms set up plants in India and have taken large shares of our domestic market. The Tatas found in the 1990s that no established carmaker would give them technology. They had to struggle to successfully develop and sell their cars.

But now, a vibrant start-up ecosystem has emerged. We are trying to make the most of the opportunity, of the West wanting to reduce its dependence on China by increasing our share in global supply chains.

We have had exemplary success with Apple. The global giant is rapidly increasing production as well as exports and is becoming one of the largest job creators in India.

But if Indian firms have to move up the technology ladder, can anything be done beyond exhorting them to spend more on R&D. Are there any policy instruments which would help? Raising import duties would make no difference as MNCs now produce and sell in India. Under the Production Linked Investment (PLI) scheme, money is given to compensate for the cost disadvantage of producing in India. It does not distinguish between foreign and Indian firms. Apple is a major beneficiary and its success in manufacturing in India is an example of the success of PLI.

Therefore, unorthodox measures will be needed to get Indian firms to the frontiers of technology. On this parameter, market forces have not yet given positive outcomes. The government would, therefore, have to assume responsibility. India should have confidence that this can be done. After all, in atomic energy and space the country has managed to reach the global frontier.

The key enabling feature was the government giving technology developers the confidence by providing them money to the extent needed. The Department of Atomic Energy and ISRO worked with private vendors to develop technology for parts and sub-assemblies with new stringent performance parameters, and got them produced for use in complex nuclear power plants and space satellites. For this, the practice of search and selection along with price negotiation was necessary. The present guidelines where nothing can be purchased without issuing tenders with specifications just cannot be used for speedy technology development.

Progress in defence

In the defence sector also we have made progress. Offers for development and procurement of parts and sub-assemblies have been invited through an open challenge process. Funding for development has been provided to those selected. Private firms like Bharat Forge and L&T have successfully developed artillery guns and tanks, which the Army is buying.

A major leap that is required is for the government to fund technology development by Indian firms in both the private and public sectors. Technology that succeeds in the market has to reside in firms and not in IITs or CSIR labs, who could be partners in the development process. How to do this in a fair and transparent manner? One is to take decisions through expert committees comprising eminent persons, including NRIs, with high integrity. Then, there should be a standard template for the government to get returns in case of success. The easiest way may be via an initial agreement to pay a share of the sales revenue, say, 2-4 per cent, for the technology developed with government money.

It would be desirable to initially take up a few big projects in some sunrise sectors. One success would catapult us to the global frontier. For instance, the government could get a zero carbon green steel plant built. A consortium of Indian firms could do this with government providing funds to the extent required and buying all the steel produced for use in its own projects.

The development of a medium range civilian aircraft through a consortium of Indian firms and funding by government should be doable and may end up being quite profitable given the growing size of the domestic market. Likewise, the government should be willing to finance the design and development of products such as smartphones, medical devices, etc., by Indian Startups and firms that are unable to get money from the market though they have promising projects.

The writer is former Secretary, DIPP