Business Today

Tweak the Make in India Recipe

Tax waivers, subsidies, reimbursement of duties or monetary grants alone can't kick-start manufacturing in India
By Rohini Lakshane   Delhi     Print Edition: June 19, 2016

Rohini Lakshane
As an erstwhile journalist covering electronics technologies and IT a few years ago, I was privy to a litany of manufacturers' woes and their causes: Tangled tax laws and regulations, red tape, corruption, licence raj, unreliable infrastructure such as power and roads, and lack of skilled labour. Unlike China, which raked in profits by keeping margins low and volumes high, every entity in the supply and distribution chain in India wanted a 30 per cent cut. India, they said, was no country for manufacturers. The only real electronics manufacturing was that of low-end or low-precision products. Where the products were of higher quality, they were merely assembled in India, often with the intent of circumventing taxes and of employing cheap labour.

Walking around the IT and Electronics pavilion at the Make in India Week in Mumbai early this year, I could see that not much has changed. As if symbolic of the scenario, there was one Indian company. The rest were MNCs based in Taiwan, China, Sweden, Japan, the US, and Germany. The push for indigenous manufacturing is nevertheless apparent from the flurry of proposed incentives, large infrastructural investments, and facilities made available to manufacturers and new entrepreneurs by the government. The Make in India mix, however, needs more than subsidies, tax waivers, reimbursement of duties, or monetary grants.

A pet peeve of brand owners and manufacturers with large patent portfolios operating in India is that research and development (R&D) in the country largely happens only in public research institutions and universities. Indian firms don't invest in R&D and subsequently fill patents. A patenting landscaping exercise conducted by us at the Centre for Internet and Society last year showed that all Indian patents, nearly 4,000 in number, pertaining to mobile technologies are owned by non-Indian companies. Out of approximately 19,500 patent applications, a meagre 18 were filed by Indian companies.

India's premier educational institutions also apply for far less patents within the country and abroad than their foreign counterparts. For example, the National Academy of Inventors has published a list of "Top 100 worldwide universities granted US utility patents in 2013" and another in 2014. One Indian school features on these lists - the Indian Institute of Science (IISc) - with 21 patents in 2013. Within India, the IITs and IISc file up to 200 applications every year; MIT files nearly 4,000 in the US. Several large MNCs run R&D facilities in India, hiring some of the best talent in the country. The patents for their work are first registered to these companies abroad, contributing to royalty outflows. One way to correct the famine of locally owned intellectual property is for the government to urge top Indian companies and academic institutions to push the envelope in terms of R&D and patenting. A promising development is that the Indian government has pledged start-up funds. So have companies such as Qualcomm, which has committed $150 million to a strategic venture fund in India.

Another gripe is that the manufacturing units in India are in reality assembly lines that only put together imported parts and components and generally make copied products. While the government has provided sops to encourage actual manufacturing to truly reduce dependence on 'screwdriver technologies', it needs to incentivise foreign corporations operating in India to transfer their technology to Indian entities, instead of only assembling here using automated or human labour. Moreover, India-manufactured products are infamously substandard. These products need to pass quality checks if India aspires for an export market and leverage in asking for transfer of technology.

To benefit from the transfer of technology, the workforce needs to learn to use it and assimilate it in its work life. Despite the intake of students in engineering schools in India being more than that in the US and China put together, a major chunk of newly graduated engineers in India is unemployable. The repairmen at Nehru Place's electronics market learn the ropes through an informal education system comprising their friends, peers and employers in small-time garage shops. Rookie engineers who secure the holy grail of college placement are trained from scratch by their employers, such as Infosys with its plush training campus located in Mysore. In either case, the employer is saddled with training new recruits. There is little in terms of professional excellence that institutions of formal education seem to impart. Prime Minister Modi believes that Indias human power would be among its largest exports by 2030, but monikers such as "coding coolies" only point to low valuation of its services. Unless quality vocational education produces professionals in different rungs of the manufacturing ecosystem - from technicians to production personnel to designers to ideators - manufacturing in the country will stay deprived of the benefits of the newest technologies.

Next would come developing indigenous technologies (governed by technical standards and otherwise) in order to reduce dependence on technologies owned by foreign rights holders. India's remote sensing capabilities are among the best in the world. Like GPS developed by the US and GLONASS by Russia, NAVIC is Indias own satellite navigation system. Where GPS in India becomes spotty or inaccurate, NAVIC is likely to be much more reliable and accurate. Mobile handsets sold in India are not equipped yet with the receivers needed to work with NAVIC. When they are, it will be a fillip for both manufacturing and location-based services in the country. There is also a need for diffusion of these technologies. India's public research organisations produce several potentially life-changing inventions, which unfortunately, almost never reach mass implementation.

With the emergence of new technologies comes a greater need for access to patenting. A patent is a monopoly granted to its owner for 20 years in return for publicly disclosing an invention. Without the ability to enforce it, such a monopoly is not of much use. Patenting is also expensive and time-consuming, especially for an individual innovator without the backing of an employer that has the wherewithal for it. Many opt for filing patents via large companies while retaining their names as the inventors. The company thus owns the patent. Small manufacturers without the resources to apply for a patent prefer to zealously guard their inventions. Instead of risking their unpatented inventions being stolen, they limit their use to their own establishments, and sometimes take the inventions with them to the grave.

Make in India was unveiled at a time when manufacturing worldwide was starting to experience the ongoing slump. China, so difficult to beat at its own game, has been facing the heat. There is a tiny window of opportunity for India, which may be akin to the guns made by Indian Ordnance Factories (IoF). These guns - exorbitantly priced and of low build quality - are notorious for backfiring. In the truly Indian spirit of jugaad, they are taken to gunsmiths by their buyers for big and small tweaks that would prevent unfortunate endings. Like the IoF guns, the Make in India recipe needs its own set of tweaks.

The writer is a researcher at the Centre for Internet and Society. Views expressed are her own

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