Fuelling a flourish
Riding upon a stable political system, a fast-growing economy, a huge young population, and global credibility, India is well-poised to leverage its promising knowledge economy
Today, the knowledge economy has become the motor force for development, as a large number of nations, though mostly in the Western world, have established strong linkages between institutions and systems of science and technological advancement and their regular national economies. It has profoundly influenced the vision of economic development in developing countries. The digital revolution is an offspring of information technology that has facilitated good governance and accountability while augmenting the ease of doing business. However, it should not be mistaken as a synonym for the knowledge economy.
Commercialisation of science and academic scholarship, innovation-based research, and the development of intellectual properties as marketable commodities characterise a true knowledge economy, typical of advanced nations. Human expertise and trade secrets are valuable economic resources today in the global economy, adding to and complementing the traditional factors of production.
The knowledge economy, far from being a silo, will go hand in hand with the regular economy by helping develop new software, search engines for data, programming for the delivery of schemes, and public services with digital solutions in various sectors, including agriculture, education, health, and transport. The Knowledge Assessment Model (KAM) of the World Bank lays down four requirements as an ecosystem for the knowledge economy: institutional structures that encourage entrepreneurship for the use of knowledge, a skilled labour force, a productive education system, access to ICT, and a vibrant innovation landscape with entrepreneurship, including academia, the private sector, and civil society. Where does India stand with regard to these goal posts?
The first requirement mandates efficient governance in the financial sector, including banks and financial institutions, with rules and regulations to ensure competitive tariff rates vis-Ã -vis middle-income countries like Brazil, Russia, China, and the Republic of Korea. Addressing corruption, creating access to information, and ensuring political credibility based on accountability are important indicators of good governance. Though India has registered tremendous progress in the last three areas, one area, i.e., corruption in institutions, continues to make a dent in efficiency.
Secondly, economic reforms help the growth of the private sector but do not necessarily guarantee the inflow of FDI, which is crucial for the growth of the knowledge economy. There has been a decrease in FDI equity inflows in FY23 as India received USD 46.03 billion compared to USD 58.77 billion in FY22. Reviewing corporate tax rates, addressing liquidity issues in NBFCs and banks, improving the ease of doing business, and introducing more policy reforms may be necessary to increase FDIs.
Similarly, education and skills, the second requirement, need enhanced public spending since it is currently less than 4 per cent of GDP. In spite of robust schemes like SSA, MDM, RMSA, etc., high dropout rates are worrisome. On the contrary, and ironically, nonavailability of talent in spite of the availability of jobs is a setback. Even in the formal sector today, in industries such as IT, health care, hospitality, financial services, which provide well-paid jobs, the employable talent is not more than 46-50 per cent. Periodic Labour Force Survey (PLFS 2019-20) shows that 86 per cent between 15 and 59 years are devoid of skills while the rest 14 per cent acquired skills through formal and informal sources compared to 52 per cent in the US, 80 per cent in Japan, and 96 per cent in South Korea; the gap is alarming. The skill crunch obviously reflects a mismatch between education and the job market; an anathema for the knowledge economy and a barrier for innovation. We need more autonomy for educational institutions, a multi-disciplinary curriculum, integrated science courses from higher secondary levels, and renewed push for skill development as envisaged by the NEP. A review of action taken by institutions on this count is necessary.
Progress of India in terms of the other two requirements, i.e., ICT and innovation landscape, has been undoubtedly historic in the last few years as the digital revolution has encompassed the whole nation, facilitating the economy to leapfrog to new heights. Nevertheless, the digital divide continues to be a challenge. The IT industry has typical problems. Rapidly evolving technology requires continuous upskilling of the workforce with the right platforms, which many companies in India fail to provide. Due to low salaries, long work hours, and poor sponsoring by outsourcing companies, brain drain has become a new normal in the IT sector, so much so that the techies began choosing the educational route to learn and also secure jobs abroad and, if luck favours, to settle down there. Measures like reducing IT costs through license management and optimisation tools, providing financial incentives to the workforce, and mental well-being programmes, phasing out grandfathered software and hardware assets, etc., are necessary to increase the overall efficiency of the sector. Tremendous growth in entrepreneurship (92,683 entities according to DPIIT until 2022) was seen after the launch of ‘Start-up India’ in 2016, but studies show that except in IT, only 20 per cent of startups survive for more than five years. Main reasons, inter alia, are two: lack of innovation and overestimation of IP.
Patents, trademarks, copyrights, and trade secrets are valuable assets that contribute to the overall growth of the economy. According to the WIPO Statistics Database, November 2023, India stands in the fifth position with inward patent applications at 77,068, reflecting a growth of 25.2 per cent from 2021 (61,573). However, China, Japan, the US, Korea, Germany, France, the UK, Switzerland, Sweden, and the Netherlands are the top 10 countries, accounting for 88.7 per cent of total applications in 2022 for the Patent Cooperation Treaty (PCT) in computer technology, electrical machinery, and digital communication.
According to the International IP Index 2023 for 55 countries, the United States is ranked first, followed by the UK and France, while India is ranked 42nd. According to Ibis World, IP-intensive industries account for over a third of GDP in the US, with an IP market worth USD 6.6 trillion. It underscores that India still needs to do better in innovations, which requires the active participation of the private sector, as public spending in R&D is only a pittance.
India, pursuing the dream of a 5 trillion Dollar economy with achievements like a billion biometrics, 500 million people insured under Ayushman Bharat (a number exceeding the populations of Europe, the US, and Mexico), and an overarching e-governance infrastructure from one coastline to the other, along with Rs 90,000 crore worth DBTs for around 500 schemes, is undoubtedly well poised to take off on the course to building a robust knowledge economy. Moreover, unlike in developed countries where data is in the possession of private companies, in India, it is owned by state agencies true to socialistic values. However, the dualism in terms of socioeconomic, demographic, and geographical disparities in the country poses considerable challenges to the mission. But the strengths India has, such as a stable political system, a fast-growing economy, a huge young population, and global credibility, outweigh the drawbacks. A synergy between private entrepreneurship, academia, and government institutions can help ensure fast and consistent progress in the mission.
The writer is a former Addl. Chief Secretary of Chhattisgarh. Views expressed are personal
