It began with the Tatas and now the country must capitalise on the new technology revolution
Ram Madhav Ram Madhav | 22 Feb, 2023
Jamsetji Nusserwanji Tata (1839 - 1904) (Photo: Getty Images)
“Jamsetji Tata was more than an industrialist—he was a nationalist with a fervour to see India ranked among the great nations of the world,” the Tata Group’s website proudly proclaims. It was this passion that drove the group from Jamshetji to JRD to Ratan Tata to Natarajan Chandrasekaran.
When Jamsetji completed his first dream project—the Taj Hotel at the Gateway of India in Mumbai (although the Gateway didn’t exist then)—towards the end of his life in 1903, he did it as a national duty against heavy odds. One anecdotal story claims that he decided to open this hotel at a whopping cost of £300,000—a huge sum 100 years ago—as a response to the humiliation he faced at the hands of the European masters of the city’s Watson’s Hotel where he was denied entry. He dismissed warnings from his family and friends “not to go ahead with the project” because “he wanted Indians to get what they needed—a great hotel that would be proud to serve them,” the Tata Group claims.
From a project to uphold national honour a century ago to a project of conquering the world markets today—the Tata Group’s journey is a fascinating story of soaring global ambitions on the one hand and glorious national pride on the other. Eight decades after Jamsetji was denied entry to a European-owned hotel in Mumbai, the Tatas had purchased a hotel in St James Court in London in 1980s. Another two decades passed when the Tatas came to the rescue of the loss-making Ford automobile group’s Jaguar by taking it over in 2008.
Today, the group has crossed another milestone with its order of 470 aircraft from Airbus in France and Boeing in the US. To understand the significance of this deal, one has to look at US President Joe Biden’s statement. “This purchase will support over one million American jobs across 44 states, and many will not require a four-year college degree,” lauded the leader of the world’s most powerful country.
The Tata story is not just about a company but the exploding power of an ambitious new India on the horizon. The $80 billion order for aircraft shows how confident and bullish the Tata Group has been about India’s economic prospects in the coming decades. The resilience that the Indian economy has shown during the trying times of the pandemic-induced macroeconomic volatility and its defiant rise in the face of global slowdowns, supply-chain disruptions, wars and economic nationalism have been admiringly acknowledged by international financial institutions.
“India is better positioned to navigate global headwinds than other major emerging economies”, concluded the World Bank, while the IMF noted: “India’s successful implementation of wide-ranging reforms or greater than expected dividends from digitalisation could increase India’s medium-term growth potential”.
INDIA’S ECONOMY SUFFERED a tragic blow in the initial decades after independence due to the romance of its leadership with an undefined idea of a “socialist pattern of society”. Through a bombastic resolution at the Congress session of Avadi in Tamil Nadu in 1955, Jawaharlal Nehru’s government claimed that the object of economic planning should be “socialist pattern” but not absolute “socialism”. It is another matter that Nehru never bothered to explain the distinction to the country. But what he did, when he left the scene in 1964, was to leave India more impoverished and backward. Between 1955 and 1965, India’s poverty rate grew from 52.66 per cent to 58.60 per cent. In absolute numbers, it meant that the number of poor people in India grew from 198.7 million in 1955 to 301.7 million in 1965.
Not much had changed in the subsequent decades until the country plunged into an unprecedented foreign exchange crisis in 1990. It had almost defaulted when its forex reserves touched their nadir. Only after that debacle did the Narasimha Rao-Manmohan Singh duo attempt to reverse the course of the Indian economy. Thus began the era of globalisation in India.
The Vajpayee era from 1998 to 2004 saw some bold systemic reforms in the economy. Interest rates were deregulated; a new ministry for disinvestment was created to shed the extra burden of the government-run white-elephant assets; telecom sector reform was pushed hard; and a major infrastructure spending was initiated through the Gram Sadak Yojana and Golden Quadrangle. These measures had led to the Indian economy bouncing back with strong growth rates between 2003 and 2008. GDP growth almost touched double digits.
Unfortunately, the global meltdown during the Great Recession of 2007-09, coupled with the corruption and mismanagement of the economy during UPA 2, led to a bad balance sheet by the time the Narendra Modi government came to power in 2014.
The last eight years under Prime Minister Modi have witnessed another round of major structural reforms in the economy. Modi’s initial focus was to set the economic fundamentals right. He introduced reform measures like demonetisation, GST, the Insolvency and Bankruptcy Code, RERA, etc towards that end. Together with other measures like the Atmanirbhar emphasis, infrastructure funding, startup and innovation initiatives and banking reforms, these measures have resulted in the economy withstanding not only the pandemic onslaught but also the post-pandemic global slowdown.
The Indian economy is continuing to grow and is poised to scale newer heights in the next couple of decades, making India the third-largest economy by 2047. Union Finance Minister Nirmala Sitharaman laid out an elaborate plan for preparing the country for Industry 4.0, by re-skilling the skilled manpower, enhancing capital expenditure to the tune of $120 billion, and other proactive measures in this year’s Budget.
The Modi government’s focused efforts at making India a global manufacturing hub are finding traction with the investor community. As the urge to relocate from China increased in the international community, India too became an attractive destination for companies. Apple is a living example, exporting close to $3 billion worth mobile phone from assembling units in south India last year.
AT THIS JUNCTURE, India may also need to turn its attention to the experience of more developed nations like Japan, China, South Korea and Taiwan, besides the US. After World War II, the US had set in motion a major industrial revolution in digital technologies with the Silicon Valley on the West Coast as the epicentre. Soon, companies like Texas Instruments, Microsoft, Apple, Intel and AMD started flourishing, birthing the digital revolution in the world. With the advent of the internet, an era of electronics, IT and allied digital technologies exploded.
The first country to exploit it was Japan. It turned to the US for copying technologies and built a massive electronics and automobiles industry in the 1980s and 1990s. By the turn of the new century, Japan became the second-largest economy in the world. Around that time, China too started rising, following the same principle of technology copy-paste. Due to its market size and enticing manufacturing environment, a large number of companies flocked to it and soon the country emerged as the world’s manufacturing hub. But today, both countries are experiencing a challenge of stagnation. The Soviet Union, too, had attempted to copy American technologies but didn’t succeed much.
On the contrary, the so-called Asian Tigers like Taiwan and South Korea, which started growing in the 1980s, still lead promising economies even after four decades. One important reason was, unlike Japan and China, Taiwan and Korea focused on innovation and sunrise industries. They did not try to become consumer goods producing economies. Instead, they became producers of next-generation core technologies like semiconductors. Between Taiwan Semiconductor Manufacturing Corporation (TSMC) and Samsung, the two countries control almost 70 per cent of all the transistor chips consumed by the entire world today.
India needs to learn from this experience if it does not want to become a big but stagnated economy 20 years from now. As the world enters the era of Artificial Intelligence (AI), robotics, the Internet of Things (IoT), and big data, a country of India’s size and technological prowess cannot aspire merely to become a manufacturing hub for consumer products or defence spares. It must aspire to become the hub of innovation, design and development of high-end technologies like semiconductor chips and a leader in AI innovation.
This year’s Budget envisages three Centres of Excellence in AI, and also a funding support for semiconductor industry. Research and development (R&D) is the key in these areas. China has invested heavily on R&D in both these frontier areas in the last decades and surged ahead as a consequence. India too needs to do the same.
THE SEMICONDUCTOR INDUSTRY is key to the development of everything in future, right from ordinary radios and electronics to the frontier of defence, space and cyber technologies. World powers are well aware of this fact. One of the causes of conflict between America and China in the South China Sea is about the control of this industry too. As it is growing into the world’s leading tech superpower, China finds itself severely handicapped in the manufacture of state-of-the-art semiconductor chips which remains a monopoly of the US and Taiwan.
Chinese President Xi Jinping is acutely aware of this situation and told his partymen and countrymen at a conference in 2016 that this monopoly of the West should end. He emphasised the need for China to gain “breakthroughs in core technology as quickly as possible”. But unlike other countries that sought collaboration with semiconductor giants like Intel and AMD for that purpose, Xi advocated conflict as the way to address the challenge. “We must attack strategic passes in a coordinated manner. We must assault the fortifications of core technology research and development,” he exhorted.
China’s dependence for chip technology is on the US, Taiwan, South Korea and Japan, none of which has good relations with Beijing. Hence, the struggle and tensions in the South China Sea and Xi’s aggressive manoeuvres to annex Taiwan. A war in the South China Sea over the Taiwan question in the near future is not ruled out and such a war will have a major impact on the future of the semiconductor industry.
It is here that countries like India should proactively strategise to bring semiconductor fabrication licences to their territories. Unfortunately, in the critical supply chain of semiconductors—from design to software development to manufacturing of tools to procurement of core elements like rare earths, including silicon, to fabrication to testing to assembly—India does not figure much today. Intellectual property is firmly controlled by American companies like Intel and AMD while fabrication licences are controlled by TSMC and Samsung.
One more area that will acquire great significance in the near future will be genetic engineering. Genetic manipulation is to this century what the internet was to the last. It will soon become ubiquitous. Genetic technologies no longer limit their research to plants and animals. After the Genome Project initiated in 1990, human genetic management acquired enormous significance. Gene technologists want to challenge Darwin’s theory of natural selection by manipulating human genetics to create superior human beings with extraordinary capabilities.
This new field too is in the control of institutions in the US and Europe while China has made significant strides into it. India needs to catch up by investing heavily in this new and frontier area of R&D, in order to reap the benefits of this new area of innovation.
The Soviet Union had tried to challenge the US in the last century. The Asian Tigers grew in the last two decades of the last century as its competitors, and a rising China wants to outsmart it today. Yet, none could displace America from its dominant position because of its dominance over research in core technologies and innovation. India has the human resources to invest in R&D in core technology areas, but it also needs vision and financial support from public and private institutions.
That defines India’s place in 2047.
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