Calcutta Notebook

Investment In New Technologies

Bharat Jhunjhunwala

China has recently successfully landed its spacecraft on Mars, created temperatures equal to that of the sun in their laboratories, and produced its own fighter jets instead of buying them from Rafael or other manufacturers. These achievements have been made possible because the Chinese government has made huge investments in the creation of new technologies. Needless to say India is lagging behind. What is more Indian situation has become more desperate in this period of Covid. The Modi government is not even able to manage its current expenditures and it is having to borrow huge amounts to maintain them. Although the Finance Minister has increased the capital expenditures by 35% to Rs 5.5 lakh crore in this financial year 2021-22. However, this amount is very small compared to the needs of investment in technologies. The government must invest heavily if it is at all serious to keep up with the march of technologies at the global level.

The present value of market capitalisation of all the public sector undertakings is about Rs 20 lakh crore. This is about 4 times the total annual capital expenditures of the Union Government at Rs 5.5 lakh crore. The government can raise about 4 times more money for these investments if the existing public sector undertakings are privatised.

No doubt certain Public Sector Undertakings (PSUs) will continue to be necessary. For example, the State Bank of India manages the clearing houses in every district of the country. The Central Board of Secondary Education undertakes regulation of schools across the country. Such PSUs are providing “public goods” that are necessarily to be provided by the Government. The regulation of schools cannot be left to the whims and fancies of the private sector. However, other PSUs are no longer essential. For example, banks other than the State Bank of India can be easily privatised without any loss to the economy. Private banks are able to provide the banking services provided by these Public Sector Banks. The possible profiteering and overcharging by private banks can be managed by stricter regulation by the Reserve Bank of India. The privatization of these Public Sector Banks will only heat up the competition among the banks and make them more efficient and force them to reduce the price of the services provided by them. Similarly, there is no need for the government to run Air India since other airline companies like Indigo and Spice Jet are able to provide domestic aviation service. Likewise oil companies like Indian oil can also be privatised since private oil companies like Reliance are able to provide the services. The basic point is that there remains no case for the government to undertake these activities in areas where private sector is competent to provide the required services. For one thing the market capitalisation of 20 lakh crore of all the PSUs in the country about 1/4th or PSUs having market capitalisation of Rs 5 lakh crore may be retained to provide essential services like managing clearing houses and regulation of schools. The remaining PSUs having market capitalisation of Rs 15 lakh crore can be privatised. This amount would be about three times the present capital expenditures of the Union Government. This money can be utilised to invest in the creation of new technologies so that Indian industry can compete with the global powers. One should not forget that the Patriot Missiles of United States were able to destroy Saddam Hussein’s army in a few days because they were technologically more advanced. Therefore, investment in technology will be absolutely essential if one has to protect the sovereignty of the country and also strengthen the economy at the same time . Also, one should not forget that multinational corporations are remitting huge amounts as royalty payments because they are giving licenses of their patented technologies to Indian manufacturers. Fifty percent of the price of Covid-19 vaccine is being paid to Astra Zeneca and other companies. Indians would not have had to pay this amount if they had invested in the creation of the Covid-19 vaccines.

The following areas desperately require more investment by the Government of India. First, Artificial Intelligence. Today IBM has a project named Watson which is helping doctors to process the various information about a patient and suggest the future course of treatment. The Artificial Intelligence programmes process the huge amount of information about a patient and provide the doctor with a number of alternative course of treatments. The doctor's work is reduced to taking the final call on the alternative treatments suggested by Artificial Intelligence. Thus, India must invest in Artificial Intelligence.

Secondly, investment is required in the Internet of Things (IOT). The security of offices, for example, can be better managed by computers. The computer can process the information about a possible theft and automatically direct the doors to be closed and send message to the police.

Third, the genetic modification is being done across the world. The world has seen the possible negative impact of such experiments in the possible creation of the Covid-19 virus in China. But the same genetic technologies can also be used to create more beneficial technologies like improving yields of crops and making them more resistant to diseases and heat; or genetically modifying potatoes to produce vitamins.

[Formerly Professor of Economics at IIM Bengaluru]

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Vol. 54, No. 8, Aug 22 - 28, 2021