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UNESCO SCIENCE REPORT The government needs to support the emergence of technology-based start-ups to broaden the innovation culture in India. Sunil Mani The majority of pharmaceutical patents are owned by Indian firms, whereas foreign firms established in India tend to own the majority of patents in computer software. Photo © A and N photography/Shutterstock.com 598
22 . India Sunil Mani INTRODUCTION Jobless growth: an emerging concern For the first time in its history, India’s economy grew at around 9% per annum between 2005 and 2007. Ever since, GDP has been progressing at a much slower pace of around 5%, primarily as a corollary of the global financial crisis in 2008, even though it did bounce back briefly between 2009 and 2011 (Table 22.1). India has experienced mixed fortunes in recent years. On the positive side, one could cite the systematic reduction in poverty rates, improvements in the macro-economic fundamentals that nurture economic growth, a greater flow of both inward and outward foreign direct investment (FDI), the emergence of India since 2005 as the world leader for exports of computer and information services and the country’s evolution into a hub for what are known as ‘frugal innovations’, some of which have been exported to the West. On the down side, there is evidence of growing inequality in income distribution, a high inflation rate and current deficit, as well as sluggish job creation despite economic growth, a phenomenon that goes by the euphemism of ‘jobless growth’. As we shall see, public policy has strived to reduce the deleterious effects of these negative features without imperilling the positive ones. Come manufacture in India! In May 2014, the Bharatiya Janata Party became the first party in 30 years to win a majority of parliamentary seats (52%) in the general elections, allowing it to govern without India the support of other parties. Prime Minister Narendra Modi will thus have considerable freedom in implementing his programme between now and the next general elections in 2019. In his speech delivered on Independence Day on 15 August 2014, the prime minister argued for a new economic model based on export-oriented manufacturing. He encouraged both domestic and foreign companies to manufacture goods for export in India, proclaiming several times, ‘Come manufacture in India!’ Today, India’s economy is dominated by the services sector, which represents 57% of GDP, compared to 25% for industry, half of which comes from manufacturing 1 (13% of GDP in 2013). The new government’s shift towards an East Asian growth 2 model with a focus on the development of manufacturing and heavy infrastructure is also driven by demographic trends: 10 million young Indians are joining the job market each year and many rural Indians are migrating to urban areas. The services sector may have fuelled growth in recent 1. The National Manufacturing Policy (2011) advocated raising the share of manufacturing from 15% to about 25% of GDP by 2022. The policy also proposed raising the share of high-tech products (aerospace, pharmaceuticals, chemicals, electronics and telecommunications) among manufactured products from 1% to at least 5% by 2022 and augmenting the current share of high-tech goods (7%) among manufactured exports by 2022. 2. The East Asian growth model implies a strong role for the state in raising the domestic investment rate as a whole and specifically in manufacturing industries. Chapter 22 Table 22.1: Positive and disquieting features of India’s socio-economic performance, 2006–2013 2006 2008 2010 2012 2013 Rate of real GDP growth (%) 9.3 3.9 10.3 4.7 4.7 Savings rate (% of GDP) 33.5 36.8 33.7 31.3 30.1 Investment rate (% of GDP) 34.7 38.1 36.5 35.5 34.8 Population living below poverty line (%) 37.20 -1 – – 21.9 – Population without access to improved sanitation (%) – – – 64.9 -1 – Population without access to electricity (%) – – – 24.7 -1 – Inward net FDI inflow (US$ billions) 8.90 34.72 33.11 32.96 30.76 +1 Outward net FDI outflow (US$ billions) 5.87 18.84 15.14 11.10 9.20 +1 India’s world share of exports of computer software services (%) 15.4 17.1 17.5 18.1 – Inflation, consumer prices (%) 6.15 8.35 11.99 9.31 10.91 Income inequality (Gini index) 33.4 35.7 – – Jobless growth (growth ratio of employees in organized sector) 0.20 0.12 0.22 – – +n/-n: data refer to n years before or after reference year Source: Central Statistical Organization; Reserve Bank of India; UNDP (2014); World Water Assessment Programme (2014) World Water Development Report: Water and Energy 599
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UNESCO SCIENCE REPORT Towards 2030
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Foreword Irina Bokova, Director-Gen
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