Tuesday, March 15, 2016

Commentary: Did 1991 economic reforms in India kill its electronics industries

With 2016 India enters the 25th year of economic liberalization inaugurated by the Narasimha Rao government in 1991 with Manmohan Singh as the steersman. While it is commonly hailed as the end of the Licence Raj and the beginning of a free market regime, the full implications of the specific policy measures that came with it may have been ignored. This is a story that needs to be retold with some serious modifications if the claims made by this article prove substantial. This can only be done after a detailed examination based on full-bodied case studies around themes cited by the author Ashok Parthasarathi, the Science and Technology Advisor to the late PM Indira Gandhi. Parthasarathi claims that while the policy decisions taken during the early 1990s favoured the software industry in India, soon turning it into a global giant, they were also instrumental in stifling and eventually killing large segments of the electronics manufacturing sector – he discusses a wide range of instances from diverse fields like communications and control systems, cell phones and television where the extant industries packed up after import duties were reduced drastically, giving way to multinationals. Parthasarathi quotes the specific instance of BHEL and how it suffered loss of market thanks to the import policies of the Rao government. By way of counter-balancing this argument, it is useful to remember that Parthasarathi looks at the liberalization process entirely through the eyes of the manufacturer and there is not even an iota of concern for the consumer. Even if Manmohan Singh's policy tilt affected the electronics industries negatively, it still remains to be seen if the consumer benefited from the decisions - the cell phone revolution in India for example would have slowed down considerably if the markets had not been opened, and there may be other similar cases.  

Indeed, if Parthasarathi has got it right, 1991 for all its positive gains also led to a grievous strategic blunder that has since shaped the Indian economy. The question is were the decisions cited by Parthasarathi were of the avoidable kind. Parthasarathi is unduly and unjustifiably brief in his presentation and what we get here is a series of quick assertions and claims rather than an elaborate analysis. This article could however provide a series of useful clues for the scholars, journalists and students of business strategy for a close look at fairly high and vital levels of policy decision. Each of the instances quoted by Parthasarathi require detailed analysis and further additions may be made to his list of lost opportunities to assess what seems like a gigantic blunder on the part of the Manmohan regime. Parthasarathi passingly links his discussion to the current theme of ‘Make in India’ suggesting that all is not lost yet. But it remains to be seen if an attempt at repair makes sense at this point and whether it is too late for India to consider entering arenas abandoned by it 25 years ago. Whether Parthasarathi is right in his assertions or not, the question carried by the title of this commentary continues to seek a satisfactory answer even after so many years. 

1 comment:

Umesh Patil said...

This is an excellent debate India should have. These topics are obscure, but indeed far more consequential than what happens in JNU. Well, that is at least my opinion.

Having said that, may be it is my professional bias, but I think India has brighter future in Software Engineering. Problem with HW is, there are so many other things which need to come together (for example infrastructure, precision manufacturing, supply chain and so on). For SW, one high bandwidth Internet Link and you are in the business (and of course electricity).