Economic policy must become industrial policy
The need of the hour is to promote strong domestic investment in skilling, building know-how in workforce, and nurturing a tradition of industrial R&D
The budget season is an appropriate time to discuss a question that dominates my mind. I come at this question from the vantage point of a predominantly rural district like Tenkasi in Tamil Nadu: how could we make Tenkasi as wealthy as the nation of Estonia, which happens to have a slightly lower population compared to the Tenkasi district, both in the range of 13 to 15 lakh people. Estonia has a per-capita GDP of about $23,000, while Tenkasi is at about $1,500. A 15-fold growth is required for Tenkasi to catch up with Estonia. How does Tenkasi get there? Our economic policy must become an industrial policy. We need to promote strong domestic investment in skill and building knowhow in our workforce, and we need to build and nurture a tradition of industrial R&D.
Science education through practical skills, ending credentialism
We need a focus on building up skills in our workforce - skills that are useful across the industrial spectrum, particularly manufacturing. That has to start at the school level. Today, our schools still emphasise book learning and endless examinations. I often hear from rural students, “If you force me to study for examinations, I don’t want to come to school”. Our first goal for children should be to make them comfortable with technologies around the home, technologies we use every day. This has to start at the school level.
We are adopting an approach where science is taught through practical demonstrations and workshops. As an example, students will learn to take apart a ceiling fan, a bicycle, a motorcycle, an old mobile phone and put them back together, figure out concepts such as electricity and magnetism by actually using winding motors, understand why sugar can burn but salt does not burn, learn to take the temperature, read the pulse, check for blood pressure, blood sugar and so on. I believe this is how we can get students interested in Physics, Chemistry and Biology.
Books can come later, once the fire in them is ignited. Even if a child is not interested in books, the practical skills they learn will remain with them. It helps them transition to a workforce with confidence that they can do something on their own.
Our New Education Policy is a good start and our budget and economic policy should reinforce the emphasis on skill building. One useful reform is to abolish formal credentials for most jobs. Credentialism is a form of superstition. Credentialism forces the education system to focus on the wrong goal obtaining a credential - rather than the real goal of imparting knowledge. Our experience with Zoho Schools of Learning for 15 years amply demonstrates that once we remove the formal credential, real learning can proceed well. Jobs that require advanced training such as Artificial Intelligence and data analytics can be done by self-taught people today, as our experience in Zoho has shown us. India’s economic policy should encourage the private sector to set up in-house skill development institutions and work towards the end of credentialism.
Strong base of know-how
We need a strong investment in broad industrial know-how. In today’s scenario, even for products that are made in India, the industrial know-how is not available in India and is acquired from abroad. Our industrial policy must focus on encouraging firms to acquire the know-how. Any product that India consumes in volume must have deep know-how available within India. We can start with basic products or commodities and then move on to advanced products. For example, we require the know-how for the entire supply chain of how everything from the humble nail clipper to drones, from digital thermometers to MRI machines are made.
Our economic policy should strongly encourage the acquisition of industrial know-how, by encouraging entire supply chains for products to be located in India. This has to be a cornerstone of our industrial policy.
Private sector-led industrial R&D
Finally, our private sector must be strongly incentivised to make serious investments in long term industrial R&D. This is not the kind that wins Nobel Prizes but it is critical for our economic progress and national security. Industrial R&D is not expensive compared to setting up factories and must be financed without debt, because of its risky and often unpredictable nature and the long term commitment required to see a project through. Since R&D teams are relatively small, rural areas can house these R&D clusters and tax policy can encourage such development.