From: sridhar@enuxhb.eas.asu.edu (Sridhar Venkataraman)
Subject: Re: IIT's and REC's. Training factories for US? 
Organization: Arizona State University, Tempe AZ
Date: Tue, 29 Sep 1992 17:59:06 GMT

Thanks to Atri Indiresan who forwarded the following article which made
interesting reading. If you have any opinions on the article, I am
sure Atri would forward it to his father.

Atri can be reached at atri@alps.eecs.umich.edu.

The following article appeared in The Hindu on  March 21, 1992.

             TECHNOLOGY POLICY AND THE WORLD BANK
                        P.V. Indiresan
     Centre for Applied Research in Electronics, IIT Delhi

  Although stagflation continues to be a worry, our economy is
doing better than many other nations who too are facing
similar problems - East European ones for instance. That is
why many people agree that Dr. Manmohan Singh is doing well. 
The Finance Minister has been at great pains to explain again
and again that his prescriptions will take some time to take
effect; that though it will be painful in the short run, in
the long run, we should do well. How about the long, long run?
That is difficult to predict, but causes some uneasiness: no
doubt we will get to a higher plateau, but there is a fear
that it will be a lowly one; that the way we are going, we may
not prosper as well as the Chinese or the Koreans - let alone
the Japanese.
  These doubts occur not because the Government has followed
World Bank's prescriptions too closely, but because it has not
followed them closely enough. Recently, the World Bank made an
in depth analysis of the reasons why some countries have
prospered technologically and why some others have not. As a
result, it has identified four crucial functions which a
government ought to perform; These are:

  1. Develop appropriate technical human capital
  2. Strengthen the basic technical infrastructure.
  3. Involve R&D institutions in the assessment and
     acquisition of new technology.
  4. Stimulate firms to improve their technological levels.

  On all these counts, India is not doing as well as others;
that is why there is a likelihood that the country's economic
progress will be stunted.
  For long we have been told that we have the third largest
scientific manpower; recent studies (by the World Bank)
indicate that we are actually the fourteenth; further our R&D
expenditure is 7 per cent of what developing countries spend,
and a minuscule 0.3 per cent of what developed countries do;
our per capita expenditure on R&D is barely a tenth of what
even some developing countries invest. Worse, we have cut the
budget for both R&D, and for higher education.
  Undoubtedly, there is considerable scope for economy in both
higher education and in R&D: many colleges are a disgrace;
much of R&D in the country is a waste. Therefore, the
budgetary cuts in these two areas are NOT unreasonable; in
fact, they are long over due. So, there can be little dispute
about the cuts themselves, but when it comes to the manner the
cuts are imposed, grave doubts ensue.
  Expenditure may be broadly dvided under two categories -
productive and wasteful. When waste is cut, institutions will
improve. If the cuts are imposed uniformly on both, that may
not help much, nor harm much. However, when cuts are imposed
on the productive part only, and the wasteful part is left
untouched, the consequences can be disastrous. That is the
kind of disaster which is feared for India.
  In technical institutions, around 80 per cent of the budget
is likely to be earmarked for fixed expenditure like salaries,
electricity/ water bills and the like; only 20 per cent (even
that is an over-estimate for India) is spent on essential
facilities needed to make work productive. This may be called
the 80:20 syndrome, which is a universal phenomenon not
confined to our country alone.
  In the Indian situation, most of the waste is due to
excessive personnel, resulting in a bloated salary budget.
However, when the axe falls, the cut will almost never be on
this waste, but mostly on production support. Then an overall
10 per cent cut, will convert the original 80:20 division into
a 80:10 one; that is, a mere 10 per cent cut may lead to a 50
per cent cut in inputs that are essential to sustain work. If
such cuts repeat, almost the entire budget will tend to go for
salaries and next to nothing will be left for the means needed
to put people to work. That is how, in the elementary school
budget, over 98 per cent goes on salaries and there is no
money to buy blackboards. In such a situation, it is not a
part of the expenditure that is saved, but the whole of it
that is wasted. For instance, IITs have done better than
others not because their salaries are much higher, but because
they enjoy better infrastructural support. If that support
goes, IITs too will dwindle the same way our once famous
universities have.  
  Talking of IITs, they have been asked to make good the
budget cuts by increasing their earnings - by selling their
services. IITs are already in the forefront in this regard,
each earning around 3 crores of rupees a year from R&D
projects. Unfortunately, currently, over 80 per cent of R&D
expenditure is being financed by the Central government. As
the budget of the science departments too have been slashed,
and they too will have to protect their own fixed costs, the
support they can give others will come down drastically, much
more steeply than the actual amount of the budget cut. So,
there is diminished scope for the IITs to retain even their
present earnings.
  By and large, many in our country are NOT convinced about
the value of indigenous R&D. Hence, at this stage, it would be
useful to discuss how valuable indigenous R&D is financially.
  In a recent seminar, a retired Vice-Admiral talked of his
experience in procuring a communication system for our
submarines. Only the French bid was suitable, but they were
asking the considerable sum of Rs. 156 crores. Our Vice
Admiral then got the idea of approaching a US manufacturer,
which was quite unusual in the Indian Armed Forces in those
days. The price  the American firm asked - believe it or not -
Rs. 16 crores! Apparently, the French not expecting us to go
to the Americans, had neglected to prime the US manufacturers
about the deal. Hence, unlike the Germans and the British, the
Americans quoted the true price. In fact, there is, in arms
sales, what is known as the Gulf price - whatever Saudis can
be charged, will be imposed on the others too irrespective of
what the true cost is!
  Let me give yet another example from my own limited
experience. Some years ago, INS Vikrant was in need of a re-
fit for a guidance equipment for landing aircraft. The price
quoted by a European firm was Rs. 95 lakhs. I still recollect
the late Admiral Ramnath barging into my room saying: "over my
dead body will I pay such a sum; why don't you make one for
us." Our estimated cost: Rs. 5 lakhs! The Admiral then
requested me to quote a much higher figure as nobody will
believe us. So we asked for Rs. 25 lakhs for which we supplied
two complete systems, a full set of spares and made a tidy
profit too for the IIT.
  I am labouring this argument at some length to show that the
hidden financial benefits of indigenous R&D capability can be
enormous. The latest technology is, by definition, unique;
hence, as a rule it enjoys monopoly prices. That is why the
World Bank has found that the only insurance against
extortionate prices is one's own R&D expertise - provided it
is utilised to assess and acquire technology, and only then.
We do no such thing, and generally pay Gulf prices. With
diminishing investment on higher education and on R&D, we will
not be able to involve R&D talent in technology procurement
even if we want to (which we don't in any case).
  Let me turn to the fourth exhortation of the World Bank -
that governments should stimulate firms to raise their
technological levels. In India, all these years, the tendency
has been to purchase not technology, but know-how. Under the
new policy that tendency will be accentuated; we will buy even
more machinery, but few patents - if at all. We will
concentrate NOT on how to develop techniques but on how to
operate imported machines - often bought at monopoly prices.
  The story of C-DoT illustrates our attitude to indigenous
technology very well indeed. When Sam Pitroda announced that
he will produce one Rural Automatic exchange a day, he was
ridiculed, and his move was dubbed as one hoax a day. Now, on
an average, six such switches are being installed all over the
country each day. The story that Pitroda could be a hoax made
headlines, but the story of his boast being over-fulfilled six
times, nobody gets to know.
  In February this year, a function was held to honour those
who developed the new large size C-DoT telephone exchange.
This switch is now in use in the busy South Parade area of
Bangalore and can handle about 8000 lines. By all accounts
that is an enviable achievement. Yet, the mood even among
those who had come to receive prizes was sombre; some even
broke down in tears. The reason: the traumatic experience they
have gone through all these years. They also felt insulted
that the Minister would not come in time for the function and
asked a deputy to give away the awards.
  In my estimate, if, in spite of his heart attack, Sam
Pitroda had not persevered, the cost of telephone expansion in
India over the next ten years would have been hiked up by MNCs
by at least a 1000 crores. Those politicians who, if they had
their way, would have cost our country so much go scot free,
but the engineers who saved us so much do not receive even
basic courtesies; in fact, they are being squeezed out.
  The fact is, for most of our political masters, import of
know-how is more important than development of indigenous
capability. Indigenous technology is at best tolerated, but
there is no pride in, or zest for self reliance.
  Reverting to the four principles advocated by the World Bank
for technological (and hence in this technological age,
economic) progress, we observe we falter on all counts.
Technology (up to date ones, not the obsolete ones) is, by
definition, an individualised monopoly product, and cannot be
obtained competitively. So, a market approach will NOT work in
its case. Hence, technology should be protected and nurtured.
  A retrograde, reactionary proposal which will nullify all
that the government has done in the past few months? Don't
blame me! I am not saying so; I am only repeating what the
World Bank (Industry Series Paper No. 37, June 1990) has said!
  Any one up there willing to listen to the World Bank?

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