As one of the fastest growing economies in the world with an attractive domestic market and a rich demographic dividend — more than half the population is younger than the age of 25 — India is generally considered well placed to steadily move up in the global pecking order. Some studies predict that the country could become the third largest economy by 2030.
But in a recent critique of the Planning Commission’s Draft Approach to the 12th Five Year Plan (2012-2013 to 2016-2017), Rajendra K. Bera, Sunish Raj and Hiten Balsari from Bangalore-based Acadinnet Education Services refute this thinking. Bera, the lead author of the critique, is chief mentor at Acadinnet and an honorary professor at the International Institute of Information Technology in Bangalore. His earlier positions include being head of the research and development (R&D) group of IBM Software Labs in India and research scientist at the National Aerospace Laboratories.
Raj, founder and managing director of Acadinnet, was with IBM before he set up Acadinnet in 2009. Explaining the impetus for their detailed study of the Draft, he says: “We believe that higher education and creation and protection of intellectual property [IP] are critical for economic growth and are keen to know where the country is headed as far as the policies on these are concerned. We find that adequate focus is not there in the draft Approach Paper on these critical areas.”
The Draft was approved in August 2011 and the final plan is expected to be released in March of this year. The 11th Five Year Plan (2007-2008 to 2011-2012) had a target of GDP growth of about 9%. Given the slowdown over the past few quarters, the Indian economy will fall short of achieving this. In the Draft of the 12th Plan, the suggested minimum GDP target is again 9%.
In their critique the researchers note: “India has visibly weathered the global crisis of 2008-2009 and its aftershocks much better than most countries for the time being because of its limited engagement with the global economy…. Execution of the 12th Five Year Plan, in whatever form it finally appears, will face much greater uncertainty and turmoil than anyone is willing to forecast at this time.” The authors state that “barring a miracle, India has no reasonable chance of becoming a country with the third largest GDP in the world in the coming two decades.”
Their premise is based on two key aspects of the Indian economy — the education system and the intellectual property (IP) system. They point out that other important players in the region, including China, Singapore, South Korea, Taiwan and Hong Kong, have all spent years building their education and R&D institutions and IP system in a planned manner. In India, the education system has been declining rapidly over the years and there is no robust IP system in place. If India is to maintain its economic growth, these two systems must be overhauled thoroughly and quickly, the researchers add.
According to the Acadinnet team, the Planning Commission has failed to highlight the serious consequences of the country’s decline in education and IP creation. The critique also points to other areas to which the authors argue that Planning Commission has not given adequate focus. For instance, the need for job creation at the high end, such as positions for researchers, innovators and professors whose knowledge and skills now drive the global economy, and the need to retain and also attract back to the country high-caliber talent that has gone overseas.
The authors of the critique also suggest that the Planning Commission has a “blind spot” toward the information technology sector. They contend that while this industry has put India on the global map by offering high salaries for low-tech jobs, it has “systematically siphoned off the top layer of the educated young population … thus depriving all other sectors of the economy in desperate need of talent.” Instead of relying on only economists and bureaucrats, Raj says, “The Planning Commission also needs to get innovators who can advise it on innovation and IP and how these impact the economy.”