How long should India seek foreign investment for its economic development

For fast economic development of the country, India should open up its economy fully to foreign investment. But this should be a short term strategy. For long term sustainable development, India should develop technology, encourage Indian companies to invest abroad and export technology. India, being a large country with a population of over 1250 million should not be a regular importer of technology. According to World Bank data Finland with a population of about 5 million has over 7000 researchers per million of population. That is why it is able to develop, utilise internally and export new technology. China has about 1000 researchers per million of population. But India has only about 160 researchers/million of population. India should give top priority for increasing this number at least to the level of China viz 1000/million of population. This is what, India should do to become a developed country. Its dependence on other countries for technology should gradually decline. For sustainable development India should depend on R & D and not on foreign investment.

India’s role in world affairs

India is at present the second largest country in the world with every sixth person in the world being an Indian.In the next 10-15 years India will be the largest country with over 20% of the world i.e every fifth person in the world will be an Indian. At present India’s contribution to the world GDP is about 6-7%,being the third largest economy in the world. In the next 10-15 years,India’s share in the world GDP may go upto 10-12%, though it may continue to be the third largest economy. In this position,India should not contiue to take the stand that it does not want to interfere in the internal affirs of other counries. It should take active interest and major role in ensuring peace in the world and in helping poor countries not with materials but by giving consultation, technology, and if necessary loans.In particular, in consultation and cooperation with large countries like China,USA,Indonesia, Brazil etc India should strive for:

i.dissuading counries like Iran, Israel and North Korea to give up plans even for developing nuclear technology even for peaceful purposes,as this is the first step in the efforts for nuclear weapons

ii.persuading countries to take full responsibility for dismantling terror outfits and eliminating terror from the world. Terrorism has been one of the causes for world economic recession, as a lot of manpower is wasted in trying to preven terrorist activities

iii. being the largest country,it has to take responsibity to contribute to the health of the world population. towards this,India has to spend more, on medical research and spend more on establishing super speciality hospitals,so that small countries which cannot afford to establish the same can utulise the facilities in India

iv.India should increase its food production by 200-300% so that countries affected by natural calamities like floods, drought, earth quakes etc. can be assisted.

v.India should take initiative in brokering peace between warring countries or groups of coutries

vi.India should be the one which tables a large number of resolutions in UN organs like General Assembly, Security Council, specialised agencies etc.(It is taken for granted that by that time India would be a permanent member of the UN)

vii.India should spend much more on and expand its aciviies in the space, nuclear, ocean,heavy materials, renewable sources of energy, nano and emerging sciences as small countries will not be able to spend manpower and money on large projects and allow other countries to benefit from its activities in these spheres.

India- Export of Technology

Excerpts from “Simple Alternate Development Strategy”1997

India

“Import of technology can be avoided,if in addition to the correction of the universiy admission system. the Indian companies allot about 15-25% of their work force, for research and development. Manpower is much cheaper in India than in advanced countries. If an advanced country like Japan or Germany or USA can deploy 100 people for research and development in a particular area, India can afford to earmark 500 people or 1000 people or more for the same purpose. Then India can improve technology much faser than developed countries and also develop much higher and sophisticated technology and within 4-5 years the country will be in a position to export technology to foreign coutries. While developed countries like Sweden, denmark, Finland etc. with populations of less than 10 million can concentrate and specialise only in a few fields, India with a population of over 900 million, can specialise in almost all fields. India has the third largest reservoir of scientific and technological manpower. But unfortunately all are not employed. Even of the employed, not all are doing scientific and tehnical work. Most of the scientists, doctors and technocrats occupying very high positions in their respective fields do very little of their work but more of administrative work, (their aptitude, more for administrative work than to technical and scientific work, can be traced to the faulty admission system in professional courses…) which can be done by non-technical persons….It is really regrettable that with the third largest reservoir of scientific and technical personnel, India has not been able to produce even a single Nobel prize winner in science….. while many small countries in Europe can boast of several Nobel prize winners.

Small countires like Singapore and even medium sized countries like Malaysia, South Korea and Taiwan cannot afford to employ large enough number of people in research and developmt and, therefore have to import technology …..Again while in many countries,the colonial powers did not leave much of infrastructure for scientific and technical development, in India,the British have left large and well equipped establishments. At the time of independence, India had several univesities, scientific institutes like Geological
Survey of India,Meteorology Department, Council of Scientific and Industrial Research etc.The British established railways and telecommunication system in India within a few years of esablishment of the same in Europe. But this is not the case with several other countries. They did not leave such establishments in Singapore, Malaysia,Sri Lanka etc. In fact, some of the counries under the foreign rule, did not even have universities when they became independent. The British had even established several modern factories in India. All that India needed to do, after independence, was to improve upon and expand the existing institutes. Even now the task is only to improve and expand the existing establishments and not to start from the scratch. If done, India could become major exporter of sophisticated technology in almost every field.”

China’s economic develoment

China’s economic development in the past 30 years has been phenomenal. It has overtaken several countries including Germany and Japan to become the world’s 2nd largest economy(GDP US$5.7 trillion). It has become the largest exporter in the world. There is discussion already,on when China would overtake USA(GDP US$ 14.6 trillion) to become the largest economy. However, it appears that China may not overtake USA in GDP, in the near future, as its development is based on weak foundation:

a. unlike in countries like India, in China, the contribution of foreign invested companies to the GDP is very high- about 40%. Foreign direct investment in China is nearly US$ 1 trillion.

b. contribution of foreign invested firms to china’s foreign trade is over 50%

c. if foreign firms withdraw, China would lose its position as the 2nd largest economy and the largest exporter. GDP growth rate would also fall substantially from the present
level of around 10%

d.China’s investment in research and development is low- about 1.5% of its GDP, compared to 3% in USA. It depends on foreign countries for technology.

e.arable land in China is limited-only about 140 million hectare(just about 15% of total area) for its population of 1350 million. USA has about 175 million hectares for a population of about 300 million.

f.agricultural land is over exploited with high input of fertilizers. Soil degradation is likely to lead to drop in agricultural production.( China has however done a good thing in leasing large areas of agricultural land in Africa.)

g. natural and man-made calamities take place more often in China than in many countries.

While the achievement of China in the last 30 years is adorable, it may also have to be noted that this has been possible because of foreign assistance, which means foreign developed countries also have contributed to the progress. Of course, the foreign countries have benefited enormously from their investments.

Debt to GDP ratio and Economic Growth

There have been some studies and conclusions therefrom about Debt to GDP ratio of a country and the econonomic growth rate. Some of the conclusions are:

1.once the debt to gdp ratio exceeds 77%, the growth rate will fall

2.for every 10 percentage points fall in debt to gdp ratio, growth rate will go up by 1.4%

These conclusions do not hold good in all situations and for all countries. Further fall or growth in growth rate depends also on the type or purpose for which the debt is incurred.
Generally,

i.if the debt is maily for purposes of undertaking short gestation project like dams, irrigation canals, linking rivers with one another and with lakes etc. the growth rate will go up even if the debt to gdp ratio exceeds 100% or even 150%.

ii.if the debt is incurred for productive purposes like generation and distribution of electricity, import of technology, capital goods, raw materials etc. there will be no fall in growth rate even if the debt to gdp ratio is very high

iii. if the debt is incurred for unproductive purposes like increase in wages without increase in productivity, welfare measures, sports, entertainment etc. growth rate may fall with increase in debt, though in some cases, increase in spending power of the people may lead to increase in demand and consequently production.

iv. irrespecive of the debt-gdp ratio, economy would witness growth, if all able-bodied persons work and they put in their maximum possible ability, time, energy, attention etc to the work

v. the amount required for servicing the debt depends not only on the quantum of debt but also on interest rate. If the interest rate is low or nil, and the repayment period is long, serving debt may not be a big problem.