India needs new public sector enterprises, as India Inc proves too timid and vapid

Geostrategic as well as techno-economic imperatives call for companies that have competence in cutting edge technologies, and the private sector shows no appetite for building such competence

India needs new public sector enterprises

To maintain strategic autonomy in a geopolitically-riven world, India needs not just to spend more on defence but also to master assorted new technologies, ranging from quantum computing and nano technologies to advanced semiconductors, cybersecurity, space technology, and carbon capture and use. Such competence calls for visionary corporate leaders and a gargantuan appetite for risk-taking and innovation.

When the scale of strategic challenges and techno-economic opportunities calls for a horde of corporate titans, we have just one — and that one makes ornaments and accessories. To occupy the commanding heights of innovation and strategic competence that the timid ambitions of India Inc have fled, India needs a new crop of public enterprises charged with producing the wherewithal of India’s strategic autonomy and sustained economic dynamism.

To get rich is glorious, declared Deng Xiaoping, marking complete rupture with the Maoist era of trying to leapfrog from primitive, farm-centred subsistence to socialist modernity, dispensing with the rigours of capitalist development and articulation of the economy. Deng elaborated on the thesis with his essentialist definition of the cat as something that catches mice, regardless of its colour. In the decades since, lots of Chinese have achieved glory.

Indian businessmen pursue their dharma when they create wealth. They, too, have contributed their fair share to the world’s growing billionaire numbers. But there is a difference between the wealth creation culture in the two countries. Some Chinese fat cats, at least, seem to look for their mice in the air. Because they see blue-sky opportunities, to which Indian businessmen putting their shoulder to the wheel seem totally oblivious.

Huawei today not just produces pho nes and sophisticated gear for 5G networks, but also has designed and built advanced microchips with sub-7 nm circuits, thumbing their nose at US sanctions that bar the sale of advanced chips and chipmaking technology to Chinese producers. It has a hand in the quantum communications and computing pie. TikTok, the video-sharing platform built by ByteDance, is as successful as it is because of the advanced AI that guides its video recommendation algorithm.

Chinese companies are at the cutting edge in RE, in battery technology, and in the chemicals and optical equipment that go into manufacturing microchips. A Chinese company has manufactured a mid-range passenger jet not made by the duopoly of Boeing and Airbus: the C919. Commercial Aircraft Corporation of China (Comac) built the plane with Russian design help, and Franco-American CFM engines. It carries around 200 passengers for flights of dura tion up to six hours.

The ambition of Indian companies is best measured by their investment in R&D. Amazon, as an individual company, spends upwards of $80 bn on R&D. India, as an economy, spends about a quarter of that. Of that quarter, the bulk is spent by central and state governments, including via universities. Indian business accounts for 37% of India’s R&D expenditure. India ranks 40th on the Global Innovation Index.

In 2010, India spent 0.8% of GDP on R&D. Since then, the rhetoric on R&D has soared, anusandhan (research) has joined the ranks of jawan, kisan and vigyan as national heroes — but expenditure has declined to 0.65% of GDP. South Korea spends 4.9% of GDP on R&D. That proportion is 2.43% for China, 3.14% for Germany, 3.3% for Japan, and 3.46% for the US, according to the World Bank.

According to the World Intellectual Property Organisation, the average share of R&D in net sales for the top three companies was 18.5% for the US, 14% for China, and 13.9% for Switzerland.

Corporate diversification strategies reflect their scale of ambition. Birla is moving into jewellery marketing. JSW added paint to its portfolio, and is daring to dream higher, all the way up to airlines. Reliance’s R&D expenditure struggles to match the reported spending on Ambani weddings. HDFC Bank struggles to keep its IT system robust enough to not be overwhelmed by customers’ digital operations.

Yes, the Tatas are spending a bit on R&D. Adani and Ambani have promised to produce green hydrogen at a price of $1 a kg, through scale economies, if not by innovation. This does mark signs of life. But not of the vigour India needs.

At the time of Independence, India didn’t have a private sector capable of producing steel, power, machine goods, power generation equipment, scientific research in nuclear and space technologies, and other bits of the industrial muscle the country needed to end poverty and ignorance and disease and inequality of opportunity among India’s impoverished masses. The state set up enterprises to build the tissues and sinews the nation required for growth and redemption.

Over time, the private sector acquired the capability to produce what the economy needed the state to provide. It became fashionable to condemn cornering of the commanding heights of the economy by the state. Tectonic plates have since shifted. Old peaks that had seemed tall now stand dwarfed by new challenging heights that have cropped up.

India’s private sector will continue to play with jewellery and software plugs. The economy and India’s geopolitical challenges cannot wait for it to grow up. India needs new public enterprises — now.