स्पष्ट रूप से पढ़ने के लिए इमेज पर डबल क्लिक करें (आप उसके बाद भी एक बार और क्लिक द्वारा ज़ूम करके पढ़ सकते हैं )
How reforms killed Indian manufacturing
Updated: March 15, 2016 03:25 IST
| Ashok Parthasarathi
“Products
that we were manufacturing in the 1990s are being imported now.”
(Ashok Parthasarathi was the Science and Technology Adviser to the late Prime Minister Indira Gandhi.)
As the government pushes for ‘Make
in India’, it could begin by unmaking the damage the post-1991 reforms
inflicted on domestic industry.
This year marks 25 years since the so-called
“economic reforms” were launched in July 1991. By now, broad contours of
the policies and practices that characterised such reforms are well
known, viz. radical deregulation, marketisation and privatisation of the
industrial, technological and financial sectors, and an
across-the-board induction of foreign direct investment and foreign
institutional investment, and so on.
Basing himself on the
erroneous views of India’s IT software and service sector behemoths, the
“advice” of Western governments, large foreign companies and the
trinity of the World Bank, the International Monetary Fund and the World
Trade Organisation, Manmohan Singh, then Finance Minister, concluded
around mid-1992 that we could be globally competitive only in IT
software and services and not in hardware. Thus he reduced import duties
on all IT hardware purportedly to “facilitate” software promotion and
growth on a globally competitive basis using imported hardware. Result:
by 1994 our fledgling civilian IT hardware industry folded up.
No
one seems to have told Dr. Singh that IT hardware far more
technologically sophisticated than the commercial hardware being
imported by our software companies was being manufactured by Indian
defence, atomic energy and space agencies and even exported to other
developing countries such as Brazil, Malaysia, and Indonesia.
Death by policyThe
“reforms” also dealt a body blow to the indigenous optic fibre
telecommunication systems industry, a project begun by the Department of
Electronics (DoE) in 1986 with the setting up of the public sector
utility, Optel. Based on a global tender, technology-transfer agreements
were concluded with two companies, Fujitsu and Furukawa, in 1987 and a
blueprint for the Optel plant prepared. It indicated a project cost of
Rs.45 crore and a construction period of 30 months; when completed, the
actual numbers were Rs.46 crore and 32 months.
All this was
possible because I got one of our top technocrat-managers, Bhagwan
Khurana, to leave his job as CEO of Punjab Wireless Ltd. (Punwire) and
become CEO of Optel. A top-class cluster of three plants was operational
by end March 1989. In its very first year of commercial operations
Optel’s turnover was Rs.64 crore with a profit of Rs.11 crore. In
1990-91 the turnover zoomed to Rs.298 crore with Rs.35 crore profit.
Around
this time, Sterlite, a metallurgical company, and Finolex, a packaging
material producer, entered the field. They would import fibres and
merely sheath them into cables. Even the sheathing material was imported
— the cables had merely 10-15 per cent domestic content. This, however,
ran into a roadblock in the form of the graduated customs duties then
applicable, which promoted local production. They started lobbying with
the government to reduce the import duty on fibre — a manufactured
component — from 40 per cent to 10 per cent, which was the duty on raw
materials. I was then Secretary of the Electronic Commission and
Additional Secretary in the DoE. Despite the DoE’s stout opposition to
both the character of the companies’ “projects” and the drastic and
irrational reduction of duties, they got their way. Within six months,
large quantities of optic fibre began to be imported. Optel had to close
down its optic fibre plant and import low-grade fibre from China to be
able to compete in our own market with the likes of Sterlite and
Finolex!
DeindustrialisationIn 1990-91, there were at least
a dozen electronics corporations producing a range of high-tech radio
communication equipment, industrial electronics and control and
instrumentation equipment worth annually around Rs.6,000 crore. However,
the reduction in customs duties from 60 per cent to 30 per cent
overall, which led to a glut of imports, forced many of these
corporations to halt production and become import agents, a phenomenon
repeated in the key solar photovoltaic industry.
“Reforms” also
led to large-scale import of cell-phone handsets that could have been
easily produced here had a policy of phased manufacture been adopted.
Result? The entire market for such handsets was met by unnecessary
imports from Day One in 2005-06. In 2013-14 cell-phone imports totalled
Rs.35,000 crore.
By 2000, foreign brands grabbed 80 per cent of
the television sets market, from a situation where 10 local companies
catered almost fully to the demand. Six of the 10 indigenous television
makers have folded up, with a ripple effect on the electronic components
sector.
My final example is our heavy electrical equipment
industry led by Bharat Heavy Electricals Limited (BHEL). Up until
1998-1999 this industry was doing very well. However from the next year
onwards, four Chinese power plant equipment manufacturers began to
seriously erode BHEL’s market. This erosion was despite the quality and
technical reliability of the Chinese equipment being considerably
inferior to BHEL’s products. The United States, home to General Electric
and Westinghouse, imposed penal anti-dumping duties on Chinese power
plant equipment. Yet, the Indian government merely watched as BHEL lost
30 per cent market share by 2014.
These examples indicate that in
sector after sector, the “reforms” have led to deindustrialisation.
Products that we were manufacturing in the 1990s are being imported now.
The negative impact this deindustrialisation has had on employment and
on our economy is gigantic. The government must act immediately to halt
the destruction of domestic industry on such a massive scale instead of
merely tom-tomming its “Make in India” policy.
http://m.thehindu.com/opinion/op-ed/ashok-parthasarathi-how-reforms-killed-indian-manufacturing/article8352882.ece
संकलन-विजय माथुर,
फौर्मैटिंग-यशवन्त यश
