While talking about “Science & Technology in China – Implications & Lessons for India – an overview”, my mind goes back by about 40-50 years, late years of my education and early years of my professional career in Atomic Energy Establishment, Trombay, the present Bhabha Atomic Research Center, Mumbai. At that time, we all used to have Camlin pens and it was supposed to be a good pen. We would like to have a Parker pen but it was too expensive to buy. Some of my friends used to have Parker pens made in China, and many of us used to say “this is no good because it doesn’t write as good as a Camlin”. We were indeed happy to have the Camlin made in India in place of the Parker made in China. Why I am saying all this is to recall that in the 60’s and 70’s, our perception of China was that it makes cheap consumer goods of questionable quality and by, what you may call, unfair means- for example, it used to be said that the Parker company was asked to set up a plant in China and then one day they were asked to pack up and go and the company became a Chinese company making China-made Parker pens.
Then I move forward by about 20 years, I was in United States with my daughter to attend my grandson’s first birth anniversary. At the end of the day, we had about 100 packets, gifts of various kinds and the usual ritual is to sit and start unwrapping all of them. It turned out that every one of them was a toy made in China except the one which I had carried from India, of course. And my daughter said that if you want any of these one dollar items, they are all made-in-China. If you want to buy a fighter plane, then we can find an American producer but most of the small day-to-day things are all made in China, they are in the market at acceptable prices and of acceptable quality.
Then, I move forward another 10 years. I see a newspaper report – in 2008 – saying that a subsidiary of the Chinese Meteorological Department outbid Bharat Electronics to supply Doppler Weather Radars to India. India had a plan to have something like 55 Doppler Weather Radars and this was the first order for about 12 units. It struck me odd because in the late 90’s, we (India Meteorological Department) had funded Bharat Electronics and the Department of Space to design, build and install a Doppler Weather Radar and it is functioning in Sriharikota from 1998-99. Subsequently, we also bought couple of Doppler Weather Radars from a German company. What China did in 2008 was to outbid both of them. How a Chinese company is able to outbid an Indian supplier, who has already had the technology from none other than the Indian Department of Space. I asked my friends in IMD what happened and why did it happen? They said “well, first, it is cheaper and second the software is better”. This was, indeed strange because in one case I am paying to BEL and the Department of Space, which means from one arm of the government to another and in the other case, we give it to China. Where is the question of which is expensive and which is cheaper. As for our software not being as good, we are supposed to be the software leader in the world More importantly, what happened in the last 10 years is that no development took place using the functioning unit. Within two years of that happening, questions are being asked whether by putting the Chinese Doppler Weather Radar, we compromising the security of our air space. One message is clear, the Chinese competition is no longer limited to small, low value items, it extends to high value, high technology products as well. With good technology at competitive prices, China is already in. I will leave the security discussions to a little later. China is clearly moving up the value chain in the global market, starting with very poor quality products to high technology products in about 30 to 40 years. In the early years, China was obviously concentrating on simple manufacture and marketing, technology inputs were not very high. In fact, we used to talk about notorious violations of IP in China in the early. But today, this is not necessarily true. For example, the Doppler Weather Radars themselves were designed and manufactured jointly with Lockheed Martin. So, obviously it is not a stolen technology, it is something which has been acquired through proper channels. Now, today the so called violator of IP has turned out second only to US in patent filing. China is a major patent filer today in the world. So, clearly you can see a change which is taking place in China’s technological capability, manufacturing capability, and to some extent, in the marketing capability. What is contributing to this phenomenon is something which we need to discuss.
During the same period, India has not been doing badly. Certainly I won’t say that we have been sleeping. We started off with practically no infrastructure on anything and we built over a period of a few decades, a good educational infrastructure, a research infrastructure and industry infrastructure. And in selected areas like agriculture or generic drugs, we have achievements to our credit. We went on from ship-to-mouth existence to food surplus using technology (green revolution). We were net importers of generic drugs in the 50’s and the 60’s, and today we are net exporter of generic drugs. So clearly, we have not been doing badly, but from the early years up to the 90’s, the emphasis was on import substitution and reverse engineering. So obviously, we were also violators of IP; IP protection was not one of the high priority items at that time. In the 90’s things changed with economic liberalization and our initial reaction was we were going to be completely overrun by the external markets and we would be finished. But we survived the competition – and there was global competitiveness in selected sectors like automobile sectors and vaccines! So, clearly we have not been keeping idle, we have been moving ahead, we are moving forward but the question which we keep on asking ourselves is that at the rate at which China is growing in the technology chain, and the rate at which India is doing on the same path, can India survive Chinese competition in the coming years. Just as in the US, our markets are also full of “made-in China” products, cost and quality competitive, often displacing many indigenous products. Haven’t we seen the famous Aligarh locks disappear from the Indian marketplace making way for the Made in China locks? Aren’t we seeing more and more silk saris made in China, better and cheaper than saris made in Mysore or Kancheepuram? Where are we heading to? This is the question which we have to keep asking ourselves.
I will not talk about how China is doing or India is doing in the space technology, nuclear technology and other strategic sectors such as defence production because these are going to be discussed subsequently by other speakers and also because in such areas each country has it’s own ambitions, it’s own strategy, and it is very difficult to compare with one another. So, I am not going to touch on all that, but I do want to touch on one aspect of strategy – not strategy in the military’s space but strategy in the market place. The story which I am going to bring to your notice is the Rare Earths Story. The term rare earth refers to group of seventeen elements in the periodic table, specifically, the 15 Lanthanides plus Scandium and Yttrium. This group of elements holds unique physical, chemical, magnetic, electrical and luminescence properties, and combined with other materials, they can also alter their physical and chemical properties in unique ways. Many of you must have heard about the rare earth magnets: they are much smaller than the standard iron magnets and they have very wide applications in automobile industry, in renewable energy industry. Wherever there is a motor, there is a magnet, and wherever there is magnet, you want to make it more powerful and more compact. Today, China produces over 90% of the low-value and 99% of the high-value of rare earth oxides for world consumption and controls 97% of the global rare earth market. But rare earth resources for China account only about 37%. How it happened is something which I would like to share with you today.
This is a clear example of how China combines scientific and technological research, economics, strategic thinking very effectively. Until the middle of the last century, most of the world’s rare earths were sourced from sand deposits in India and Brazil, not from China at all. Through the 50’s, South Africa came into the market because there were some new findings of rare earths bearing monazites and then through the 60’s and 80’s the Mountain Pass rare earth in California was the leading producer in the United States. In 1986, for some reason, which cannot be just without a basis, the Chinese government placed rare earths on the list of top secret national priorities, and in 1992, Chinese Prime Minister stated to the world, “the Middle East has oil, China has rare earths”. This is the statement made by the Chinese premier. A few years later in Policy decision in the late 80’s and 90’s, the Chinese President said to his own people: “Improve the development and applications of rare earths and change the resource advantage into economic superiority”. By 1997, the rare earth producer in United States was forced to stop mining. Why? Under increasing pricing pressure from China! They basically outbid them in price and, of course, there was help from the United States itself, environmental pressure from the State of California, leading to stoppage of all operations by 2002. In 2003, China acquired one of the most advanced rare earths magnetic facility in United States, closed it, transplanted the entire plant to China including its portfolio of patents in 2003. Now, while the company was being brought by China, they also trained the manpower so that the whole thing is manned by Chinese manpower. In less than 30 years China had made rare earths into a national monopoly!
The Chinese were also using a mixture of restrictive production, export policy, tax regime on rare earths, with the object, basically, of shifting more and more rare earth technology-dependent manufacturing facilities with them the borders of China. So, you would never know when you would get the raw material, or not get it at all. So, put up the plant in China! Japan had a taste of this near monopoly policy when Beijing halted shipments to Japan, over a territorial dispute: it had nothing to do with anything other than a territorial dispute. So, clearly China has not only built the monopoly, it also knows how to twist things around in its favor in unrelated matters. Now, of course, efforts are being made in the United States and elsewhere to catch up with China in this field but this is not going to happen overnight because they had closed their factories, dismissed their manpower and there is nothing left there of the earlier operations. They have to start all over again when 97% of the market is controlled by China.
Where are we now? In the 50’s we were the major producers of rare earths. We actually stopped producing rare earths in 2004 due to lack of market competitiveness. Now I also remember that in the 90’s, there was a proposal to have a Titanium plant in India and it was scuttled because it was not economically viable because of the cost of production was more than the cost of the Chinese Titanium. What is the manufacturing cost in China? God only knows! Their marketing is what we need to understand. They closed the Titanium market last year, and I understand some product prices went up by a factor of 10. Talking about competitiveness in the market and taking a policy decision like closing that activity is not a great strategy. Of course, now we are trying to revive our capabilities to become competitive once again both through indigenous efforts as well as with international co-operation, with Japan for example. Now considering that India has a major stake in renewable energy and major ambitions in the automobile sectors, both of which require rare earths, it is indeed surprising that we did not have a policy on rare earth minerals. But perhaps, it is not surprising because we rarely have any strategy in the market place.
Are there lessons for India in all the above narrations? India and China are the two most populous countries of the world accounting for nearly one third of the world population. Both the countries while having different political systems, have adopted science and technology for their development, both economic development and national security. They have chosen different paths and their achievements have been different. Let us begin with a comparison of India and China in terms of their Research Intensity.
As regards a comparison of Science & technology in India and China, the first question we need to ask is how much the two countries are investing in scientific research and development. I have given in the table some figures related to the research intensity for India, China and US.
RESEARCH INTENSITY World USA China India Population 6671 309 1329 1165 (millions) (4.6%) (19.9%) (17.5%)
GDP 66294 13741 7103 3100 PPP$billions (20.7%) (10.7%) (4.7%)
GERD 1146 373 102 25 PPP$billions (32.6%) (8.9%) (2.2%)
GERD/GDP 1.7 2.7 1.4 0.8 GERD per capita 172 1209 77 21 PPP$ GERD per researcher 159 244 72 127 PPP$thousands
(UNESCO Science Report 2010, 2007 Statistics)
While India and China are comparable countries in terms of their population, in terms of GDP, our GDP is a little less than half of China’s. On the other hand, our gross expenditure on R&D (GERD in PPP terms in dollars) is only about one fourth of what China is spending. If in terms of population we are similar, our GDP is half of China’s and our investment in R&D is one forth of China’s, we are clearly investing a good deal less than China. Of course, the GERD/GDP ratio of 1.4 for China and 0.8 for India themselves compare poorly with 2.7 as in many of the technologically advanced countries. What is even more disturbing is that our 0.8 has remained 0.8 for past about 20 years, whereas China started off with 0.8 and has been ramping up very fast. They want to catch up with the advanced countries. I will give some more comments on this a little later. Though in terms of per unit population, our investments are about one fourth of China, we are not doing badly in terms of expenditure per researcher. What it says is that the number of researchers in India is not as high as in China. These are the broad parameters.
How do the two countries compare in terms of their scientific outputs? What are the indicators that reflect the returns on the investments in R&D? Number of scientific publications and patents filed are some of the quantitative measures of research activity in a country. China beats India in terms of mere numbers though both fall far below the US. On the other hand, it is somewhat comforting to note that the performances of the two countries are comparable when one looks at the scientific outputs per unit investment basis. I would venture to add that the quality of scientific output in the two countries is also comparable based on the citations. Where ever India has participated in International mega science projects, Indian contributions have always been internationally competitive.
What I would like to conclude is the following: In terms of the quality of output for the investments, it’s not fair to say that our S&T system is poorer than China’s S&T. Quality is in fact comparable. Investment per researcher is comparable, research output per researcher is comparable. We simply do not have as many number of researchers on the work bench as China. Lower research intensity is of course a concern but growing slower is even a greater concern. This needs to be corrected. Of course, Our Prime Minister made the statement in the last Science Congress that this will be corrected during the 12th Plan. Unfortunately, I have been hearing similar sentiments since the 9th Plan period onwards. Every Prime Minister makes exactly the same statement, but nothing changes.
While the standard S&T indicators are good indicators of the level of S&T activity in the country and often reflect the capacity of the country to embark on a technology led economic growth, this capacity does not automatically translate into economic development and may remain dormant or frittered away. I am not aware of any specific indicator of the forward link between R&D expenditure and economic returns. An indirect indicator of this forward link is the industry contribution to the national GERD.
COMPOSITION OF THE NATIONAL GERD’S (Average from 1995 to 2005 as a percentage of GDP) USA CHINA INDIA GERD 2.6 1.0 0.8 GOVERD 0.3 0.3 0.6 BERD 1.9 0.6 0.2 OTHERS 0.4 0.1 0.0 RAND Report “China and India, 2025”, 2011
It is interesting to note that India is the only country in this group where the industry contribution to R&D is much lower than that by the government. Industry investments on R&D have always been poor in India. Prior to the economic liberalization of the 90’s, this was not unexpected. However, even after economic liberalization, industry investments on R&D have remained poor. The industry neither play a proactive role in the commercialization of the research results nor invest in R&D, Government incentives to promote industry investments on R&D have had very marginal impacts. While China is doing some what better than India, The contrast with the US can not be missed. The US economy during the twentieth century has been a text book example of technology driven economic development. The first five decades dominated by defence technologies. On the other hand, the last three decades are being ruled by the market place. “Silicon Valley” and “Route 128” indeed characterize the three decades. The contributions of the Indian diaspora can also not be missed. Innovation and Entrepreneurship are the mantras of these three decades. Innovation, defined as the creation of novel and more effective products, processes, services or even ideas that are acceptable to the markets, cuts across the entire population of the country and is not related to the academic achievements of the persons. One indicator of innovation today is the number of patents filed. The US leads the world in terms of the number of patents filed across the world. Till recently, both India and China have been poor in patents filing and notorious for their poor implementation of IP Rights. But one must concede that civilizations that have survived for thousands of years can not but be innovative. India and China are no exceptions. China has moved forward and has created a formidable IP portfolio. If you look at the last WIPO report of 2011, you will find that while China is moving forward, we are yet to catch up. Well, we have taken some steps. We have aligned ourselves with the global IP regime. We have sensitized our R&D system to protect IP. But in my view, while a lot has been said or written about innovation in India, very little has been done to nurture innovation. The National Innovation Foundation lists thousands of grass root innovations. They however lack institutional support for validation, infrastructure for manufacturing and marketing. The TEPP program of the Ministry of Science and Technology offers financial assistance to the innovators cutting across the entire population. The Patent Facilitating Cell of DST offers information and assistance in protecting IP. All the initiatives are sub-critical. China’s patenting system definitely started off earlier than ours and I understand they are doing better than ours. I really do not know how China is promoting innovation. But the proof of the pudding is in eating. The Chinese are now filing nearly 75% of the number of patents by the US. The government of India has recently declared the decade 2010-2020 as the decade of innovations. I have high hopes on the National Innovation Council to put in place some concrete initiatives.
Entrepreneurship is the other link in the technology transfer chain. An entrepreneur is the one who converts an innovation into a wealth generation activity. The economic impacts of entrepreneurship in MIT (Route 128) and in Silicon Valley are too well known to be repeated here. Both India and China embarked on aggressive entrepreneurship development programs very early. Unfortunately, over a period of time, India has lagged behind. I have been personally involved with the activities of the National Science and Technology Entrepreneurship Board and in the establishment of the Technology Development Board, both under the Department of Science and Technology. The role of NSTEDB in creating and nurturing a culture of entrepreneurship among young engineering students over the last few decades is indeed commendable. The Board has also established a chain of Technology Business Incubators in academic institutions to identify and nurture young entrepreneurs. It is worthwhile to note that while India and China embarked on the TBI program almost at the same time, China has forged ahead both in the number and scale of operation of TBI’s. China India • First TBI started in 1987 2000 (Pilot Projects during 87-90 in both countries with UNF S&T)
• Number of TBI’s(2008) 670 120
• Number of graduated tenants 31764 1150 India has important lessons to learn from countries like Israel, Taiwan and of course China in promoting innovation and entrepreneurship. As was pointed out earlier, India’s GDP is lower than China’s, and the contribution of technology to GDP is also definitely lower than China. So, if we want to catch up with China in GDP, we have to increase production, manufacturing, marketing. There are a whole range of issues. Where are we investing? Where the money is coming from? Whereas in the United States, out of 2.6 for the GERD/GDP, only 0.3 comes from the government and 1.9 comes from the industry. And in China, out of 1.0, 0.3 comes from government and 0.6 comes from business. In contrast, in our case, out of 0.8, only 0.2 comes from non-government sources. So clearly, Chinese industry is having better forward and better backward links to the industry. What they are doing is they are making high technology industries taking the research output from the R&D system and they are contributing back into the R&D system much more than in India. This, in my view, is one of the major drawbacks in our case. This too has been talked about for the last 30 years. We are not discovering this now as it were: we knew it but we have not been able to make major corrections to it. An interesting exception is the increasing R&D investment by biotech companies in India.
This is the picture of R&D expenditure per firm in India’s pharmaceutical industry. See what’s happening after 2000. It’s just shooting up. I certainly believe that the early successes of some of the government initiatives in nurturing new biotech companies are responsible for this change in the scenario. But, this has not happened in the other sectors. The question to now ask is why haven’t we expanded/replicated such programs. We have not yet learnt to repeat successes.
And, of course, the remnants of colonial rule in many of our government policies continue to act as hindrance to our technology development and commercialization efforts. This deserves a separate discussion. It sometimes takes years to approve a technology project and in an environment of fast changing technologies, this is not acceptable. Of course, it takes years to even close it if found unfeasible. Procurement policies are totally skewed and safety net for genuine technology failures does not exist. I am sure that Ashok Jhunjunwala of IITM will tell you how the wireless on local loop technology developed in India had to be sold through Brazil to India because China outbid the India purely on the disqualification clause that they don’t have the requisite experience of supplying 50 thousand lines. A new company doesn’t start with supplying 50000 lines. It doesn’t make sense and there is no long term strategy by government on industries in non-strategic sectors. This is something which we have to worry about.
Last but not the least, every link in the Mind to Marketplace technology transfer chain is human centric. The availability of skilled human resources is therefore a measure of a country’s ability to create wealth and is as important as resources and capital inputs for any country with technology ambitions. While human resource is a truly renewable resource, it is education at all levels that converts a mouth to feed into a skilled pair of hands or an innovative brain. The human resource pipe line is also a pipe line that can not be turned on and off at will as per requirements. Today’s student is tomorrow’s teacher who trains more students. In general, China is presently better educated than India. India has an unacceptably large fraction of its youngsters outside the educational system at all levels. Even after 15 years of formal education, an unacceptably large fraction of our students turn out to be unemployable. China not only has more number of scientists and engineers per million populations than India at present but also trains more scientists and engineers annually. If we have to really draw the full benefit of the demographic advantage that we are likely to have over China in the 2020’s and beyond, (increasing number of youngsters in the productive age group and the declining dependency ratio) we need to revamp our educational system and that too NOW.
(The writer is Professor V.S.Ramamurthy, Director, National Institute of Advanced Studies, Bangalore and former Secretary, Department of Science and Technology, Government of India. This formed the basis of a talk delivered by him at the Chennai Centre for China Studies on 22 August 2012).