. -” alt=”How The Economy Works
-“/>Indian economy is in a nascent stage. It is not as mature as Japanese, European or the US economies. Hence, we need technology imports more often than other developed nations do. We also import products which are basically raw materials, finished and semi-finished components, spare parts, chemicals, accessories and electronic goods in Complete Knocked Down (CKD) or Semi Knocked Down (SKD) conditions.
For growth on a long term basis, technology import is essential. For growth on a short term basis, products have to be imported. Products raise the living standards as well. As Indian economy and industry are developing, new products and technologies need to be imported.
For example, India is a major importer of petroleum products, electronic goods and parts, gold, vital chemicals, fertilizers capital equipment, computer parts, processing machinery and medical equipments.
Similarly, India is also importing technologies for power generation, rail and road construction, civil aviation, mining, nuclear power generation and utilization and for other infrastructure related projects. The question now arises what should we import? Technology or products?
If we import only the products, we would be the biggest consumers of foreign goods on account of our burgeoning population, We would produce more (in terms of agricultural, industrial and service related outputs) in order to import these products, Our living standards would improve.
Imports would increase, Gross Domestic Product (GDP) would also increase as imports would necessitate the generation of additional resources. So, economy would certainly grow.
For example, petroleum products are imported by us and we import them only after we generate enough of resources so that we could pay in US dollars. That would automatically mean that our exports would also grow.
However, there would be no investment in infrastructure development. Construction of roads, rails, steel, coal, power and fertilizers would be ignored. New technologies for generation of better products or services in these core areas would not be developed.
There would be no generation of additional jobs which is an essential ingredient of our economy. The rising population must be absorbed in productive operations. There must be jobs for our masses from workers to managers. But if we import products only, we would not be able to achieve the low unemployment level.
This could lead to large scale industrial unrest. The product consumers would work hard to earn extra money (so that they could buy those products). However, the basic engines of economy would not generate opportunities for jobs, business or entrepreneurship. Hence, in the long run, they would not be able to buy imported goods.
Product import would lead to decline in service import. The import of services includes industrial and management consultancy.
As this is not related to product import, nobody would buy these vital services from abroad, As a result, we would be deprived of the latest developments in computers, Internet, electronics, management consultancy, human re- engineering, telecommunications, farming, plant breeding, agriculture and other vital fields.
India would lag behind other developing nations. Our services sectors would also suffer because services are always supported by latest technologies which are imported.
Now let us take a look at the other side of the picture as well. If we import only the technologies, we would develop the basic infrastructure to arrive at the self-reliance stage.
We would be able to develop new and indigenous technologies on our own once we have imported latest technologies for power generation, defence, mining, shipping, metal extraction, chemical plants, fertilizers and telecommunications.
Indians can adopt all types of imported technologies for their local needs. The example of PARAM can be cited, the first full operational supercomputer built by Centre for Development of Advance Computing (CDAC).
We can create records in economic development, industrial production, software development and exports, manufacturing and allied areas provided that we are fully conversant with the latest technologies from the West. Another example can be cited of the Indian software brain power.
The computer was developed in the USA and was adopted by Indians. Now Indians comprise the largest technical manpower pool in the USA for on-shore and off-shore software development jobs. This proves our versatile capabilities and abilities to adapt to new technologies.
Import of new techniques would lead to more production. This would, in turn, lead to more jobs and a rise in the GDP. Hence, there would be a rise in the productivity of core sectors, secondary industrial sectors and services sectors. There would be a boom in Indian economy. Exports would grow which would make up for increased imports (for import of technologies).
But there are some strings attached to the import of technologies. We have to spend first and the payoffs would come later. In case of product import, the import would automatically trigger off a chain reaction in the economy. But industrial infrastructure would take years to develop.
The import of technologies would not have a visible impact on the economy. True, it would pay us later. But the Indian populace needs products as well. Living standards would have to be raised. Vital life saving drugs must be imported.
Computers and vital electronic components must be purchased within specific timeframes. Product imports cannot be stopped as Indian economy would not start producing these products within a short time span. True, our indigenous manufacturing would lead to the development of industry and economy. But our industry would not be able to produce good quality products (which are at par with imported ones) immediately.
The solution has to be sought in terms of a balance between the two imports. The two basic guidelines in this context are:
(A) We have to import those products which cannot be produced at home (For example, petroleum, vital electronic components, etc.) The national exchequer has to bear the burden of these imports. These products do not require technology import but understanding and adoption of technology is free of cost or cheap by all standards.
(B) We must try to indigenize the production of all other products which could be manufactured at home. (For example, steel, vital medicines, computers, telecom equipments, agricultural equipments, etc.). These products could be manufactured in India. In order to produce the best quality, we can import latest technologies from abroad.
The basic infrastructures would have to be built or upgraded. Technology import would also be a burden on our national exchequer. However, we would learn the art of making good products with gradual exposure to latest technologies.
Therefore, the action plan could be summarized as follows:
(1) Import those products which cannot be produced or which cannot be manufactured economically in India.
(2) Manufacture those products and technology which are vital for:
(a) Infrastructure development; and
(b) For raising the living standards of the masses.
Both these categories have to be given a certain ratio. Let us give it a ratio of 40 : 60 (products : technologies). We should import lower quantity of products because products do not improve our productivity and technological up-gradation at all.
They raise our living standards. The technology imports are investments for the future. They build our nation so that she becomes more independent and self-reliant.
Our main objective should be a growing and self-sustaining economy without foreign aids and assistance. This ratio would be ideal for the achievement of our national objectives and for the attainment of a healthy rate of economic development.
The main issue of economic development must never be ignored at any cost while importing products and technologies. The State as well as the importers must ensure that the imports being affected by them are for the benefit of their industry, region and nation.
The foreign cash reserves are limited and the world-wide secession has triggered off industrial slowdown and a reduction in exports. Hence, imports of any kind must be resorted to after careful discussions and predictions about the future of international trading in the times to come.