A country’s engagement in high technology exports (HTX) reflects the sophistication of its economy, level of productivity and future capabilities. HTX are products with high R&D intensity, as defined by the Organization for Economic Cooperation and Development (OECD). The OECD has identified specific products in this category in the sectors of aerospace, computers, pharmaceuticals, electronics-telecommunications, scientific instruments, electrical machinery, chemistry, non-electrical machinery and armaments.
With an accelerated fourth industrial revolution and rising consumption of R&D-intensive goods, global trade in high-technology products can be expected to remain a key growth driver. India, a leading provider of software exports, can emerge as a key player in the evolving HTX regime.
Extensive work in R&D, innovation, design and knowledge in the manufacturing sector has led to India’s enhanced participation in the global economy in this critical segment. Its progress has been noteworthy, with HTX from the country going up from USD 2.1 billion in 2000 to USD 13.3 billion in 2016.
Though India’s share in high-technology exports has gone up from 0.18% in 2000 to 0.81% in 2014, there has been a dip in the total exports from USD 17.3 billion in 2014 to USD 13.8 billion in 2015. HTX as a percentage of India’s total exports has remained stagnant over the years.
At the same time, imports have gone up from USD 3.7 billion in 2000 to USD 35.9 billion in 2017. The rising imports and slowing exports in the high-technology sector are a matter of concern for India’s overall trade profile.
The HTX sector requires national expertise across several key areas. Policies currently in place aim at boosting domestic manufacturing and promoting exports.
Under the latest Foreign Trade Policy (FTP), 2015-20, 5 different schemes for facilitating merchandise exports have been merged and consolidated under the Merchandise Exports from India Scheme (MEIS). This promotes the export of notified goods that are either manufactured or produced in India.
‘Make in India’ Scheme, launched in 2014, aims at improving the manufacturing infrastructure in the country by facilitating investments, nurturing innovation and research and development, promoting skill development and fostering ease of doing business in the country.
For the active promotion of R&D in the country the government has engaged itself by providing financial support and grants to educational and research institutions.
An important aspect of expansion of high-tech export opportunities is the Intellectual Property Rights (IPR) regime of a country. Creativity and innovation are crucial for the growth and development of any economy. India has improved its position from 60th to 57th most innovative nation in the world, according to the 2018 Global Innovation Index.
Given the recent reforms, the future outlook of the country in innovation and high-tech production seems positive.
With a low share of HTX in manufactured exports, India, like other countries needs to push up its engagement in high tech sectors through a coordinated strategy. Strengthening the domestic manufacturing sector and initiatives to enhance technology through innovation and R&D on a broader level, along with sector specific policies tailored to the requirements of a specific sector would help in creating a strong high-tech manufacturing sector in India.
Promoting high technology exports requires a holistic set of policies covering domestic manufacturing, technological development, exports and sector specific policies. A board should be set up to monitor Ease of Doing Business at the centre and state levels. FDI could be incentivized through subsidized interest rates and tax incentives. Investments for innovation and R&D must be strategized so that they can be promoted through limited period fiscals. Champion sectors and products should be identified and promoted intensively.
India has tremendous potential to build competitiveness in its high-tech manufacturing sector. This is an opportune time for India to shift focus from exporting traditional items which use low or medium levels of technology to hi-tech manufacturing products.
Source: CII Report – India’s High-Technology Exports: Aiming for the Big League