There is a fourth industrial revolution in the world right now and India needs to focus on industrial growth and hardware production, says N.R. Bhanumurthy, a noted Indian economist and a professor at the National Institute of Public Finance and Policy in New Delhi.
Addressing China's status as the world's biggest tech industry manufacturer, Prof. Bhanumurthy told Sputnik in an interview: “We don’t need to necessarily follow the Chinese model of growth. For production, we need a flexible land market and labour market. China must have a much better market system than us, which is working for them.”
He then focused on some of the problems hindering India’s growth in tech industry, saying: “Land and labour in the market is in a black box, where you don’t know about the available land and labour, which makes for the main concern.”
“In India the IT boom has been just in the service sector. The economy needs to be pushed towards tech industry.”
There is a huge demand and supply of human resources in the industry but there is labour friction, which means that skill set of available labour doesn’t match the skill set demanded by the industry, he said.
“The service sector boom took place in urban areas as it doesn’t need much land, but with an industrial boom in technology, land is required.”
Bhanumurthy says a lot of factors are in play: land market reforms are required, the education sector must be more flexible and the friction between labour demand and supply needs to be tackled.
On the other hand, China is big on research and development in tech investment. A World Economic Forum report says China spent 70% more in the area in 2017 than in 2012.
“It’s also investing in high-tech industrial parks and incubators focusing on technologies such as artificial intelligence, robotics and big data.”
The same report says Internet companies like Alibaba, Tencent and Baidu are investing billions in new research centres, AI experts and data scientists.
Partly as a consequence of this, high-value businesses are being funded faster there than anywhere else in the world. As of February 2018, China ranked second behind the US in terms of its number of 'unicorns' – privately-held startup companies valued at $1 billion or more.
However, government data says India's industrial production or factory output shrunk by 1.1% in August compared with an expansion of 4.3% in July. Factory output growth declined in August in the manufacturing, power generation and mining sectors, official data released last week showed. All major automakers saw a steep double-digit decline in September.