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India and the Knowledge Economy: Leveraging Strengths and Opportunities

A World Bank report, India and the Knowledge Economy: Leveraging Strengths and Opportunities, was launched in Washington DC on June 28, 2005.


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New World Bank Report Says India Can Make Even Greater Strides in Growing its Economy and Reducing Poverty.


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One of the world’s largest economies, India has made enormous strides in its economic and social development in the past two decades. But according to a new World Bank report, India can do much more to leverage its strengths in today’s knowledge-based global economy.


India and the Knowledge Economy: Leveraging Strengths and Opportunities argues that, when supported by the right kind of government policy incentives, the country can increase its economic productivity and the well-being of its population by making more effective use of knowledge.


"This report serves as an important Bank input into the domestic consultation and reform process which will move India further into the global knowledge economy of the twenty-first century,” says Michael Carter, World Bank Country Director for India. “The World Bank recognizes that making effective use of knowledge in any country requires developing appropriate policies and institutions to promote entrepreneurship and efficient use of knowledge.”


Grooming World Class Knowledge Workers


India already has many highly educated and vocationally qualified people who are making their mark, domestically and globally, in science, engineering, information technology (IT), and research and development (R&D). But they represent only a small fraction of the total population. 


“To create a sustained cadre of 'knowledge workers,' India needs to make its education system more demand driven to meet the emerging needs of the economy and to keep its highly qualified people in the country,” suggests Anuja Utz, co-author of the report. “This means raising the quality of all higher education institutions, not just a few world-class ones, such as the Indian Institutes of Technology.”


Some ways of making the system more demand driven are to allow the private sector to fill the burgeoning demand for higher education by relaxing bureaucratic hurdles, and through better accreditation systems for private providers of education and training.  Increased university-industry partnerships to translate research into applications can yield economic value. Lifelong learning programs can be used to meet the learning needs of all, both within and outside the school system, including using distance learning technologies to expand access to and the quality of formal education and lifelong training programs.


Promoting Innovation


India is becoming a major global source of R&D; about 100 multinational corporations have already set up R&D centers in the country, leading to the deepening of technological and innovative capabilities among Indian firms. But even so, “India is still a relatively closed economy compared with other Asian economies,” notes Carl Dahlman, co-author of the report. “India should increasingly tap into the rapidly growing stock of global knowledge through channels such as foreign direct investment, technology licensing, and so on, so that it can catch up to countries like China, where reforms have moved ahead much more rapidly.”


An important part of India ’s innovation system is the diffusion of modern and more efficient technologies in all sectors of the economy.  According  to Dr. R.A. Mashelkar, Director General, Council of Scientific and Industrial Research of India, India is already gaining international repute for its innovations in areas ranging from pharmaceuticals to software. IT will achieve even more as it improves the efficiency of public R&D, increase private R&D, and encourages greater university-industry linkages.  It is leveraging traditional knowledge with modern science and exploiting public-private partnerships to support grassroots innovations which can improve the quality of life for the poor. An example is the Computer-Based Functional Literacy program, initiated by Tata Group to overcome illiteracy through innovative use of IT.”


Creating a for Center of Excellence Information and Communication Technology


In the telecommunications sector, fierce price competition has resulted in Indian mobile telephony becoming one of the cheapest in the world; more than 47 million people had mobile phones at the end of 2004!  India has achieved remarkable global success in the IT sector which accounted for about 3.82 percent of India ’s GDP in 2003-04, and provided employment for almost a million people. 


But the report notes that the explosive growth of ICTs has been concentrated in urban areas. The government should promote the application and use of ICTs throughout the economy to raise productivity and growth. This requires increasing access to ICTs, such as widespread availability of telephones, including mobile phones, computers, and connectivity to the Internet; enhancing ICT literacy and skills among the population; and developing ICT applications that can provide much-needed social, economic, and government services to citizens.


Moving to Action


This report recognized India ’s achievements but sees enormous potential yet to be unleashed. It recommends an India-led process to coordinate and integrate reforms, combining those in the economic and institutional regime with the many initiatives in education, innovation and ICTs.


“This report comes at a very opportune time. It provides a very useful input for discussion by all stakeholders. What is needed is a national vision and the leadership and governance mechanisms to put this into action,” notes Arun Maira, Chairman, Boston Consulting Group, India.


Sam Pitroda, Chairman of India's National Knowledge Commission supports this view: “We will take into consideration the analysis and recommendations of the report as we design our own strategy. We look forward to cooperating with the World Bank and other multilateral agencies as well as with think tanks and universities in India and abroad as the Commission works to harness knowledge for India ’s development and realize its potential to become a major knowledge power."



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