Recently IIT Kanpur developed the 5th fastest super computer in the world at a cost, which is only a fraction of what is available in the global technology market. We achieved super computing capabilities way back in 2001 if I remember correctly and every progress that we make in this area is a sign of our technological prowess. Super computers are generally used for high end research involving trillions of calculations in areas like detailed simulations on earths climate, for carrying out biological simulations, to design super-efficient internal combustion engines and solar panels, in aeronautics & astronautics, in quantum mechanics, in material science for simulating the breaking of the bonds that holds molecules together and in many other areas. Developing new energy sources, improving energy efficiency, understanding climate change and its potential impact on monsoon (Monsoon has been subdued so far this year) and our water system, developing new materials etc.need high performance computing capabilities and faster computing capabilities are essential for maintaining economic & intellectual leadership in the 21st Century. Ideally every major research center associated with all the leading universities in the country should be bestowed with supercomputers and engineering & science departments in these universities should develop their own version of supercomputers or its next version quantum computers. ISRO is scheduled to launch a commercial rocket on Monday that carries 5 satellites including 2 from Canada, one each from France, Singapore and Germany, which will be another milestone in our space endeavours as we are gradually building up significant cost competitiveness and technical competence in this area. ISRO is scheduled to test fire its next generation GSLV-III rocket in the near future and it will involve cryogenic upper stage, which may enable ISRO to launch heavy lift vehicles, where commercial opportunities are much more attractive. ISRO should work on next generation advanced propulsion rocket engines, which is used in space shuttles. Plasma physics & propulsion technology should be one of our core competences in future and our ultimate goal should be to develop nuclear fusion rockets, which may enable exploration of the entire solar system. ISRO & DRDO are yet to fully commercialize growing technological competence and should collaborate and develop civilian air crafts & drones or they could collaborate with interested foreign players through joint ventures as commercial air crafts & drones have brighter future ahead. ISRO & DRDO should introduce the concept of profit sharing with the aim of attracting the best scientific talent. Government recently announced 100% FDI in the Defense sector, which may enable transfer of technologies by global defense pioneers to their fully owned domestic subsidiaries and India could leverage its engineering talent and become a hub for global defense manufacturing. Another area where we need to make more progress is in Nuclear energy and Nuclear R&D should be one of our top priorities in the 21st Century. If we look at the pricing dynamics based on projections, gas based power plants will be expensive in our case since we are importing natural gas and even domestic gas is expected to be priced at 8.4 mmbtu, which translate into per unit cost of Rs. 6.5 to Rs. 7.5 making it expensive compared to other sources. While shale gas revolution in the U.S., the recent deal between Russia & China and new production, which is coming on stream in places like Australia & Brazil has altered global gas dynamics globally but in the international markets gas prices are linked to Oil and Oil prices continue to remain elevated meaning significant reduction in the prices of natural gas cannot be expected. The U.S. has huge shale oil reserves and some experts are forecasting export of shale oil but currently there is an embargo on oil exports and even if export ban is lifted, Oil prices will remain elevated. While we should encourage more investment and domestic production of Oil & Gas but natural gas should be primarily used for other industrial activities as it is a feed stock for Chemicals, Fertilizers, Pesticides, Paints and Plastics & Cosmetics etc. and each of these industries have huge growth potential in the country. Gas based technologies are fully developed and not much efficiency gains or cost competitiveness will be coming through in future unlike solar power, battery technology and other such renewable sources, where technological improvement based price competitiveness is still feasible and in our case gas based power plants does not have significant cost competitiveness compared to renewables. Even in the case of China gas based power plants does not have significant cost competitiveness compared to renewables but it is giving significant cost competitiveness to the U.S. and the share of shale-gas in the overall energy mix has gone up and will continue to play a dominant role in future. While China has significant shale-gas reserves but its recovery in a cost effective way is yet to be proven otherwise Chinese would not have signed long term contracts with the Russians. China is also one of the biggest investor in the world in renewable energy & nuclear energy and the big picture is a diversified energy mix leveraging the unique requirements and characteristics of the Chinese economy, resource availability & technological feasibility. Our unique 500 megawatt three stage thorium fuel cycles, which uses fast breeder reactors became operational at Kalpakkam in 2012, has achieved full plant capacity recently. India has 25% of the thorium deposits found globally as it can be extracted from monazite, which is abundant in the southern part of the country. Most of the nuclear power plants in the country uses Slow Reactors that uses less than 1% of the nuclear fuel and eventually we need to migrate to Fast Reactors, which utilize more than 99% of the nuclear fuel and can burn the nuclear waste. As per the deal with the nuclear supplier group, which we signed into in 2008 under Indo-US nuclear deal, we have access to a wider supplier base but as the share of nuclear power in our energy mix go up based on projections, we may end up importing a lot of uranium. Uranium can be extracted from the ocean and India is blessed with access to a wider oceanic floor and this coupled with fast reactors may enhance energy security without creating any enviornmental damages involving nuclear waste. Fast reactor based nuclear power plants can be used to make hydrogen fuel during off peak hours and could fuel future vehicles, of course that is far into the future. While it is impossible to predict the future but if recent trends are any indication, electric vehicles & hydrogen powered cars may become cost competitive with gasoline vehicles by 2030 with TESLA pioneering battery technology and a host auto-majors pioneering hydrogen fuel cell technology and the transportation system in the U.S. will undergo dramatic shift with arrival of long-haul trucks optimized to run on natural gas. Electro- mobility on an international level got a boost recently when German automakers Diamler & BMW expressed their interest to collaborate with Tesla with the aim of further developing this technology and Tesla is inclined toward open source sharing of its technology. When it comes automobile engineering & innovation German automakers are powerhouses. Recently the rail operator Deutsche Bahn opened high speed charging stations along key rail routes in Germany to make electric car vehicles viable in long distance commuting. The average lifespan of nuclear power plant is estimated to be anywhere between 40 to 50 years and the average age of worlds 450 odd nuclear power plants are anywhere between 25 to 30 years and in America it is upwards of 40 years and thus globally transition from Slow Reactors to Fast Reactors is possible in a cost effective way. Globally some 20 Fast Reactors are operating commercially. Government is planning to roll out broadband highway so that internet reach every village and provide internet connectivity to all the schools in a phased manner. Our universities need to be networked so that students in one university can access resources in other universities and researchers can collaborate. Collaboration may enable us to optimize the cost of higher education system in the country. This is especially pertinent since Indian higher education system is heavily subsidized by the government ( Taxpayers) unlike in the developed world where higher education system are self financing in nature. Thus in our case the intellectual capital & resources available in our universities is a public good and should be made available to the public who is heavily subsidizing it. While the government recently announced it is committed to setting up IITs, IIMs, IISc, AIIMSs etc. in every state and government will continue to play an important role in the higher education but I think government should be more like an angel investor and instead of relying on government funding alone, these institutions need to be made self-financing autonomous higher education centers. Their alumni are very strong and these institutions can tap their alumni network and create endowment funds like what Harvard, Stanford, Colombia, Carnegie-Mellon, MIT etc. does. A 21st century economys requirements ate diverse and skill up-gradation should involve every facet of the education value chain and government need to focus on second tier engineering colleges, poly-techniques and ITIs etc. with the aim of making semi-skilled workers world class; be it industrial sector or agriculture or construction or healthcare or retail etc. and we should do international bench marking in the semi-skilled education sector. Higher education involving the highly skilled needs to be made self- financing in nature with a judicious mix of student loans & scholarships so that social mobility in terms of access to education is possible. We need more collaboration between the academia and the industry. A bigger economic pie necessitates world class research centers and an education system, which encourages discoveries & inventions and a financial system, which rewards ingenuity. A bigger economic pie means more money for the industry and higher market capitalization in the stock market and thus collaboration between the industry and the academia could be a win-win partnership. A lot of leading industrial houses in the country are already running educational institutions and we need to strengthen this partnership with the aim of making India an innovation hub of the future; we are talking about an economy with a per capita income of $ 50000 by 2050 and that is a $70 Trillion economy. Recently Chicagos North-Western University invented Smart Pipe, which reduces the amount of clean, treated drinking water that is wasted by leaky pipes. It uses nano-sensors to monitor water flow in the critical sections of a public water system. The amount of water wasted in our leaky public water system is mind boggling. Another interesting invention, which caught my attention is water vapor distillation system known ad Slingshot, which can produce clean water from any source, which is energy efficient ad well. Water recycling could save a lot of money in our metropolitan cities. These are the type of incremental innovations, which will dramatically alter the quality of life in this country and these are the type of inventions, which we should encourage our universities to pursue vigorously. This is a classic example of how to link research & education to the developmental needs of the country but we should not forget the fact we are living in an interconnected world economy of globalization & WTO with free flow of goods, services and ideas and thus bench marking of our education system has to be always international. Some R&D is always local and some international, so essentially R&D ecosystem has to be glocal serving the requirements of the end user. Indian diaspora is acclaimed for its technical know-how, managerial capabilities and work ethic and this export of human resources to different parts of the world often termed as brain drain turned out to be a blessing in disguise as India is a beneficiary of huge remittances averaging $60 to $70 billion per year, in fact human talent turned out to be Indias biggest export. What made America so dominant in the 19th & 20th century was its education system, which attracts the best & the brightest from around the world and an ecosystem of enabling capital markets comprising of venture capital, private equity, hedge funds and dynamic primary & secondary markets, which facilitates successful commercialization of discoveries and inventions carried out in research labs & other educational institutions. Thomas Always Edison & John Piedmont Morgan pioneered this system and this has done wonders to entrepreneurialism in America. While many great entrepreneurs does not have any formal degrees like Thomas Edison, Bill Gates and Larry Ellison just to name a few and many of them does not have any formal training in the businesses, which they set up like John D Rockfeller & Jack Ma being classic examples but their companies continue to look for talent in the universities and todays science & technology are so evolved that incremental innovation requires familiarity with the existing know-how. Alibaba did not invent anything new but successfully replicated a business strategy, which was pursued elsewhere by pioneers like Amazo EBAY and online payment providers like PayPal etc. and successfully leveraged an ecosystem of internet, technical know-how and managerial talent. Of course that requires imagination, willingness to embrace the unknown and unique entrepreneurial insight to see the changing patterns of consumer & client behavior. When Amazon & Alibaba started investing heavily to attract mobile commerce as the total transaction value of mobile in the overall pie of e-commerce revenue started going up since 2009, it temporarily depressed their operating margin. Media started speculating about their business model by speculating people tend to spend less on mobile- that was a premature value judgement on consumer behavior as consumer purchase using mobile is still evolving. This is a classic example of unique entrepreneurial insight. What enabled ancient India to earn the sobriquet The Wonder that was India was; we were a civilization of inventors, builders and makers of things based on the technology prevalent at that time. Just to give an example, the place that I hail from Calicut got its name because of the unique weaving techniques, which used to produce one of the finest fabrics in the world called Calli and it was Portuguese who gave this city this name when it is locally known a Kozhikode. We survived as a civilization thousands of years of vicissitudes, trials & tribulations that civilizations face because we refused to stand still. It is surprising to learn, till 1830 India had trade surplus with the world including China even when Dutch East India Company, French East India Company and British East India company monopolized Indias trade with the external world. Since the trade was done in gold and gold was a stable store of value, there was no issue of gold imports unlike in the fiat currency system of today when we are struggling to control inflation and restrict gold imports. The only way to restore ourselves to the formal glory and regain our legitimate place in the comity of nations is through faster equitable growth, which lifts all the boats and this cannot be an open ended journey but based on fixed time tables with markers & milestones to be reached in stages. This necessitates gradually moving toward a higher growth trajectory of 8 to 9% and staying there for the next 2 to 3 decades. This naturally means well-calibrated thrust on investments with the aim of improving our infrastructure and it also means improving the agricultural productivity, optimally using the water system and absorbing the surplus labour in the agriculture sector to construction, services & manufacturing and making our government & governance technology savvy, efficient & effective so that India become the leading nation in terms of ease of doing business. The government has already announced a lot of positive initiatives like setting up 8 new industrial clusters for electronic manufacturing development as India imports 90% of electronic goods used in the country. Government wants to boost urbanization by setting up 100 smart cities and wants to connect all the major towns through airports & bullet trains and give a boost to road construction etc. We need to set a target of keeping our trade deficits within an acceptable band of +/- 0.5% . For a stable global economy while it is imperative that all the large economies run current account deficits as these countries can fund their deficits through capital inflows but for developing countries with high inflation, high current account deficit tend to depreciate the currency creating a negative feedback loop effect. So either we should aim for low current account deficit or well contained inflationary expectation framework and at this stage of development, we should leverage labor cost arbitrage and aim for current account surplus with moderate inflation of 4 to 5%.
Posted on: Sat, 28 Jun 2014 09:32:13 +0000
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