High-Tech Exports & Indian Industry: A Tale of Transformation and Challenge

The Core Question Can Indian companies compete globally in knowledge-intensive industries? This comprehensive study examines how Indian firms performed in high-tech exports during the 1990s, a crucial period of economic reforms.

Why This Matters Now

• High-tech industries grow faster and add more value than traditional manufacturing
• They generate valuable knowledge spillovers that boost economic growth
• Success in these sectors is increasingly crucial for developing countries’ competitiveness

The Global High-Tech Landscape

• High-tech trade grew twice as fast as overall world trade (13% vs 7% annually) from 1988-2000
• Developed countries dominated with 84% of global high-tech exports
• Among developing nations, East Asia led the pack with 75% of high-tech exports
• India’s share remained small at less than 1% of developing country high-tech exports

India’s Manufacturing Reality Check Think of India’s manufacturing sector as a pyramid:

• Base (60%): Low-tech industries (textiles, food products, etc.)
• Middle (35%): Medium-tech industries (chemicals, machinery)
• Top (5%): High-tech industries (pharmaceuticals, electronics)

This structure barely changed over 15 years, highlighting the challenge of moving up the technology ladder.

Key Findings: The Reform Effect The study found that India’s 1991 economic reforms had mixed impacts:

What Worked

• Overall export performance improved significantly
• Domestic firms became more export-oriented
• Companies with foreign operations performed better

What Didn’t

• Foreign companies didn’t boost exports as much as expected
• High-tech sectors remained relatively weak in exports
• Technology upgrading was slower than hoped

The Ownership Factor Surprising finding: Domestic Indian companies often outperformed foreign firms in exports, especially after reforms. This challenges the common belief that foreign companies are always better at exporting.

The Global Connection Advantage Companies with international operations showed consistently better export performance:

• 12% export intensity vs 8% for purely domestic firms
• Stronger performance across all technology levels
• Better able to provide after-sales service and understand foreign markets

Practical Implications

For Business Leaders

• Consider international operations to boost export capability
• Focus on building technological capabilities
• Invest in understanding global markets

For Policymakers

• Create targeted policies for high-tech sector development
• Encourage international operations by Indian firms
• Review policies to better leverage foreign investment

For Future Research

• Examine why foreign firms underperformed in exports
• Study successful cases of technology upgrading
• Investigate effective policy interventions

The Bottom Line India’s journey to high-tech export competitiveness is still a work in progress. Success requires:

• Strategic focus on technological capability building
• Better leverage of foreign investment
• Support for international expansion by Indian firms
• Continued reform and policy innovation

Academic Abstract:

Achieving higher export competitiveness in the high technology industries is becoming the focus of policy attention in both developed and developing countries, as these industries are by nature higher value-adding, faster growing segments of manufacturing and may generate significant knowledge spillovers vital for economic growth. The present paper finds that India’s export structure continues to be dominated by low technology products. Economic reforms have helped in improvement of enterprise-level export performance across technology segment. However, this improvement in the post-reform period has been mainly limited to the domestic firms. Indian firms having foreign presence through establishing affiliates abroad had shown superior export performance than firms not having such investment.

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Full citation: N. Kumar and Jaya Prakash Pradhan (2007), ‘Knowledge-based Exports from India: Recent Trends, Patterns, and Implications’, in N. Kumar and K.J. Joseph (2007) (eds.) International Competitiveness & Knowledge-based Industries, pp. 21–52, New Delhi: Oxford University Press.

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