How India continues to lose enormous wealth!

Since joining TIFAC in April 2013, I have been learning many things that never crossed my thoughts due to my research focused on S&T for Nation and Society. I would like use this blog to share some of the issues I have been talking about at various forums so that the same is available to larger audience.

Due to India’s exports taking a nose dive couple of years back by nearly 20-25%, Govt of India set up an Inter Ministerial Group (IMG) to look into the issues that could help restore the export. One of the need was to infuse technology in some of the MSME sector. TIFAC along with DSIR was entrusted to take action along this line. TIFAC had discussions with Ministry of Commerce and Ministry of MSME on the issue and four areas were identified:

1. Technical Textiles
2. ESDM (Electronic System Design and Manufacturing)
3. Essential Oils(specially flavors and fragrances)
4. Guar Gum

I wish to talk about the last one here – Guar Gum. I was familiar with Guar beans since it was very popular in Gujarat, where I have lived 18 years. When I heard about this to be looked at Export potential point of view, I was very surprised. When we returned to office and looked at the statistics, it was mind boggling. Guar Gum (Guar seed powder) has its use in industry of various kind including Oil and Gas industry. It had nearly Rs 3000 Crore as export and then jumped to Rs 21,000 Crore suddenly and became number one farm export from India exceeding rice and cotton exports. The reason for this sudden surge was not difficult to find. With fracking (hydro-fracturing) technology developing successfully,  “Shale Gas” production started to ramp up in USA. Guar Gum is used in this process and demand for it shot up suddenly. This put pressure on supply and prices went up also. Total export jumped to Rs 21,000 Crore.

TIFAC took up the study of Guar Gum export and worked with various stakeholders and experts and prepared a report on this, which was submitted to the relevant agencies. TIFAC also published a newsletter on this and can be seen here:

TIFACiTECH With Guar Gum story

  While TIFAC is working with various other agencies to take care of various issues identified in the report, I would like to highlight a couple of points here, on which I would build rest of the story:

1. India exports Guar Gum to the extent of 80% of global export. However almost no value addition is done in the country. Price of Guar Gum derivatives jumps 5-10 times compared to raw material. This shows that if we could do value addition within country before exporting, we have an earning potential of more than Rs 50,000 Crore per year.

2. TIFAC did patent analysis of Guar Gum sector and found that of the nearly 12,000 global patents, India holds less than 1% of patents. This clearly shows countries lack of focus on its own strength and proper mechanism to ensure this.

TIFAC has now started to work on a report, which would identify all such raw materials where we are major global exporters without value addition. There are 100s of such materials and I would not even hazard a guess about how much export earning potential this represents!

There is a lesson to be learnt from history in this. India along with China manufactured between 20-30% of global products till about 1750. Look at the chart below carefully. After this India’s manufacturing kept dropping to less than 5%. However during this period export of raw material continued to grow to feed Industrial revolution taking place in Europe. India in turn also served as big market for products manufactured abroad.

Unfortunately,  situation has not changed even after India became independent and enormous amount of wealth is leaking out of India in the form of raw material. Unless India takes major steps to correct this situation we would continue to remain poor. Mr Shashi Tharoor also talks about how raw material was taken out by British and local manufacturing destroyed by them.

Author: Prabhat Ranjan

Prof. Prabhat Ranjan is Vice Chancellor, D Y Patil International University, Akurdi, Pune. He was heading India's Technology Think Tank, TIFAC(tifac.org.in) as its Executive Director since April 2013 to April 2018. Earlier he was Professor at Dhirubhai Ambani Institute for Information and Communication Technology, Gandhinagar (DA-IICT) since 2002. He was educated in Netarhat School(near Ranchi), IIT Kharagpur and Delhi University. He received his Ph D from University of California, Berkeley where he carried our research on “Nuclear Fusion” at Lawrence Berkeley Laboratory during 1983-86. He immediately returned to India after this and carried out research in Nuclear Fusion area at Saha Institute of Nuclear Physics, Calcutta and Institute for Plasma Research(IPR), Gandhinagar. He played a major role in India’s Nuclear Fusion program and was Project Leader of the largest operational Indian Fusion Reactor, ADITYA, at Institute for Plasma Research from 1996-2002. His current interests include applications of Wireless Sensor Network to Wildlife, Planetary Exploration (Chandrayaan mission), Nuclear Fusion, Healthcare, Agriculture etc. He has received National Science Talent Search Award, IBM Faculty Innovation Grant and HP Innovate 2009 award, NPEDP-Mphasis Universal Design Award 2012, Bihar Gaurav Samman 2012 etc. View all posts by Prabhat Ranjan