V.S. Naipul. Photo: Reuters
V.S. Naipul. Photo: Reuters

Opinion | V.S. Naipaul and India’s industrial policy

Talking to real people in real places, as Naipaul did, can help to pierce through the fog of ideologies and provide invaluable insights for tuning up India's trade and industrial policies

The passing away of V.S. Naipaul, one of the world’s great writers, who had written despairingly about India, the land of his forefathers, is a moment to honour him, as well as to recall what he wrote. Naipaul wrote, in India: An Area of Darkness (1964), and India: A Wounded Civilization (1977), about the darkness that remained in India after its independence, along with self-inflicted wounds caused by Indian policies. 

Amid concerns now that, by formulating an industrial policy to “Make in India" and to raise import duties to protect Indian industries, India may be going back to those dark years, one passage in his books stands out like a beacon. Naipaul had been persuaded, on a research visit to India in 1976, to take time out from discussions in Delhi and Mumbai, from which he drew much of his material, to go to Tata Motors’ (then TELCO) new factories on the outskirts of Pune to see a new India taking shape. He wrote about what he saw, in India: A Wounded Civilization: “The plateau around Pune is now in parts like a new continent. It provides uncluttered space, and space is what the factory-builders and the machine-makers say they need; they say they are building for the twenty-first century. Their confidence, in the general doubt, is staggering. But it is so in India: the doers are always enthusiastic. And industrial India is a world away from the India of bureaucrats and journalists and theoreticians. The men who make and use machines—and the Indian industrial revolution is increasingly Indian: more and more of the machines are made in India—glory in their new skills. Industry in India is not what industry is said to be in other parts of the world. It has its horrors, but in spite of Gandhi, it does not—in the context of India—dehumanize. An industrial job in India is more than just a job. Men handling new machines, technical skills that to them are new, can also discover themselves as men, as individuals."

Naipaul had asked for freedom to wander the factory with a translator, and to talk to whomsoever he wanted to. He met young graduate engineers, and blue-collar workers, and older managers too. What he could see as a keen observer and great writer is a human story of aspirations and the relish of developing new capabilities, which economists’ and policymakers’ numbers cannot reveal. 

TELCO had set out in Pune to build a new “Indian" factory built by Indians. Its first factory in Jamshedpur was built with excellent technical support from Mercedes Benz. That agreement was over: now Indian engineers wanted to build a factory themselves, and design new vehicles on their own, and export these to other countries to compete even with their erstwhile teacher, Mercedes Benz. The ambition was audacious—times were very hard. Due to an acute shortage of foreign exchange, even the machines required for the factory could not be imported. Therefore, TELCO’s engineers had to learn how to make machines too. They succeeded in creating a range and depth of capabilities that very few auto manufacturers in the world had because manufacturers in “developed" countries could rely on a base of industrial capabilities to provide the complex machine tools they needed. By the 1980s, TELCO had succeeded in exporting India-made vehicles to over 50 countries, even during those dark, inward-looking years of “protection" that many lament. 

Naipaul’s story reveals the heart of industrial development, which is generally lost sight of in debates among economists about trade and industrial policies. Industrial development is a process of enterprises in a country (and the people in them) acquiring capabilities that they do not have. Therefore, the ultimate purpose of a country’s trade and industrial policies must be to build more capabilities in people and enterprises in the country, so that they can compete with others and increase their income. 

The story of the Indian automobile industry, including the auto parts industry is a remarkable story of growth of internationally competitive capabilities. It is a story well worth drawing lessons from regarding what India’s trade and industrial policies should be, as well as what manufacturers must do to build their own capabilities. What this story reveals is the emphasis of many manufacturers in the industry who succeeded on the development of their human resources through apprenticeships, total quality management , and other approaches to accelerate learning at all levels. The story will also reveal how to tune up trade and industrial policies to nurture the growth of domestic capabilities. 

Three other industries are worth studying too for India’s policymakers. The success of India’s software industry was founded upon the availability of high-class talent, largely developed in Indian Institutes of Technology. These engineers could be put on the job very quickly to write software to international standards. 

The other two industries are the electronic hardware industry and the machine tool industry. The same engineers who built India’s automobile and software industries were available to these industries, too. However, the growth of these industries was killed by trade and industry policies after the 1990s. In 1990, India’s capital goods industry was the same size as China’s. By 2010, China’s was 50 times larger. Now, India is importing large quantities of capital goods and electronic hardware from China. There is a huge trade imbalance, and there are also security concerns. 

Why have Indian enterprises developed strong capabilities in some industries and failed in others? Talking to real people in real places, as Naipaul did, can help to pierce through the fog of ideologies and tightly meshed screens of numbers, and provide invaluable insights for tuning up India’s trade and industrial policies. 

Arun Maira was a member of the erstwhile Planning Commission.

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