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Breaking things down by sector, imports of embodied technology improve exports of intermediate and capital goods, which are used to make other products. (Photo: Bloomberg)
Breaking things down by sector, imports of embodied technology improve exports of intermediate and capital goods, which are used to make other products. (Photo: Bloomberg)

Tech imports lift manufacturing exports

The import of technology by Indian firms has a positive impact on the country’s overall manufacturing exports, finds a study

Technologies are imported by manufacturers either as physical goods such as machinery, or in the form of the right to use them, such as licenses or royalties. Does this affect the ultimate export of goods in India’s context? A new study has linked an increase in both kinds of technology imports with an increase in manufacturing exports.

A 1% increase in spending on imports of “embodied" technology—the one sold in the physical form—is found to increase manufacturing exports by 0.6%. A similar increase in spending on the other kind—"disembodied" technology imports—increases manufacturing exports by 0.3%.

R. Rijesh of Delhi’s Institute for Studies in Industrial Development arrives at this finding using data on how much Indian firms spent to import technology during 1995-2016. Technology imports let firms make better products, so they become more competitive in the global market and export more.

Breaking things down by sector, imports of embodied technology improve exports of intermediate and capital goods, which are used to make other products. On the other hand, imports of disembodied technology increase exports of capital goods and consumer goods.

Looking at imports of embodied technology, India was more dependent in the late 1990s on the US, Germany and Japan, with around half of its imports by value coming from them. Since the mid-2000s, China’s contribution has grown, providing around 40% of India’s embodied technology imports in 2016.

Traditionally, firms in emerging economies such as India haven’t had an incentive to invest in research and development (R&D), finding it cheaper to import technology. The study finds that building up technological capability internally by investing in R&D has a positive effect on exports too.

The author concludes that improving India’s manufacturing exports will come about not just by importing technology, but by creating local technological capability too.

Also read: “Trade Liberalisation, Technology Import, and Indian Manufacturing Exports"

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