Three wishes for 2025

Industry must invest in technology and international sales, economic policy must focus on structural change and productivity, and politics on ideas

- NAUSHAD FORBES

New Year is a time to take stock. This next quarter-century can be India's if industry, economic policy, and politics make it so. Industry must invest in innovation and manufacturing at scale. Our economic policy must focus on long-run productivity growth and its root in structural change. And our political debate must be about ideas.

Indian industry must have the ambition to lead: Start with investment in innovation. I have written often here (email us for links) on this subject, so I will be brief: For Indian industry to lead, we have to be much more serious about innovation. Indian industry invests 0.3 per cent of gross domestic product (GDP) in in-house research and development (R&D), compared to a world average of 1.5 per cent.

We spend $7 billion annually on industrial R&D, compared to $625 billion in the US, $335 billion in China, $130 billion in Japan, and $90 billion in Germany. We are the world's fifth-largest economy and manufacturer, but rank 21st in industrial R&D. Our 10 most successful non-financial firms have a very healthy profit by world standards but invest little in R&D: A mere 2 per cent of profit. By contrast, firms in the US, China, Japan, and Germany invest between 29 and 55 per cent of their profits in R&D. To put this in perspective, 25 individual firms from Alphabet ($40 billion) to BMW ($7.6 billion) invest more in R&D than all Indian firms combined.

Together with R&D, we need to invest in world-scale manufacturing and international sales. Dr Manmohan Singh published a book based on his PhD thesis, which drew attention to our export pessimism. He argued, so presciently, that India needed to shift its focus from import substitution to export ambition. He was right in 1964; he is still right in 2025. Indian industry must see the world as our market, investing in capacity and developing markets in the world's largest countries.