Question

Explain and determine which Asian country can be an example of this statement: "High-technology business services in Asia remain underdeveloped compared with manufacturing technology." Determine its implications in the Economic and Socio-Political areas of this country, and what possible policies can the government implement regarding international trade and investment?

Answer 1

India is the perfect example of a situation where high technology business services have established very well but it is laggard in the manufacturing technology. Its Asian rival China has been at the forefront of manufacturing technology.
So it is not surprising that China has been regarded as the factory of the world while India as the back-office of the world.

As a natural consequence, the high technology business has created more white-collar jobs that require higher education and technical skills. The infrastructure necessary for these businesses such as skilled labor, data connectivity was available only in the developed cities. It has created urbanization but cities were unable to take such excess intake and they became unmanageable.

Meanwhile, the vast majority of the population was not that skilled and they remained dependent either on the agricultural sector or low-skilled jobs in the cities or in manufacturing. They were unable to be a part of the wealth creation that has taken place because of the 'new economy' businesses. This has widened the urban-rural divide and further increased income inequality in society.

The government has complete policy failure because it has implemented a socialist economic model for the first four decades after the independence of the country which was a disaster. The progress towards the market economy is very slow even after three decades of economic liberalization. The government needs to cut subsidies and other support to the farming sector which is blocking the majority of its labor force without any material output for the economy.

The government also needs to loosen the control on the education sector which is controlled by the government-run universities and should introduce skill-enhancing short technical or vocational courses. This will unlock the labor potential and will attract manufacturing firms. As a matter of fact, a manufacturing business creates more jobs than a technology or a service firm. India will have to reform its policy in terms of land availability also that will help the firms to acquire land. This will attract a lot of investment and will also create more jobs.