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Latest Working Papers

WP234: Deconstructing New Labour Codes: Implications for the News Media Workforce, Jaishri Jethwaney, January 2021

Abstract: The over seven-decade long struggle of journalists for fair wages and better service conditions came a cropper when the two Acts relating to their wages and working conditions  were subsumed in the overarching new Labour Codes. The Parliamentary Standing Committee on Labour after stakeholder consultations has submitted its Report to the government. All major trade unions except the Bharatiya Mazdoor Sangh have rejected all Four Labour Codes and demanded to put all the Labour Codes on hold and discuss afresh on Labour laws; only thereafter on Rules.

Various professional journalists’ associations feel that whatever protection the Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 (hereinafter the Working Journalists Act) gave them, has been taken away by the merging of both the Acts in the overarching Labour Codes, making them a part of the 50 crore labour force, without any niche. This working paper has enquired into the various provisions of the codes, varying perspectives of professional associations, trade unions, media watch organisations, and working journalists that emerged during the deliberations at the National Webinar held on January 27, 2021 through primary research and secondary data from the public domain. It has also looked, in retrospect, at the setting up of the various wage boards and the reasons of newspaper owners’ tirade against implementing the recommendations of wage boards and why a nuanced approach for the media industry is required in the new Labour Codes. The Working paper at the end has articulated the implications of the new Labour Codes on the media workforce and has also made recommendations for a nuanced approach.

WP233: India’s Participation in Electronics Industry Value Chains: A new analytical framework and a case study analysis, Smitha Francis & Murali Kallummal, December 2020

Abstract: Several policy reforms carried out by successive Indian governments since the mid-2000s have focused on attracting FDI to promote global value chain (GVC) engagement by Indian electronics firms. The paper examines the nature of GVC participation of foreign-invested Indian electronics firms, based on a critique of existing approaches for assessing GVC participation. A new analytical framework is developed, which integrates macro policy aspects of trade and FDI liberalisation and micro-level policy incentives with firm-level business strategies. It is argued that ‘importing-for-domestic sales’ must be considered as one of the forms of GVC engagement, which the current conceptualisation of GVC participation as ‘importing-to-export’ excludes. The nature of value chain participation is assessed through an analysis of related and non-related party transactions using firm-level financial and customs trade data. This methodology is used to analyse the value chain engagement of a leading domestic market-oriented mobile phone and consumer electronics subsidiary, Samsung India Electronics Ltd. While the FDI-led production restructuring associated with FTAs has been expected to lead to improved efficiency for firms in the participating countries, the analysis found that the gains expected from greater inter- and intra-industry specialisation and economies of scale accrue predominantly to the lead firm, which controls and coordinates the network transactions within its subsidiaries and group associates. Domestic backward linkages for higher value added services were also with related parties. Consequently, there has been rising net foreign exchange outflows from the Indian subsidiary. Sustainable FDI-productivity-investment nexus cannot be achieved with net foreign exchange outflows from foreign-invested companies, and the latter cannot be reversed without establishing the linkages of foreign-invested firms and imported technology with a homegrown supplier base. Several industrial policy suggestions are made towards incentivising local linkages and domestic innovation by foreign-invested firms.

WP232: A Comparative Study of Large Domestic and FDI Non-Government, Non-Financial Companies in India, K.S. Chalapati Rao, M.R. Murty and K.V.K Ranganathan, November 2020

Abstract: The study was conducted in the context of India’s continued struggle to develop an internationally competitive manufacturing sector even after three decades of initiating the process of economic liberalisation. The well-acknowledged need for a strong and vibrant domestic sector provided an additional context. Since the corporate sector, in particular its private sector component, occupies an overwhelmingly important place in organised manufacturing, this study makes an attempt to understand the relative position and a few important operational aspects of different types of companies in the large private sector, which can be reasonably expected to include leading enterprises in different branches of the manufacturing sector. The study underlines that the experience of the past three decades exposed the limitations of open and hands-free FDI-focused approach coupled with the liberalised trade and strong IPR regimes. Following the unexpected and almost simultaneous exposure to external and internal competition, most of the leading domestic private sector, far from equipping itself to meet the competition, preferred to give way to its foreign counter-part. Even new companies which emerged in the top league in the post-liberalisation period preferred low-technology services rather than getting into high-end manufacturing. Within manufacturing, their preference was for medium and medium low technology areas. The study also underlined the shortcomings of corporate disclosures which seriously hamper analysis of corporate data for policy-relevant research.

WP231: Technology Transfer through FDI in India: Mode, Extent and Prospects, Swati Verma, October 2020

Abstract: Foreign technology collaboration is widely perceived as an effective means to address the technology gap in any developing economy, and transfer of advanced technology through licensing route via FDI or pure technical collaboration contracts is highly desired in such economies. However, any technology purchase is ruled by the various specific terms of technical collaboration contracts imposed by the technology supplier on the licensee that are prone to heavy bias in favour of the technology supplier due to its inherent ownership and control on technology. A number of restrictive and prohibitive intellectual property conditions may largely restrict the extent of technology transfer to the licensee, and the vulnerability to abuses in technology collaboration contracts may exist in both within firm and open market purchases. Perpetual payments of high value, limited technology transfer and continued technological dependence on foreign collaborator may result. The local innovation initiatives by foreign affiliates may get sufficiently inhibited in such set up. Owing to lack of evidence on technical collaboration contracts in India, these underlying aspects of technology transfer process in India remain largely unexplored. This study reviews the foreign technical collaborations of 164 FDI manufacturing firms and identifies a range of restrictive terms of foreign technical collaboration in many instances. Limited active absorption of foreign technology by local affiliates is noted in such set-up. The local innovation initiatives are low or negligible for majority of them. A possibly incomplete process of technology transfer via FDI is suggested. An appropriate policy intervention to effectively enhance the scope for technology transfer under fair terms of collaboration and active absorption of foreign technology by local affiliates is crucially needed.

WP230: Trade Liberalisation and Export Competitiveness of Indian Manufacturing Industries, Ramaa Arun Kumar and Biswajit Dhar, October 2020

Abstract: India embraced open trade policy from 1990s onwards, following the Economic Reforms of 1991, by reducing import tariffs and opening up Indian markets to competition. The expectation from this reform was that the Indian industry would be more competitive. By mid 2000s, India was not only an open economy, however, it was on its way to effect across-the-board reductions/elimination of tariffs and other non-tariff barriers by formalising FTAs and CEPAs several prominent trade partners. Although, trade to GDP ratio has increased from 13 per cent in 1990 to 27 per cent in 2019-20, import dependence of India, especially on China has risen manifold. The paper has delved into the trade policy evolution that led India to open up and increase its presence in the global trade market. However, an industry level Revealed Comparative Advantage (RCA) analysis reveals that the loss in export competitiveness in six industries at NIC 4-digit level, since 2000-01 to 2017-18, retarded the growth potential in exports that India could have claimed with a phased opening up of trade. These industries were mainly in the textiles and apparel sector and gems and jewellery sector. The domestic industry level factors such as labour productivity, average wage share, presence of MSMEs are prominent factors that explain the export performance of India that we observe.

WP229: Outward FDI as a Strategy for Technology Catch-Up: A Case Study of Two Indian Automotive Firms, Reji K. Joseph, September 2020

Abstarct: Liberalisation of outward FDI (OFDI) in India in the beginning of this millennium had resulted in a spurt in OFDI flows from India. Automotive was one of the leading sectors of origin of OFDI. Interestingly, it was also found that nearly half of the total innovation-oriented greenfield OFDI, originating from the manufacturing sector of India, had come from this sector alone. This paper, which looks into the factors leading to OFDI from Indian automotive sector and the impact of such investments through a case study of two Indian automotive firms, finds that acquisition of technology was a major driver of OFDI. Fast-changing preferences of Indian consumers necessitated going outward for the acquisition of technology and know-how. This has resulted in the establishment of an R&D network located in different parts of the world to continuously work on improving the products and identifying new possibilities. This has also resulted in the increased R&D spending and introduction of vehicles that meet the toughest global safety and environmental standards.

WP228: Spatial Distribution of Workers in Manufacturing India – 1991 and 2011, H. Ramachandran and Priyanka Tiwari, September 2020

Abstract: For decades, the relationship between structure of the economy and development has been of interest to scholars working on development economics. The major points emerging out in such studies are (a) to grow, countries must undergo ‘structural transformation’ and (b) this transformation involves shifts in resource, labour force and production from primary through secondary to tertiary activities. Thus, changes in composition of employment and production are important part of process of development. This paper is focussed on the question of change in relative strength of labour engaged in manufacturing activities in India in 1991 and 2011. The analysis is based on GINI values and Index of Concentration computed on the basis of data from Census of India.

Based on the data analysis the paper concludes that: (1) Although the GDP has increased between 1991 and 2011 by a factor of almost 5, the proportional contribution to the GDP of the secondary sector in general, and the manufacturing in particular, has been more or less the same. (a) As a consequence of the near stagnant manufacturing sector the regional pattern of concentration of the manufacturing activities in the twenty- year period remains similar. (3) While interstate disparity in manufacturing to a large extent has to be addressed by the Union Government, intra-state disparities illustrated by eastern and western parts of Maharashtra, northern and southern regions of West Bengal and other state level regional inequalities have to be essentially corrected by the state governments. (4) We may not be able to address the problems of regional disparities at the national and state levels in the New Economic Policy regime which is grounded in benefitting from human and physical resource advantage, but such policies particularly at the national level, must change tracks to significantly increase the magnitude of manufacturing activities. Among other things, differential package of incentives to promote manufacturing in poorly developed industrial areas needs to considered both at the national and state levels.

WP227: Impact of Preferential Trade Liberalisation on India’s Manufacturing Sector Trade Performance: An Analysis of India’s Major Trade Agreements, Smitha Francis, August 2020

Abstract: The shift in India’s trade policy focus away from multilateralism towards preferential trade agreements (PTAs) was reflected in the trade deals which India signed with the East and Southeast Asian countries from around the mid-2000s. Earlier work by the author have analysed several broader issues that needs to be inform any systematic assessment of the implications of India’s PTAs/FTAs. The present study focuses on the nature and impact of tariff liberalisation under three major PTAs, the India-ASEAN FTA, India-South Korea CEPA and India-Japan CEPA. It was on the basis of bright export prospects that India committed to reducing or eliminating tariffs across manufacturing industries in these PTAs. With a decade having passed since their entry into force, India’s trade experience in the light of the expectations from the different agreements was examined. The overall evidence that came out of the in-depth analysis invalidates the widespread argument in the academic and policy literature that FTAs enable India to improve export competitiveness. Increased preferential or tariff-free access to imported intermediate products under these FTAs did not deliver sustained export competitiveness for the Indian manufacturing sector—in these PTA partner markets, or globally. In the absence of strategic industrial policy support for building up the dynamic competitiveness of local value chain segments, domestic producers were put in disadvantageous domestic market access position against imports. The study makes a number of critical policy suggestions in the context of the domestic economic crisis, the dependence on China, and the accelerated digital transformations across sectors.

WP226: Inbound M&As in India: Issues and Challenges, K.S. Chalapati Rao and Biswajit Dhar, July 2020

Abstract: The liberal FDI regime with its emphasis on attracting increasingly large amounts of FDI, did not pay heed to the warning signals regarding its adverse impact. Importantly, there were no regulations on M&As for two decades and when they were finally introduced in 2011 under the Competition Act, 2002, they were rendered ineffective by setting high thresholds, providing exemptions and by narrowly focusing on competition.  As a result, major domestic companies as also emerging leaders were taken over.  The relative shares of acquisitions were far higher in case of manufacturing sector compared to services.   In fact, official data seriously underestimates the extent of actual extent of cross-border acquisitions.  Many foreign companies gained strong hold in the economy without adding capacities.  The domestic private corporate sector lagged far behind in various respects.  Belying the expectations of the policymakers, it invested far too inadequately in R&D. The paper argues that   India should do more than establishing an FDI review mechanism. Cross-border acquisitions must be subjected to strict scrutiny by a specialized agency. Proactive and coordinated measures must be devised to encourage domestic enterprises. Special attention must be given to providing long-term risk capital.

WP225: Liberalisation, Structural Change and Productivity Growth in Indian Organised Manufacturing Sector, R. Rijesh, May 2020

Abstract: The present study examines the nature of structural change and productivity growth dynamics in the Indian organised manufacturing since the beginning of economic liberalisation in the early 1990s. We find significant changes in manufacturing as the specialization pattern moved towards technology-intensive segments with considerable improvement in output, productivity, wages and capital intensity over time. However, a corresponding growth in employment is not observed across many industries. The decomposition of labour productivity at the sectoral level reveals the overwhelming presence of within-sectoral technological change component of growth across different industries. However, the detailed plant-level data shows the evidence of positive structural change, in terms of static and dynamic shifts, among the medium technology-intensive sectors during the 2000s. The findings point out the need to have comprehensive and strategic policy interventions to address the structural rigidities and institutional bottlenecks in India manufacturing.

WP224: Foreign Direct Investment and Innovation activities in Indian Manufacturing Industries, Sanjaya Kumar Malik, April 2020

WP223: Is Domestic Value Addition A Source of Export Sophistication: A Case Study of India, Anjali Tandon, April 2020

Abstract: An implication of a globally fragmented production system is that countries which assemble and export high-tech products could reflect a sophisticated export structure while generating low domestic value-added component. Therefore, understanding the relationship between domestic value-added component in export, and the export sophistication of a country would be helpful in assessing if the country indeed achieved a quality improvement through indigenous attempts. However, for countries with export competitiveness essentially on grounds of cheap and abundant labour, rather than technological advantage, there is a significant disincentive to invest in innovation and R&D. This could possibly the case for India, motivating the investigation.

Results show that exports of sophisticated products, which also belong to the high-technology segment, are paired with low indigenous contribution in the product manufacture. The subscription to imports for exporting high-tech products reflects upon the deficient domestic R&D needed to bolster innovative practices such as product design and engineering. There needs to be a conscious effort to indulge in production stages characterized by high domestic value addition content.