Industrialization and economic growth of India: interactions of indigenous and foreign technology

The Indian economy was inward-looking and protected from internal and external competition. In the absence of competition, firms did not develop the technological capability needed for penetrating the global market. Because of this, Indian firms were inefficient, did not seek access to foreign technology, and did not develop the capability for integrating with the global economy, even though India has excellent technological infrastructure and R&D institutions. Foreign direct investment was very low, and imports of capital goods were strictly controlled. Indian industry thus had a very low share in emerging areas where world trade was growing rapidly. The liberalization and globalization processes initiated in 1991 are facilitating many changes. Consequently, in developing countries, the government has to devise policies which induce the building-up of technological capability.