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KNOWLEDGEBASED ECONOMY: IMPLICATIONS FOR INDIA

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Email: sppasher_at_nus.edu.sg. and. Amarendu Nandy. PhD Candidate, LKY School of ... quality of institutions, a reasonable degree of contestability in the economy ... – PowerPoint PPT presentation

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Title: KNOWLEDGEBASED ECONOMY: IMPLICATIONS FOR INDIA


1
  • KNOWLEDGE-BASED ECONOMY IMPLICATIONS FOR INDIA

Mukul G. Asher Professor of Public
Policy National University of Singapore Email
sppasher_at_nus.edu.sg and Amarendu Nandy PhD
Candidate, LKY School of Public Policy National
University of Singapore E-mail
amarendun_at_gmail.com
Presented at Fourth Annual Conference on Public
Policy and Management, Indian Institute of
Management, Bangalore, August 9-12, 2009.
2
Main drivers of growth
  • For an economy, main drivers of growth are
  • Quantity and quality of labor
  • Capital
  • Land and natural resources
  • Managerial and organizational capabilities
  • Entrepreneurship
  • Knowledge (its generation, adaptation, and
    diffusion)
  • Knowledge explosion in many areas, most notably
    in IT, telecommunication, biological sciences,
    and energy has increased the knowledge-intensity
    of human activities in general.

3
Main drivers of growth
  • Factor accumulation alone, without new
    technologies or improved human capital leaves a
    significant proportion of economic growth
    unexplained.
  • The endogenous growth theory emphasizes the above
    factors, which are an integral part of
    knowledge-economy (Romer, 2007).

4
Main drivers of growth
  • Recent decades have witnessed an explosion of
    knowledge and of technologies which have the
    potential to make them accessible to an
    overwhelming proportion of the worlds
    population.
  • The role of managers in facilitating creation,
    application and diffusion of knowledge within
    their organizations has also correspondingly
    become more essential and complex.
  • The term manager in the current context refers
    to anyone with position of trust, and
    responsibility.
  • This presentation analyzes the implications of
    the principles and practices of knowledge-based
    economy for Indias government, business, and
    not-for-profit sectors.
  • In the Indian context, knowledge as an input is
    also essential for better consumption and
    lifestyle choices. These can provide higher level
    of welfare from a given household budget.
  • Complementarities in knowledge application in
    both the public and the private sectors is of
    considerable relevance.

5
Key Economic Characteristics of Knowledge
  • Knowledge is highly specific in nature, both when
    knowledge is an input, and when it is output.
  • Some knowledge is embodied in individuals in a
    tacit and implicit form, usually called human
    capital.
  • Other knowledge is available in codified form,
    such as books, patents and databases, which can
    be transmitted, received, and mined. In some
    cases, this involves intellectual property
    rights, which in selected cases, such as
    open-source systems can be explicitly waived.
    This may help in diffusion of such knowledge.
  • Indian organizations should make much more
    strategic and extensive use of such open source
    systems.
  • New knowledge is costly to produce, but once
    produced, can be used with very low marginal
    cost, particularly in this digital age.
  • The value of knowledge to society increases, the
    more widely it is used (Network externality
    effect)

6
Key Economic Characteristics of Knowledge
  • In the Indian context, the knowledge economy
    would involve application of different
    sub-branches of knowledge to diverse set of
    production, consumption, and delivery or
    distribution of private and public goods and
    services.
  • The Presidents address to the Parliament in June
    2009 highlighted the urgent need to improve
    delivery of public services, and get better
    outcomes from the budgetary outlays.
  • The fact that the Indian economy is much below
    potential production possibilities (Figure 1),
    and as many public and private organizations have
    not integrated knowledge management in their
    structures and practices, provides India with
    considerable opportunities for rapid growth
    through the knowledge economy.
  • This does not imply that India should not be
    active in creating new knowledge such as creation
    of new energy sources (India is a part of
    consortium to develop hydrogen as an energy
    source), actively patenting its accumulated
    ancient wisdom, and developing new scientific and
    technological products and processes. These are
    important, but much of the rapid gains can be
    obtained through convergence with the existing
    international knowledge base.
  • The above explanation of the knowledge in the
    Indian context is consistent with the approach of
    Indias Knowledge Commission (Government of
    India, 2009).

7
Figure 1 Production Possibility Frontier
Private Goods
.
.
C
B
.
A
Public Goods
Application of knowledge economy is essential to
shift from point A to point B. This will not only
enhance growth rate, but will also increase
availability of both public and private goods,
with given resources and technology. This is the
sustainable way of improving living standards.
To move to point C, increased resources
, Particularly capital (both human and physical),
plus technological progress will be required.
8
Key elements of a knowledge economy
  • Figure 2 provides the key elements of a knowledge
    economy.
  • Note
  • A Learning Organization may be defined as an
    organization that facilitates the learning of all
    its members and consciously transforms itself and
    its context (Pedler et al., 1997)
  • A Truthful Organization is one where information
    flows in both directions represent an accurate
    and timely state of affairs.
  • Developing Learning and Truthful Organizations
    requires considerable effort and leadership.
  • Knowledge management involves the process of
    identifying, collating, and leveraging the
    accumulated knowledge in an organization to
    improve organizational performance, including
    turning intellectual capital into patents, and
    other forms of competitiveness.
  • The knowledge management differs significantly
    between the public and the private sectors (Pee
    and Kankanhalli, 2008). Nevertheless, it is
    important for improving performance of both types
    of organizations.

9
Figure 2 Elements of Knowledge Economy
10
Select Applications in india
  • In this presentation, two applications involving
    knowledge economy are highlighted. The discussion
    in each case emphasizes the adaptation and
    diffusion of existing knowledge to wider set of
    stakeholders, and to organizations delivering
    goods and services.
  • Agriculture
  • The food consumption in India is rising due to
    factors such as higher incomes, increasing
    population, diversion of grains into bio-fuel,
    and increasing meat consumption which is less
    efficient in converting grains into food energy
    (Asher and Nandy, 2008).
  • The food production is however growing at a
    relatively lower rate. Indias share in arable
    land in the world is 11.5 percent, second only to
    the United States, but it lacks considerably
    behind in yield per hectare, as compared to other
    countries.

11
Select Applications in india
  • Application of knowledge economy tools such as
  • Provision of information to the farmer about farm
    prices (reducing the middlemen so that farmers
    can take home a greater chunk of their income).
  • Giving information to the farmer as to the
    requirements of the market (example of straight
    chillis, reddish tomatoes being more preferred
    than their ordinary counterparts so that farmers
    can gain more from the high prices).
  • Introducing cost effective and efficient
    irrigation systems and practicing sound water
    resources management plans at the centre and
    state level can assure continuous water supply to
    the community so that the farmer does not have to
    look up at the skies whenever he needs water for
    his crops.
  • Provision of highly disease resistant seeds and
    good quality fertilizers at appropriate costs so
    that we have the maximum return from the crops.

12
Select Applications in india
  • The recommendations of the Knowledge Commission
    regarding Agriculture are the following
    (Government of India, 2009)
  • Modernizing and stimulating agricultural research
    institutions, co-ordinating research and making
    research support more flexible
  • Improve the organization of agricultural research
  • Direct more research to neglected areas
  • Provide more effective incentives for researchers
  • Change the curricula in agricultural universities
    to ensure greater relevance
  • Exploit the opportunities and meet the challenges
    of Intellectual Property Rights
  • Encourage and regulate private agricultural
    research
  • Make knowledge applications in agriculture
    community-driven and farmer-led

13
Select Applications in india
  • Redesign the existing support systems
  • Document and disseminate successful experiences
    and good practices
  • Improve the capacities and expertise of extension
    workers
  • Restructure Agricultural Technology Management
    Agency (ATMA) to make it more decentralized,
    participatory and locally responsive
  • Enhance and regulate the role of private players
    in agricultural extension delivery
  • Create a web-enabled knowledge bank on all
    aspects of agriculture

14
Select Applications in india
  • With regard to Traditional Health Systems (THS),
    the Knowledge Commission has advocated the
    following measures
  • Transformation of traditional medicine system
  • Strengthen research on traditional health systems
  • Strengthen pharmacopoeial standards
  • Increase quality and quantity of clinical trials
    and certification
  • Digitize traditional knowledge
  • Create suitable framework for intellectual
    property rights
  • Establish goals for conservation of natural
    resources
  • Support non-government and corporate initiatives
    for promotion of THS
  • Promote international cooperation
  • Create a major re-branding exercise of Indian
    traditional medicine
  • There is also an additional challenge of
    integrating THS with the other systems of
    medicine and finding appropriate risk-sharing
    arrangements to finance and deliver health
    services.

15
Concluding remarks
  • For India, the two main lessons in using
    knowledge as a driver of economic growth,
    emphasized by Arrow (2000) are relevant
  • Education and training in science and technology
    is crucial, even if research is not on par with
    that being conducted elsewhere. Knowledge cannot
    be absorbed unless some knowledge is already
    possessed.
  • It is also important to be open to new ideas,
    have multiple sources of new ideas, and see that
    ideas are diffused. This point strongly argues
    for freedom of entry, even when it seems to forgo
    economies of scale.

16
Concluding remarks
  • The following points merit urgent consideration
    by all the policymakers in India in preparing for
    the knowledge economy.
  • As the quality of institutions, a reasonable
    degree of contestability in the economy and in
    polity, and an outward-orientation are essential
    for creating, diffusing and adapting knowledge in
    India, efforts should be made to deepen and
    institutionalize economic and governance reforms.
  • The Reports of the Second Administrative Reforms
    Commission (http//arc.gov.in/) merit much more
    serious consideration and wider public debate
    than has been the case so far.
  • Strong education and training in technology and
    science are essential as knowledge cannot be
    absorbed unless some basic knowledge is already
    possessed.
  • Health and education policies thus must be reform
    priorities. In many developing counties,
    traditional knowledge must be preserved and
    subjected to scientific inquiry.
  • Capabilities to take advantage of international
    conventions for e.g., converting knowledge into
    patents and intellectual property rights, must be
    developed. Commoditization of traditional
    knowledge by more resourceful countries needs to
    be addressed through cooperation among developing
    countries, which have similar interests.

17
Concluding remarks
  • Private, public sector and non-profit firms and
    organizations in India must be open to new ideas.
    There is no more insidious colonization than
    colonization of the mind. In many organizations,
    the desire to reform traditional methods of doing
    business or administration and delivery of
    government services, is essential to apply
    knowledge to bring efficiencies in real resource
    use.
  • Multiple sources of new ideas and experiments,
    including rural technology innovations, need to
    be cultivated. If such sources of ideas are
    combined with encouragement of social
    entrepreneurship, (i.e. meeting social needs with
    capitalist means), and with effective public
    private partnerships (PPP), application of
    knowledge-economy to diverse areas can be
    facilitated.
  • The Indian Railways for example would need to
    become much more skilful in effectively
    implementing PPPs if they are to fulfill their
    economic and social functions relevant for rising
    India.

18
references
  • Arrow, K. J. (2000), Knowledge as a Factor of
    Production, Keynote Address at the Annual World
    Bank Conference on Development Economics 1999,
    Washington D.C. World Bank.
  • Asher, Mukul G. and A Nandy. (2008). Fruits of
    Knowledge Apply knowledge-economy processes for
    food security. Pragati - The Indian National
    Interest Review, 16, 17-19, http//pragati.nationa
    linterest.in/
  • Government of India (2009), National Knowledge
    Commission Report to the Nation 2006-2009, New
    Delhi. Available at www.knowledgecommission.gov.i
    n
  • Pedler, M., Burgoyne, J. and Boydell, T. (1997),
    The Learning Company A strategy for sustainable
    development, 2nd Ed. London McGraw-Hill.
  • Pee, L.G. and Kankanhalli, A. (2008),
    Understanding the Drivers, Enablers, and
    Performance of Knowledge Management in Public
    Organizations,
  • Romer, P.A. (2007), Economic Growth, in David
    R. Henderson (ed.), The Concise Encyclopedia of
    Economics, Liberty Fund. Available at
    .http//www.stanford.edu/promer/EconomicGrowth.pd
    f
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