Budget: Rs 1 Lakh Crore Corpus to Fund Tech Cos Should Benefit India Not Private Sector
Corpus structure should dispel concerns about the socialisation of risk and privatisation of profits
The Finance Minister announced a corpus of Rs 1 lakh crore to fund hi-tech companies. “For our tech savvy youth, this will be a golden era. A corpus of rupees one lakh crore will be established with fifty-year interest free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to scale up research and innovation significantly in sunrise domains. We need to have programmes that combine the powers of our youth and technology”, Point 59 of the Budget Speech
As per a PTI news report, Union Minister Ashwini Vaishnaw hailed the corpus as a "game changer" and said that the “contours of the corpus and its selection criteria will be spelt out over the coming days”.
While the exact contours of this corpus are not yet out in the public domain, some details are available in news reports. As per a report in the Indian Express based on conversation with official[s] with knowledge of the deliberations, three key points emerge:
The Government is likely to involve financial institutions such as the National Bank for Financing Infrastructure and Development (NaBFID), the National Investment and Infrastructure Fund (NIIF), or the Small Industries Development Bank of India (SIDBI)
To provide long-term, concessional credit of Rs 1 lakh crore to “finance or refinance private sector projects to develop cutting-edge, innovative technologies [...] for commercial, for-profit ventures”
Since “the government is best placed to take this kind of long term risk knowing that some will not pay off but many will”
Technology is playing an increasingly crucial role in the landscape of global competition. Countries worldwide are making substantial investments in research and development to gain a competitive edge underscoring the significance of technological advancements as a key factor in determining success on the global stage. Government investments in this realm are thus to be welcomed. However, the above report raises some concerns about the socialisation of risk and privatisation of profits which should be addressed in the final structure of the proposed corpus.
These concerns emerge too from the Government’s approach towards economic development and industrialisation which tends towards a “national champions” strategy where large conglomerates are favoured to achieve economies of scale and help pursue national economic goals. This strategy can be seen in Government’s support for certain business groups such as Adani and Ambani but also in Government’s approach to EVs, a sunrise industry where the dependence on the PLI scheme may disproportionately subsidise large companies at the expense of smaller companies and thus hurt industry competition, stifle innovation and lead to oligopolies.
In light of the above, it is important that the full details of assumption of risk by the Government should be available in the public domain - on a loan by loan basis. It is not clear from the details available thus far in the public domain whether the Government is proposing to forgo only interest or the principal amount as well since the interest component usually provides the buffer for the potential loss of the entire loan amount. The potential loss of the principal amount should result in some form of equity or other mechanism for compensation.
Second, interest-free or subsidised funding should not result in knowledge being harnessed only by the private sector for private profit; instead funding through the Corpus should ensure public access to knowledge created. Since a primary purpose of the Corpus is to usher in a “golden era” for our youth and ensure job creation, one measure could be to mandate collaboration with public universities to build capacity and ensure wider dissemination of knowledge created through public subsidy. The Government may specify a range of measures which can be deployed based on the specifics of the project in question - as long as it is clear that the benefits derived from the research should directly benefit the people of the country instead of notional indirect benefits such as national prestige, trickle down development etc.
Finally, it is notable that Big Tech has acquired size and salience which is increasingly challenging the democratic set-up, regulatory capacity, and in some instances even national sovereignty of nations around the world. Advancements in artificial intelligence especially may have significant impact on labour and employment, our information ecosystem and privacy. All technological advancements will not benefit the people of our country equally and therefore it is important that public funding be directed towards projects of significant public interest.
Also Read: