Last week, Joel Mokyr, Philippe Aghion and Peter Howitt were honoured with The Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel. Mokyr has argued that societies flourish when—among other things—they nurture, develop and spread useful knowledge. Aghion and Howitt explain how such knowledge can be highly productive when it unleashes competition, destruction and regeneration. Together, they explain why certain countries continue to grow for very long periods of time. Can India learn from the framework of economic progress as described by Mokyr? India’s policy-makers have no shortage of economic blueprints. Yet, its per-capita income remains a fraction of East Asia’s. Economic progress can be measured in a variety of ways but, by all measures, India is growing far below its potential. A lot of progress has been the result of two happy accidents—India’s software industry and massive remittances from non-resident Indians. Decades of haphazard actions have resulted in a mixed picture: pockets of excellence, a prosperous middle class, but poor education and joblessness among the masses and 800mn (million) people on government dole.
How can India break from the gentle trot of the last 75 years into a gallop? By focusing on what Mokyr calls 'useful knowledge'—the ability of a society to generate, connect and diffuse new ideas that turn into economic progress. Europe’s transformation in the 18th century, he contends, rested on three interlocking institutions: the generation of propositional knowledge (science and theory), its translation into prescriptive knowledge (techniques and engineering) and a network that allowed ideas to circulate freely between the two.
Modern China has built its own version of this at a breathtaking pace. Its R&D (research & development ) spending is above 2.5% of GDP (gross domestic product), its patent filings outnumber those of any other country and its universities now churn out hundreds of thousands of engineers and scientists each year. Behind these statistics lies something deeper: a dense network connecting research institutes and industrial clusters of the supply chain. The system is far from the liberal, open model Mokyr celebrated, but it functions in the same way—continuously generating and applying 'useful knowledge'. For example, it is known that in China flying cars are only just beginning to take off and drone deliveries are becoming more common. What is less known is that this year alone six universities have established degree courses in 'low-altitude technology and engineering'. In parallel, a complete and tightly-knit supply chain is falling in place which will help this sub-sector scale up fast.
India’s scientific elite is world-class, yet the bridge between laboratory and factory floor remains rickety. The country spends barely 0.7% of GDP on R&D—about one-quarter of China’s share—and most of that comes from the public sector. Indian universities are strong in teaching but weak in research; industry prefers to import technology rather than adapt or develop it; and collaboration between the two remains sporadic. The result is an economy rich in human talent but poor in cumulative technical capability. Applying Mokyr’s framework to India means recognising that economic growth is, at heart, a knowledge system. The task is to build institutions that expand the stock of useful knowledge and the speed at which it circulates between teaching and building, in turn using the fresh knowledge gained from building, to teach better. In other words, a growing and improving stock of useful, codified, teachable knowledge. Such knowledge is especially transformative when it addresses pressing needs such as clean energy, urban transport, waste recycling, water management, affordable healthcare, etc.
For this, India has to enlarge the supply of propositional and technical knowledge, investing far more heavily in science and engineering education, including a broad network of technical universities and polytechnics. The government’s current move to turn industrial training institutes into public-private partnerships is a step in this direction. In 2022,(latest data), 36% of all Chinese undergraduate entrants picked an engineering degree. In Britain and America, the proportion hovers around 5%. In 2025, India produced about as many STEM graduates as China, but most of them want to get into software services. We produce far fewer at the postgraduate and doctoral levels, where original research takes place. Equally crucial is to strengthen incentives for private R&D. At present, large Indian companies devote only 0.2%–0.3% of sales to research, far below global norms. A combination of tax incentives, targeted procurement and public–private partnerships could change that. The defence research and development organisation (DRDO) and Indian Space Research Organisation (ISRO) have shown how public missions can spawn ecosystems of suppliers and engineers; the challenge is to replicate that model in civilian industries.
Mokyr’s second requirement is connections, linking science to practice. India’s innovation system is still too compartmentalised. Academic research is rarely commercialised; industrial clusters often operate without research institutions nearby. A more integrated model would pair universities with regional manufacturing hubs, promote joint appointments for scientists and engineers and create funding schemes that require collaboration between academia and industry. China’s network of university-linked science parks and Germany’s Fraunhofer institutes offer instructive examples.
In the 19th century, the British economist Alfred Marshall described economic progress as “knowledge growing within knowledge.” That phrase captures Mokyr’s insight and India’s predicament. The country has the talent, the entrepreneurial energy and the domestic market size to grow rapidly (as Xi Jinping says: “advantage of large-country economies is the internal circulation that is possible”). What it lacks is a system that lets knowledge accumulate upon itself. How to achieve this? In practical terms, it calls for a lot of unglamorous grunt work: building institutions, incentives and feedback mechanisms to continually refine the outcomes, all the while doing the unglamorous work of documentation, replication and dissemination. This would be impossible without a culture that respects and celebrates useful knowledge. Quite a tall order.
(This article first appeared in Business Standard newspaper)
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