The Economy Driven by Biotechnology

KIRAN MAZUMDAR SHAW

The Indian economy faces grave challenges that are compounded by a stalled global economy. Industrial output has dropped, exports are declining, consumer price inflation is stubbornly hovering near double digits, and the fiscal deficit is alarming.

We have a skewed economic model where the service industry accounts for nearly 58 per cent of the country's GDP while the industrial and agricultural sectors contribute 28 per cent and 14 per cent, respectively. However, agriculture accounts for about 52 per cent of employment. The service sector makes up 34 per cent, and the industrial sector around 14 per cent.

A key characteristic of an equitable economy is one that balances the contribution of the three main sectors. Agricultural productivity can be enhanced through science and technology.

TECHNOLOGY IN AGRICULTURE

Biotechnology can usher in a second Green Revolution with unprecedented opportunities to ensure food security along with the economic well-being of the farmer. Indian farmers have increasingly opted for Genetically Modified Bt cotton seeds to enhance productivity.

Agricultural biotechnology is working on crop breeding for the selective propagation of genes that improve yields and resist disease. The technology also helps produce pathogen-free plants and address soil imbalance issues.

Unfortunately, biotechnology faces several challenges. While the Government understands the importance of food security, it needs to translate this understanding into action.

CRIPPLED MANUFACTURING

We need to shift subsistence jobs in agriculture to sustainable jobs in labour-intensive industry. We also need to create a large market for skilled jobs through building scale in high-end manufacturing. Even after the Centre and States announcing multiple manufacturing policies, imports of equipment remains cheaper rather than sourcing them locally, because of the lack of incentives and an enabling ecosystem for the manufacturing sector. Manufacturing is crippled by high cost of capital and antiquated labour and land laws.

Studies show that the productivity of our manufacturing industry is approximately one-fifth that of its US counterpart. McKinsey and Co believe that India's manufacturing sector has the potential to create up to 90 million jobs by 2025. Today, the sector generates only about 45 million jobs, 80 per cent of which are in the unorganized sector. Most of these micro and small-scale enterprises rely on traditional, low- grade technologies that offer limited earnings and stunted prospects for growth.

India should pursue a strategy of scale based on technology-driven manufacturing. This will create a core manufacturing sector based on high-end expertise, fed by ancillary manufacturers that rely on simple technical skills.

PHARMA OPPORTUNITIES

Biotechnology and more explicitly, fermentation technology can help boost India’s manufacturing sector in a significant way.

Fermentation-based manufacturing supports production of antibiotics, vaccines, bio pharmaceuticals, enzymes, alcohol, foods and biofuels. India has global scale in many of these but the true potential remains unrealised. A focused policy thrust can build global prowess and generate millions of jobs.

India is already one of the world's leading manufacturers of generic drugs and vaccines at the lowest cost. A "made in India" vaccine immunises a third of the world's children. This has earned us a global competitive edge over China. However, recent drug pricing policies have hampered investment and early signs of China taking advantage of this situation are apparent. While the drug industry is a soft target to derive political mileage, it can cause long term damage.

Beyond generics, India is a contract manufacturer to leading multinational pharma companies who are increasingly shifting their manufacturing base to lower cost centres in Asia.

The Indian Contract Manufacturing (CMO) market was estimated to be worth approximately $2.3 billion in 2010 and forecast to attain a size of $10 billion by 2025.

At a time when companies in the developed world are challenged with spiraling R&D costs and loss of patent protection on a number of blockbuster drugs, India can effectively position itself as the “laboratory” for the world for developing affordable drugs, vaccines and diagnostics.

According to a McKinsey report, R&D costs of drug research in India are about 75 per cent lower than that in the US. Our qualified English-speaking scientific, engineering and medical talent pool provides us with a competitive edge. These strengths must be leveraged not only to create a contract research sector.

Policymakers must synergise BT and IT to deliver world class innovative solutions for global healthcare. Over the next decade, there will be worldwide shortage of fermentation based bio-pharmaceutical capacity. Can we leverage this global opportunity?

Biomanufacturing, together with our large chemical synthesis-based pharma and petrochemical industries can build an indomitable position for India. It can make us a resource base for biofuels, petrochemicals and fertilisers. It can create a plethora of jobs it creates for engineers, scientists, technicians and entrepreneurs.

Bioethanol, fermented from sugarcane bagasse, sorghum and cereals is already being blended with petrol to defray our oil imports. Microalgae and seaweed that grow abundantly along our coast line are now being harnessed through novel enzyme technologies for fuel alcohol as a more sustainable option for renewable energy.

Such innovative new approaches must be supported through fiscal policies that provide grants and tax credits.

The success of biomanufacturing depends on land availability, uninterrupted power supply, potable water, effective effluent treatment and good logistical connectivity and policies must be legislated to address these needs.

BIO-INFORMATICS IS HERE

Another promising area is new-age diagnostics based on genetic as well as metabolite-based bio-markers. Our IT prowess gives us a natural advantage in bio-informatics.

Biometrics is an enormous opportunity where DNA techniques can far outweigh the benefits of retinal and fingerprinting technologies of today.

The cost of sequencing entire human genomes is shrinking exponentially and it won't be too long before it overtakes present-day conventional biometrics to make DNA fingerprinting the most reliable identification technology of the future.

India missed participating in the Human Genome Project. We now have the opportunity to lead the way in its application where Aadhaar can spearhead a powerful global paradigm.

(The author is Chairman and Managing Director, Biocon )