National Commission on Labour (1967)||
18.8 Automation represents not only a higher technology but also highly capital intensive techniques that are built in its sophisticated machinery which has to be imported in the initial stages or at least so long as such machines are not domestically produced. This implies an increase in capital requirements for any given level of output, and that too, mainly in foreign capital. In a phase of capital shortage and foreign exchange scarcity this is not easy to meet and hence any programme of automation has to be limited by this constraint. The important question is not of the private rate of return on capital required for automation, but of its social productivity, viz., whether the use of the same resources will not bring a higher return elsewhere in the economy. A similar consideration obtains when automation has to be introduced in an existing plant. The rate of obsolescence of the plant is not an internal problem of the firm only. It is linked with the overall rate at which, at any given time, an economy can afford to replace the existing capital goods by new ones. This rate is governed by the equilibrium conditions of the capital goods market as well as by those of the labour market, since, when new machinery is introduced it not only replaces existing machines but also replaces labour as well. Moreover, requirements of foreign capital for automation are not simply costs incurred once and for all at the time of installation. In addition, maintenance components have to be imported year after year and their costs are substantial. Further, obsolescence here is very high, since the technology of automation is fast changing. Finally, maintenance and running of automated plants may require, at least in the initial stages, employment of foreign technicians and engineers whose emoluments represent another strain on foreign exchange resources. All these repercussions on capital resources and on the labour market cannot enter the cost and benefit calculation of an individual firm. But these have their own impact on the growth of the economy and on employment. Automation, therefore, has to be socially guided so that the country's resources are properly allocated and disequilibrium in its factor-goods markets is not aggravated.