India gradually improving its innovation and competitiveness now needs to focus on disruptive and world beating innovations

Rajesh Uppal July 21, 2021 Geopolitics, Industry Comments Off on India gradually improving its innovation and competitiveness now needs to focus on disruptive and world beating innovations 637 Views

The Global Competitiveness Index is released by the World Economic Forum(WEF). It was launched in 1979. It ranks the competitiveness landscape of 141 economies through 103 indicators organised into 12 pillars. These 12 pillars are (1) Institutions (2) Infrastructure (3) ICT adoption (4) Macroeconomic stability (5) Health (6) Skills (7) Product market (8) Labour market (9) Financial system (10) Market size (11) Business dynamism and (12) Innovation capability.

India has moved down 10 places to rank 68th in 2019 from 58th in 2018 on the global competitiveness index. The index has flagged limited ICT (information, communications and technology) adoption, poor health conditions and low healthy life expectancy as the reasons.
India is also among the worst-performing BRICS nations along with Brazil which is ranked even lower than India at 71st.

Singapore has replaced the US as the world’s most competitive country. The US was positioned at 2nd place and was followed by Hong Kong at third place and Netherlands and Switzerland at 4th and 5th places respectively. China was ranked at 28th position and was the highest ranked among BRICS nations. Vietnam showed higher improvements in the region and was ranked at 67. The report has also said that Asia Pacific was the most competitive region globally. It was followed by Europe and North America.

India Innovation Challenges

Historically India faced many challenges which hampered its innovation. As a result, India continues to languish behind peers in the Global Innovation Index; it ranked 52nd compared to China’s 14th ranking on the index in 2019. Poor education system is a weakness in spite of recent improvements.

India currently spends far below its economic capacity on research, As per DST, gross domestic expenditure on R&D (GERD) as a percentage of GDP was 0.7% in FY19—low even if one accounts for India’s income levels. In comparison China spending in 2019 amounted to 2.23% of GDP, an increase of 0.09 percentage points from the previous year. While U.S. organizations continue to lead in global spending, as they have for more than 50 years, China is inching ever closer to becoming the leading global R&D investor and is forecast to surpass total U.S. spending by no later than 2025 if current spending trends continue.

Indian innovation is also hampered by poor environment performance, low density of startups, and low publishing output. India also generated few science PhDs and fewer engineering PhDs.

India’s Institutes of Eminence program is struggling to yield results, with no increase in top-100 representation for India’s public Institutes of Eminence. Latest global university rankings in QS World Rankings 2021, gave MIT & Harvard share top spot, with Russia and China record best-ever performances Chinese higher education continues to reach new heights, with the sector attaining a record number of programs now achieving a top-50 rank. The Institutes of Eminence that has seen a slip in performance are the University of Delhi, Indian Institute of Technology Delhi, Kharagpur, Madras, IISc-Bangalore, and the Central University of Hyderabad.

Only three per cent of engineer graduates in India get high-quality tech jobs with salary packages of ₹ 8-10 lakh and above, according to a 2020 report by Scaler. It found that over 80 per cent of these graduates end up pursuing non-technical careers due to lack of available employment opportunities.

Further there is the disconnect between academia and industry which inhibits the academic advances being employed to enhance innovation. Top institutions in India are still focused on being teaching Institutions. The research done in universities is not linked with the industry or real-world problems.

For innovation to flourish, ideas must be funded and taken to market. The lack of funding support in the country forces innovators in India to park their IP rights outside the country. Without capital, even the most transformative ideas can die before they take flight. Until we are able to create a funding-financing ecosystem, innovation in India will continue to be a far-fetched dream, says Kiran Mazumdar-Shaw, founder of Biocon, is a pioneer of India’s biotech industry.

India had poor record in intellectual property development. US Chambers of Commerce place India at 40rd among 53 nations in global Intellectual Property index 2020. India has been ranked at 40th position among 53 global economies in the 2020 International Intellectual Property (IP) Index, according to the report released by US Chamber of Commerce’s Global Innovation Policy Center on 5th February. This is the eighth edition of the annual U.S. Chamber International IP Index, with the theme “The Art of the Possible.” Last year India was ranked at 36th position out of 50 countries.

In addition, the deep economic recession triggered by COVID-19 continues to have profound economic and social consequences. Since the outbreak of the pandemic, unemployment rates have rapidly increased in most developing and advanced economies, and poverty rates have begun to rise again, reversing the gains achieved over the past few decades. According to the latest estimates, the economic and health crisis triggered by COVID-19 is expected to push between 88 million and 115 million more people into extreme poverty in 2020. The global economic outlook for 2021 is highly dependent both on the evolution of the pandemic and on the effectiveness of the recovery strategies of governments.

However, India has been gradually improving it’s Global Innovation Index (GII), in 2016, India climbed 15 spots, from 81 to 66 and maintained the top spot in the Central and South Asia regions. India occupied the 52nd position in 2019 and was ranked 81st in the year 2015. GII uses a broad definition of innovation which includes both product and processes. It has two sub-indices with equal weightage, ie, inputs (pillars of institutions, human capital and research, infrastructure, market sophistication, business sophistication) and outputs (knowledge and technological outputs and creative outputs). Its R&D investments were low. But the country was still innovating in business models and select areas of technology.

The WIPO had also accepted India as one of the leading innovation achievers of 2019 in the central and southern Asian region, as it has shown a consistent improvement in its innovation ranking for the last 5 years. As per the release, the consistent improvement in the global innovation index rankings is owing to the immense knowledge capital, the vibrant startup ecosystem, and the amazing work done by the public and private research organizations.

India climbed four spots on the Global Innovation Index 2020 and is now at 48th position in the list of top 50 innovative countries in the World Intellectual Property Organization (WIPO) annual ranking. “The top 10 is dominated by high-income countries,” said GII. Switzerland, Sweden, the United States, the United Kingdom and the Netherlands are the top five global economies. The Republic of Korea has become the second Asian economy to join the top 10, trailing Singapore in the eighth position.

However compared to China its record is not very impressive. China has been improving gradually, and first broke into the top 25 in 2016. China retains its 14th spot in the top-performing economies in the Global Innovation Index (GII) 2020. China remains the only middle-income economy in the top 30 of the GII list in terms of innovation capacity and output. It has high ranks in patents, utility models, trademarks, industrial design applications and creative products exports and other important metrics. The country features 17 world-leading technology clusters, among which Shenzhen-Hong Kong-Guangzhou and Beijing rank the world’s second and fourth respectively, said GII 2020. China’s innovation rankings also reflect high scores in both the Business sophistication and Knowledge and technology outputs pillars. For example, the country has a particularly high number of R&D-intensive firms among the top global corporate R&D spenders.

For example, while the size of China’s ball is close to the size of the U.S.’s ball, it is lower on the vertical scale because of its large overall population and hence lower ratio of researchers to population. China actually graduates more new engineers annually than the total number of engineers in the U.S. China’s ratio of R&D as a percent of GDP also is lower than that of the U.S. but has been gaining over the past several years. China’s current five-year plan has a goal of continuing to increase this ratio.

Overall, the GII shows a country’s weaknesses and strengths, and tells policy-makers where to focus for producing innovation led growth. “Innovation is the greatest component of economic growth,” says Francis Gurry, director-general of WIPO, a partner in the GII report. “It is the principal means of improving the quality of life in a country.

India’s inherent strengths

India has some intrinsic strengths which make it a naturally strong contender, such as domestic market scale (ranked 3rd), ICT service exports as proportion of total trade (ranked 1st), government’s online service (ranked 9th), ease of protecting minority investors (ranked 13th), and graduates in science and engineering (ranked 12th). The rise in India’s rank is attributed both to methodological factors and its ascent in innovation performance. The rise in political stability, government effectiveness and ease of resolving insolvency have contributed to the improved institutions’ pillar. In the business sophistication pillar, firms’ conduciveness to innovation, gross R&D expenditure by businesses and intellectual property payments as a proportion of total trade and research talent have improved significantly. In creative outputs, we have improved in cultural and creative service exports

Thanks to its high-quality scientific publications and universities, India remains 2nd among middle-income economies in the quality of innovation. It maintains top ranks in a number of important indicators such as productivity growth and exports of services related to information and communication technologies.

With over 135,000 scientific papers published, India has become the world’s third largest publisher of science and engineering articles, according to a US government agency data, topped by China. As per the statistics compiled by the US National Science Foundation (NSF), the number of scientific papers published worldwide increased from 1,755,850 in 2008 to 2,555,959 in 2018. China, which accounts for 20.67 per cent of all global publications in scientific articles, is at the top position, followed by the US at 16.54 per cent. In China, the number of global scientific publications increased from 2,49,049 in 2008 to 5,28,263 in 2018, at a growth rate of 7.81 per cent per annum. Research papers from the US and the EU continue to have the most impact; however, China has shown a rapid increase in producing impactful publications, as measured by references to journal articles and conference papers. While India has the scientific talent, we do not have the deep pockets and the enabling ecosystem that drives most of the innovation in the West.

India was the biggest ‘overperformer’ in frontier technologies than the country’s per capita gross domestic products (GDP) would suggest, according to a recent country-readiness index released by the United Nations Conference on Trade and Development (UNCTAD) in March 20121. Frontier technologies include artificial intelligence, the internet of things, big data, blockchain, fifth-generation mobile telephony, three-dimensional printing, robotics, drones (remotely controlled flights), gene-editing, nanotechnology and solar power — the ones that take advantage of digitalisation and connectivity. The index analysed progress of countries in using frontier technologies, considering their national capacities related to physical investment, human capital and technological effort.

India’s actual index ranking was 43, while the estimated one based on per capita income was 108. This meant that India overperformed other countries by 65 ranking positions. It was followed by the Philippines, which overperformed by 57 ranking positions. China was at position 25; both India and China performed well in research and development. This was reflective of their abundant supplies of qualified and highly skilled human resources available at a comparatively low cost.

Since 2016, India has improved the speed of processing for patent and trademark applications, increased awareness of IP rights among Indian innovators and creators, and facilitated the registration and enforcement of those rights, it added. However, India’s score increased from 36.04 percent in 2019 to 38.46 percent in 2020, a 2.42 per cent jump. The report noted that “to continue this upward trajectory, much work remains to be done to introduce transformative changes to India’s overall IP framework and take serious steps to consistently implement strong IP standards”. “Although India has made incremental progress, the government needs to build upon the positive rhetoric of its IPR policy with the substantial legislative reforms that innovators need,” he said.

Hirschmann said reforms can improve its reputation as a destination for doing business, foreign businesses’ ability to invest in and ‘Make in India’, and India’s own innovative industries. “If Indian policymakers wish to deliver the kinds of results the Modi administration once hoped for, they can act to address issues that impact Indian innovation, such as software patentability, life sciences patents, copyright protection and enforcement, and trade secrets protection,” Hirschmann said.

Indian Government initiatives

Innovation is at the forefront of India’s “Make in India” and “Aatmanirbhar Bharat” initiatives. The aim is not only to make in India but also to innovate in India and transform the Indian economy. India’s vision of becoming a $5-trillion economy is intricately linked with an innovation-oriented approach to economic growth. In this present crisis-hit world, while most countries are looking inward, India should use this opportunity to build its innovative capabilities to meet future global demands by producing a range of novel products, services, and processes. With the thrust from innovation, India can scale-up its manufacturing and develop its export competitiveness.

Niti Aayog has also released the second edition of the India Innovation Index in 2020. Building on the previous edition, which was released in 2019, the current index provides a comprehensive framework to examine the sub-national innovation ecosystem across India. The index’s learning can be useful for formulating policies and devising strategies at both the state and the national levels. The index benchmarks the performance of the states and union territories against their peers, to better understand the reasons for differential performance and the areas of strengths and weaknesses.

India’s innovation output is much more as compared to its innovation inputs. INSPIRE scholarships, infrastructure support through FIST Scheme, incubation support, soft loans and tailored grants, goal-specific challenges such as Smart India Hackathons and sectoral schemes such as Biotechnology Ignition Grants have been beneficial in shaping the innovation landscape. That said, India has many grounds to work upon.

Catching student innovators when young, through Atal Innovation Mission, Smart India Hackathons, Grand Challenges and making entrepreneurship a part of school curriculum, will foster an innovative and entrepreneurial culture. Atal Tinkering Labs (ATL), was established, to boost the application-based knowledge of STEM and problem-solving ability of school-going kids. Due to the success of ATL, ISRO decided to adopt 100 ATLs. This will promote the curiosity and knowledge of students in the fields of Electronics, Physics, Optics, Space Technology, Material Sciences, and much more.

According to R&D Statistics and Indicators FY20, women participation in extramural R&D projects has increased significantly to 24% in 2016-17 from 13% in FY01. Policy support through schemes like KIRAN of DST has to be complemented with behavioral changes to promote female labour force participation and equitable sharing of household care services. Unleashing this “gender dividend” can help nurture innovations for women-centric issues.

Another concern has been the lack of private sector investment in R&D. Indian brands do well in terms of international brand value, but industry R&D is limited to 40% of GERD (compared to 50% in other BRIC economies), that too for few firms and too few sectors. An atmanirbhar Bharat needs local firms to innovate for domestic as well as global challenges.

To boost it to the targeted 2% by 2022 (recommended by PMEAC), both public and especially private sector expenditure on R&D need to rise. Presently, the Government, PSUs and institutes of higher learning (all non-private) fund 62% of Indian R&D with agencies like Defence Research and Development Organisation (DRDO), Indian Space Research Organisation (ISRO), Indian Council of Agricultural Research (ICAR), Department of Atomic Energy, Department of Science & Technology (DST) and Council of Scientific and Industrial Research (CSIR) being the lead players.

Covid has opened up areas in innovation in health, pharma, ICT and processes such as remote working, staggered work shifts, court proceedings and passenger management. India is one of the six middle-income countries, where three knowledge clusters (Bengaluru, Delhi and Mumbai) feature in global top-100. Our rising entrepreneurship can both be a source and outcome of innovation, flowering through programmes such as Start-up India, Skill India, and Mudra. India could become the world’s second largest Covid vaccine maker, according to consulting firm Deloitte. Analysts say the country has the capacity to produce for both its own population and other developing countries.
Even before Covid-19, the South Asian country produced up to about 60% of the world’s vaccines —and at a relatively low cost.

Stressing that India’s priorities for innovation need to be in the areas of energy, water, transport, health care, food security and digital consumption, the index said that India should strengthen its own talent pool and leverage global talent “in these market-pull areas”. Soumitra Dutta, Dean, Cornell College of Business points out that Investing in improving innovation quality is essential for closing the innovation divide. While institutions create an essential supportive framework for doing so, economies need to focus on reforming education and growing their research capabilities to compete successfully in a rapidly changing globalized world.

Researchers, venture capitalists and policymakers in India think that the country is changing rapidly, “There has been a significant broadening of the innovation ecosystem in recent years,” says former Infosys co-founder Nandan Nilekani. The ecosystem consists of educational institutions, research output, patents, entrepreneurship, venture capital, government policies and so on. “A lot of innovation in India is about creating affordable products,” says IIM Indore director Rishikesha Krishnan. “I am not sure this is captured in indices.” Innovation of a unique variety was thriving in its villages.

India was ranked high at 15th place in terms of corporate governance, while it is ranked second globally for shareholder governance.
In terms of the market size, India is ranked third and has the same rank for renewable energy regulation. Besides, India has also punched above its development status when it comes to innovation which is well ahead of most emerging economies and on par with several advanced economies. According to the report, India also needs to work on its skill base, market efficiency, trade openness and worker protection rights.

India needs to thrust disruptive world beating innovation

India has all the ingredients needed to become a global driver of innovation including strong market potential, an excellent talent pool, and an underlying culture of frugal innovation. Its large technical workforce and R&D system are strengths, compared with peers measured by GDP. With over 1,000 multinational R&D centres, India is a global R&D powerhouse.

For India to emerge as a global R&D hub, the following challenges need to be addressed: Private sector R&D investments have to be encouraged., The Government should consider providing grants to the industry to the tune of 50% of the project cost for critical technology areas. The present weak link between universities and industry needs to be strengthened. Higher education curriculum needs to be focussed on changing times. Applied research should be prioritized for higher industrial relevance. Venture capital (VC) and private equity (PE) funding needs to shift focus to genetics, new molecules and clinical research. Establish a strong Intellectual Property Rights (IPR) regime, structurally strong and easy to enforce.

Interdisciplinary and international collaborations are the need of the hour, to ensure maximum impact and outcome. The recently announced Indian National Education Policy 2020 (“NEP”) has proposed Internationalization of Higher Education sector in India. The NEP, apart from focus on a traditional learning model, pushes for online, open and distance learning as well.

India needs to do more if we are to retain IP within our borders and derive value from our innovations by monetising them at a global level. But first, we must build the credibility of Indian innovation within our borders and convince people that the quality of research done in India is at par with the best in the world. While India has the scientific talent, we do not have the deep pockets and the enabling ecosystem that drives most of the innovation in the West. Often, we end up doing innovative research for global pharma companies as contract research service providers. We do not aim for breakthrough innovation because this kind of innovation does not get due recognition at home, writes Kiran Mazumdar Shaw fouder of Biocon.

In today’s knowledge-driven economy, innovation is the primary driver of progress. India’s ability to generate wealth and create social good will come to naught unless we monetize innovative ideas by unshackling our entrepreneurial spirit. For innovation to flourish, ideas must be funded and taken to market. Without capital, even the most transformative ideas can die before they take flight. Until we are able to create a funding-financing ecosystem, innovation in India will continue to be a far-fetched dream, writes Kiran Mazumdar. But first, we must build the credibility of Indian innovation within our borders and convince people that the quality of research done in India is at par with the best in the world, Kiran further says.

Also, investors in India prefer predictable, imitative business models and me-too products, where they have the visibility of assured returns. On the other hand, business models that are truly innovative, first of its kind, and thus untested, find no takers among the investor community here. Real innovation has an inherent element of high risk, which Indians are averse to. As a result, you do not see people in India investing in real innovation.

The Mahindra Group today launched in Feb 2021, India’s biggest innovation prize, called the ‘Rise Prize,’ which offers $1 million to drive globally relevant, disruptive innovations while helping build a culture of innovation in India. It will start with two primary challenges, the Mobility Challenge, which invites solutions for driverless cars in India, while the second Solar Challenge aims to make solar energy products more accessible to the population at large.

According to Anand Mahindra, chairman, Mahindra Group, “With the Rise Prize, the Mahindra Group wants to provoke big disruptive ideas that can dramatically change lives. We are offering a big incentive for fresh thinking among the new generation of innovators in our country. Our ambition is to propel India into the next orbit of innovation and develop the nascent innovation ecosystem in India. Essentially we want to catalyze the rise of world-class, world-beating innovations and technology from India.” With the Mobility Challenge, the Mahindra Group is encouraging innovation in the area of driverless cars for Indian Roads. The company states this would redefine the future of mobility and carries the promise of transforming our lives while addressing a range of challenges. The benefits of an effective solution include decreased road mortality rates,

What India needs is a national innovation ecosystem that puts in place a financing cycle — academia generating ideas, especially those based on science and technology, which are incubated to proof of concept through government-sponsored seed and incubation funding and then taken to market through business intervention backed by venture funding. Ease of accessing a market, both primary and secondary, and being able to raise capital with greater flexibility would spur innovation and unleash an entrepreneurial avalanche that would transform the pace of value-added growth in the Indian economy.

Developing countries should align science, technology and innovation policies with industrial policies. New technologies can re-invigorate traditional production sectors and speed up industrialisation and economic structural transformation,” Shamika N Sirimanne, director, UNCTAD’s division on technology and logistics, said.