The curious case of Indian innovation

 

India’s slide as a global innovation hub continues. Not only is India expected to perform poorly on this year’s World Bank sponsored Global Innovation Index, slated to be released later this month, the country drew a blank on the 2015 Bloomberg Innovation Index, an annual ranking of the world’s 50 most innovative countries. All of the BRICS nations, except India, and even countries like Malta and Tunisia, were featured on the list.

 

Even official records of the Indian Patent Office cast a gloomy picture—while patent grants for foreign inventions increased by almost 300%, grants to Indian inventions grew by a mere 45%. In 2013-14, while as many as 42,951 patent applications were made, only 10,941 were made by Indian applicants. The Indian government spends less than five times of what China spends on R&D and the country attracts a mere 2.7% of the global R&D spend (China attracts 17.5%). India scores poorly in commercialising R&D from its universities, and its regulators often create antitrust and taxation hurdles in the effective exploitation of foreign-owned patents on Indian soil.

 

If India fails to incubate innovative ideas at home or creates a reputation of failing to protect ideas of others, our ambitious manufacturing policy would be still-born. The country needs to adopt policies for ‘nudging’ the public and private creation and commercialisation of knowledge, and the 29-page draft IPR policy; although a good start is definitely not enough. An innovation-conscious economy needs more than a robust IPR regime. In 2014, China—in spite of being on the ‘serious watch list’ of the United States Trade Representative for IPR deficiencies—was the highest climber in the ranking for patents granted by the European Patent’s Office, reaching the fourth spot after an 18% year-on-year increase in patent filings.

 

What could have helped China is that its government has itself invested close to 2.8% of its GDP in developing R&D efforts in science and technology (bringing China closer to R&D intensity levels of a number of developed nations). It has also incentivised Chinese companies to boost their own R&D efforts (including corporate tax deductions up to 150% on expenditures that create intangible assets, such as patents or trademarks)—resulting in such companies having increased their R&D spending by an average of 64% every year for the past five years. China has also made huge investments in the country’s university system, hoping to recreate a Silicon Valley-style symbiosis between industry and the research sector.

 

However, innovation is both country-specific and industry-specific, and emulating another country’s model may not work for India. Each Indian industry has its distinctive array of strengths and constraints for innovative growth and its unique set of innovation bottlenecks. Patent policies that help pharmaceutical companies with products having longer life-cycles may hinder the disruptive-innovation practices of maverick IT businesses. India’s media and entertainment industry’s innovation woes arise as much from weak copyright laws as from fixed tariff rules preventing the effective monetisation of the industry’s rich content. Such differences among industries need to be reflected in India’s innovation strategy and policy. The National Innovation Council—set up to adopt a holistic innovation strategy for all sectors of the economy—aims at identifying such sector-specific bottlenecks through ‘innovation surveys’. However, sparse efforts are being undertaken to align sector-specific innovation quirks to matching regulation/legislation—aimed at curbing such handicaps.

 

Another aspect of India’s engineering strength that remains conspicuously absent from our national innovation agenda is that of ‘frugal innovation’ (different from jugaad and quick-fix solutions). From the Mangalyaan to the Nano to the Six Sigma certified dabbawalas, Indians have developed innovative products and processes, with limited resources—providing competitive advantage through product differentiation or cost leadership, or both. In the process, they have created no-frills, good quality, functional products, affordable to consumers with modest means. Given the revolution in product-design and process-design philosophy that such innovation embody, if used systematically it can become the lynchpin of India’s homegrown innovation culture. The government should join India Inc in patronising research and training in codified frugal-engineering practices and brand it as a globally-relevant business methodology.

 

Traditional SME sectors of the Indian economy, like textile, foot ware and metal ware, which have their own unique ‘local innovation systems’, need strengthening to make them more competitive. Principles of modern systems of innovation are only partially relevant to such sectors. These principles needs contextualisation to ensure that the delicate balance of the traditional knowledge based production techniques of such sectors are not disrupted. The recently launched Mudra Bank(India’s Mittelstand) can take leadership in providing a platform for cooperative stakeholder based R&D efforts, matching their innovation needs to external funding and training resources and providing direct linkages to national and international markets.

 

Further, India needs to adopt an ‘innovation principle’ in its risk management and regulatory language—ensuring that whenever any state or a federal ministry/agency proposes a legislation or a regulation, the impact on innovation should also be taken into account in the policy and legislative process.

 

The script of the Indian innovation agenda is a work in progress, but the incumbent government’s heart and money is in the right place. Earlier this month, Prime Minister Narendra Modi launched his government’s much awaited Digital India initiative—a R1.13 lakh crore government programme—which, among other things, aims at making India a hub of innovation. However, as it is often said, the devil lies in the implementation.

 

The author is assistant professor of Competition Law at the Jindal Global Law School and a former expert consultant to the Competition Commission of India