·
California, with a population that is 1/33th of
the population of India, has an economy of size that is comparable to that of
India. As of FY16, the GDP of India is ~USD 2.26 trillion, while the GDP of the
state of California is ~ USD 2.6 trillion. California is at the forefront of
innovation and technology, providing a favorable ecosystem to promote
innovation, with numerous technology companies, including Facebook, Google and
Apple Inc., headquartered in California.
·
California is considered to be the home of
American innovation, providing constant inspiration, a culture of innovation, and
a healthy competitive energy. California has a large number of good-paying,
tech-sector jobs.
o
California leads among states of the US in
number of industries in which it has a higher proportion of employment than the
US national average. A research study shows that California exceeds the U.S.
average in 17 out of a possible 19 high-tech industries.
o
The state boasts nearly 1.2 million tech-sector
employees, a robust 7.2% of the workforce, making it number one among states of
the US in number of employees and fourth largest as a percentage of the workforce
o
On average, the wage in California is nearly two
and half times more than the US national average wage
o
According to a report by WalletHub in 2017,
California was ranked 4th among states of the US in 18 “key
indicators of innovation-friendliness”. It was ranked behind the District of
Columbia, Maryland and Massachusetts.
o
California ranked No. 1 among states of the US in
venture-capital spending per capita
o
California ranked No. 4 among states of the US in
research-and-development spending per capita, behind District of Columbia,
Massachusetts and Maryland
o
California is ranked 1st among states
of the US for number of patents issued per capita, almost 3 times the national
average of USA
·
The role of governments is critical in the
promotion of innovation. Government policies play a critical role in the
determination of where R&D investments will be made, and consequently where successful innovations occur and spur
economic growth. Interventions promoting innovation in California include –
creation of the Innovation and Entrepreneurship Unit under the Governor’s
Office of Business and Economic Development, banning of non-compete agreements
and hence promoting entrepreneurial growth, and recently announced proposed
regulations for testing autonomous cars on public roads.
Indian Context
·
"Jugaad", the poster boy of Indian innovation, is also a poster boy of what is wrong in the Indian innovation ecosystem and policy. Jugaad is a means of transportation in
north India, powered by diesel/kerosene engines originally intended to power
agricultural irrigation pumps. It has numerous benefits – helps in irrigation,
in transportation of farm produce and in transportation of people. It is therefore a perfect example of innovation that leads to enormous asset optimization as the same asset is used for multiple purposes and does not lie idle.
However, as per Government of India's Central Motor Vehicle's Act , Jugaad is an illegal vehicle. In spite of the
product providing asset optimization, limited efforts were made by the
Government of India to strengthen it and popularize it in the rest of the
country and therefore its usage stays limited to north India and is subject to the vagaries of the whims and fancies of the local police in allowing it to operate on the roads.
On the other hand, Uber, which faced similar regulatory challenges globally and in India, was able to tweak the regulatory bottlenecks to enable it to survive and prosper. Uber could do that as their home government supported them from a regulatory perspective and allowed Uber to prosper.
·
Innovations in science and technology are
integral to the long-term growth and dynamism of any nation. According to the
Global Innovation Index (GII) 2017, announced by the World Intellectual
Property Organisation, India is ranked 60 out of 130 nations, up
from Rank 66 in 2016.
·
While Indian historic contribution to scientific
knowledge has been significant, currently India under-spends on R&D, even
relative to its level of development.
·
According to the 2016 Global R&D Funding
Forecast, global R&D spending was estimated to grow by ~3.5% in 2016. On the
other hand, according to the Economic Survey 2017 – 2018, R&D spending in
India has doubled in the last 10 years, growing at a CAGR of ~8% over this
period. However, India’s R&D spending as a % of GDP has remained stagnant
at 0.6% – 0.7% over this period.
· According to the Economic Survey 2017 – 2018, India’s
spending on R&D is ~0.6% of GDP and is well below that in major nations:
o
USA: 2.8% of GDP,
o
China: 2.1% of GDP, and
o
Israel: 4.3% of GDP
·
The Economic Survey 2017 – 2018 observes that in
India, unlike other nations, the central government is not just the primary
source of R&D funding, but also the primary user of these funds. It is
critical that state governments step up and increase spending on R&D, to
target problems specific to their population and economies.
·
According to Forbes 2017, there are 26 Indian
companies in the list of the top 2,500 global R&D spenders compared to 301
Chinese companies. Further, 19 (of these 26) firms are in just three sectors:
pharmaceuticals, automobiles and software. There is a need for greater private
sector investments in R&D.
·
The Economic Survey 2017 – 2018 advises doubling
of R&D spending is necessary, with a much larger role by the private sector
and universities. This also involves a more conducive regulatory environment.
·
Number of publications:
o
Between 2009-2014, annual publication growth in
India was almost 14%. This increased India’s share in global publications from
3.1% in 2009 to 4.4% in 2014 as per the Scopus Database.
o
The Nature Index publishes tables based on
counts of high-quality research outputs in the previous calendar year covering
the natural sciences. This Index ranked India at 13 in 2017.
·
Patents:
o
While, India is the 7th largest Patent Filing
Office in the World (according to the World Intellectual Property
Organisation), the number of patents filed in India is just ~7% of the number
of patents filed in USA and ~4% of the number of patents filed in China.
o
Also, India has a poor patents per capita
o
There is a severe backlog and high rate of
pendency for domestic patent applications. Given the rapid rate of
technological obsolescence, the inordinate delays in processing patents
penalizes innovation and innovators within the country.
·
The Government of India has adopted numerous
initiatives to promote innovation and entrepreneurship, including Start Up
India, Make in India, Atal Innovation Mission (AIM), Support to Training and
Employment Programme for Women, Jan Dhan – Aadhaar – Mobile (JAM) Trinity,
Digital India, Stand Up India, among several other initiatives.
There are broadly 2 types of innovation models, depending on
the main driver of innovation – the bottom-up approach and the top down
approach.
Bottom-up approach
to innovation:
·
The bottom-up approach to innovation is
demand-based and driven by affected communities, with effective incentivization
for all stakeholders.
·
In the bottom-up approach, the role of the
government is to provide a conducive environment for research and for adoption
of innovations.
·
A stable, innovation-friendly regulatory
framework is critical to encourage and promote innovation. Moreover, along with
simplification of the regulatory framework, it is important to spread awareness
on the related regulations; this ensures a level-playing field.
·
An example of short-term innovation developed
using the bottom-up approach is the Jugaad vehicle in India. An economy that
achieves long-term innovations using the bottom-up approach is an innovating
economy, and this is the ideal state for an economy to be in.
Top-down approach
to innovation:
·
The top-down approach to innovation is driven by
companies or nations. Examples of short-term innovations using this approach
can include electric vehicles, while long-term innovations may include
Artificial Intelligence.
·
China has adopted the top-down approach to great
success. The central and provincial governments have funded numerous projects
throughout the country that aim to produce advanced technology, cultivate
high-level talent and nurture an entrepreneurial environment.
·
Big data has become crucial to building China’s
IT industry and China’s economic growth. According to the China Academy of
Information and Communication Technology, investments promoting big data
storage and use in 2015 were estimated at USD 1.89 billion. It is estimated
that China's data volume will expand at an annual rate of over 50% and account
for 21% of worldwide data by 2020.
·
China aims to be the global leader in artificial
intelligence (AI) by 2030.
o
With more than 700 million internet users, China
has an abundance of data to train AI-learning algorithms
o
The existing mobile internet ecosystem provides
the opportunities for AI researchers to collect and analyze big data related to
demographics and behavior, and to conduct large-scale experiments
o
The Chinese government has adopted favorable
policies to inspire innovations, with several internet giants and rising
start-ups adopting AI technology in their operations or investing in it.
o
Local governments in China are offering
incentives to encourage AI-related innovations.
§
Guizhou, earlier one of the poorest provinces in
the country, has become known as China’s ‘big data hub’, with major internet
companies setting up big data centers in the province.
§
Chongqing became one of the 1st
municipalities of China to establish a bureau to support local AI development
§
Xiong’an New Area and Guangdong-Hong Kong-Macau
Greater Bay Area have incorporated AI in their development plans
Global Context:
·
Innovation requires continuous investment.
Before the 2009 crisis, global research and development (R&D) expenditure
grew at an annual pace of approximately 7%. GII 2016 data indicate that global
R&D grew by only 4% in 2014, as a result of slower growth in emerging
economies and tighter R&D budgets in high-income economies.
·
The growth in global R&D investments is
being driven by spending in Asian countries, in particular, China, Japan, and
South Korea, which now account for more than 40% of all global investments.
·
The top innovating nations are all high-income
economies, with high GDP per capita, and these economies show mature innovation
systems with robust institutions and high levels of market and business
sophistication, allowing investment in human capital and infrastructure to
translate into quality innovation outputs. The steps taken by some of these top
innovating regions are:
o
United Kingdom: the framework under the
Department for Innovation, Universities & Skills (DIUS) has been performing
well, especially on the lifelong learning and early-stage venture capital front.
The Innovation Nation White Paper outlines the future of innovation in the
country, providing intellectual leadership by suggesting new policies based on
new imperatives. Highlights include provisioning for ‘hidden’ innovation and
demand-driven ideas and fostering collaboration between public, private and
non-governmental organizations (NGOs) to transform public services.
o
United States: The US recognizes a vision
and strong culture of innovation, and more importantly, successful
commercialization of innovation in the country. The National Innovation
Initiative (NII) outlines the next phase in this journey, focusing strongly on
the three pillars - talent, investment and infrastructure.
o
European Union: The European Union (EU) stresses
on innovation at both the Union level as well as the regional level. For Europe
2020, the three priorities identified include smart growth, sustainable growth
and inclusive growth. The EU’s Innovation Policy places strong emphasis on
social innovation, recognizing it as “an important new field which should be
nurtured”.
o
China: China has shown tremendous rise
over the past decade, and is currently ranked 22 in the Global Innovation Index
2017. This high ranking was on the back of strong performance in business
sophistication and knowledge and technology outputs, presence of global R&D
companies, research talent in business enterprise and patent applications.
Recommendations to
promote innovation in India:
·
The innovation strategy for India needs to have
four very clear objectives:
o
enable innovation at the bottom of the pyramid
(for and by the next billion)
o
create an innovation ecosystem
o
focus on local capabilities for both near- and
long-term benefits, and
o
harvest existing innovations so that the
benefits reach a larger potential user base.
This quadri-focal strategy is outlined in the figure below:
·
To build the environment for innovation, the
strategy needs to address the following factors:
o
Ensure research converts to innovation
o
Create a strong legal structure
o
Enable business partnerships and incubation
o
Encourage community participation
o
Develop policies to incentivize innovation
·
The legal and regulatory framework in India for
promotion of innovation may be further strengthened to address the existing
weaknesses. There are three requirements on the policy front for innovation:
o
formulation of appropriate strategies for promoting technological
development,
o
identification of trade and fiscal measures to
encourage technology development, and
o
developing of a framework for standardization, certification
and accreditation
·
According to the Global Innovation Index 2017
Report, the weaknesses in regulatory ecosystem in India include ease of
starting of business, ease of resolving insolvency, ease of paying taxes and
environmental performance. India is expected to show improvement in these
parameters, with the Government’s steps to address these issues, including
adoption of the Insolvency and Bankruptcy Code (IBC) Code.
·
The intellectual property regime in India is
weak, and there is scope for strengthening. Innovators do not generally seek
protection for their intellectual property unless forced to. For most
entrepreneurs, patents and other forms of protection take too long and cost too
much. Patent literacy is low and there is a lack of expert help in this field.
·
Incentives in the form of capital investment,
finance and favorable taxation are critical. Also, current procurement policies
disincentivize innovation, there is a need for government policies to enable
procurement of innovation. Technology and IPR framework, availability of a
talent pool and better access to market are all necessary to foster innovation
as well.
·
Innovation is critical to the creation of
high-quality, high-wage, sustainable jobs and economic growth. It is important
to create an ecosystem to recognize a vision and strong culture of innovation,
and also promote successful commercialization of innovation.
·
As India emerges as one of the world’s largest
economies, it needs to gradually move from being a net consumer of knowledge to
becoming a net producer.
·
India lacks structures and mechanisms to
identify areas of innovation for a top-down innovation approach. This needs to
be defined and created.
·
Also, India needs to create institutional
mechanisms to identify and promote innovations happening at the grassroots.
·
As highlighted by the Economic Survey 2017 –
2018, the Government of India is the main source and user of R&D funding. It
is critical that state governments, private sector and universities step up and
play a greater role in investments in R&D.
·
While research is integral to innovation, it is
also important to convert research into meaningful innovation. This calls for a
three-way understanding and collaboration between the public sector, the
private sector and the academia. Collaboration between industry and labs,
creating a framework for jointly-funded research, creating a functioning
lab-less research capability that leverages the existing facilities in the
private sector, universities and the government itself, and ensuring feedback
for research are the other important factors.
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