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28 December 2017

How to re-make in India

By Aloknath De

It is no coincidence that the top 10 countries on the World Economic Forum’s Global Competitiveness Index (GCI) score highly in the ‘innovation’ parameter. Efficiency has always been at the heart of any innovative undertaking, and each invention invariably leads to an increased level of productivity and economic growth.

India’s GCI ranking — of 40 — can be significantly improved with a growthpath focused on innovation. A 2015 report by PwC examined India’s potential growth through innovation under three scenarios: investment in human capital, in physical infrastructure, and in innovation. It concluded that the maximum gain can be derived from investments in innovation.


India is expected to be a $6 trillion economy, the third largest in the world, in the next 10 years. To achieve this, it will have to significantly ramp up its R&D spending from the current 0.88% of GDP, with a corresponding improvement to our current 60th rank on the Global Innovation Index (GII).

South Korea provides a demonstrable success story here. It is ranked 11th on the GII. Until the 1960s, it was a developing country with few means of production, an economy based on subsistence agriculture. It had only two science and technology institutes and a percapita GDP of $1,700. Over the next few decades, investments in R&D and machinery led to it becoming a highincome, advanced economy.

You don’t even have to invent the wheel

Today, South Korea boasts a per-capita GDP of over $29,000 and is the world’s sixth-largest exporter, driven by hi-tech multinational brands that built their capabilities during the country’s growthspurt. Its inclusive-growth economy has resulted in major improvements in universal healthcare, education and other benefits for its citizens, leading to an improvement in its Human Development Index (HDI) score.

India’s innovation growth can, in fact, be driven by MNCs. These firms have realised the need to tailor their products specifically for the Indian consumer, keeping price sensitivity and consumer behaviour in mind. This ‘reverse innovation’ approach has been extremely successful, with some of these ‘Indianised’ products successfully relaunched in the West.

A multinational healthcare firm used Indian engineers to develop a small, portable, low-cost ECG (electro-cardiograph) machine to cater to India’s ruralpopulation. It then launched that product in its home market in the West.

India’s economy stands to benefit as more products are adapted to the Indian market through the application of such frugal engineering. Companies would invest a greater amount in research to gain that ‘cutting edge’, which would mean more employment for engineers. A reverse engineering approach would also benefit the support ecosystem of tier 1and tier 2 suppliers, technology vendors and educational institutions.

GoI had taken a few positive steps to foster a culture of innovation. The Startup India initiative and Atal Innovation Mission have been created along similar lines. Startup India provides a comprehensive four-week free online learning programme and facilitates a ‘fund of funds’ for startups and provides incubatory support.

The Atal Innovation Mission also provides incubation centres, besides encouraging children to get hands-on training in STEM (Science, Technology, Engineering and Maths) concepts through Atal Tinkering Labs.

Developing a true innovation economy, however, requires a friendly ecosystem with intensive government support. Israel, for example, provides grants of 20-50% of the R&D expenditure that businesses need. Its spending on R&D today is the highest in the world.

To drive more businesses towards R&D, India can look at setting up a programme similar to the US Small Business Innovative Research (SBIR) Program, which encourages domestic small businesses to engage in federal research/R&D that has the potential for commercialisation. The programme provides incentives for commercial profit and enables small businesses to explore their technological potential.

The simultaneous development of a streamlined intellectual property rights framework would also help. Meaningful protection will strengthen legal certainty and increase the investor’s appetite for risk.

Innovation thrust in important sectors can boost productivity immensely. For example, transforming the agricultural sector would lead to the most direct gains for India. With the fastest rate of internet and smartphone adoption in the world, there is a huge amount of data that can be mined from Indianfarms. Coupled with AI, these insights could be used to develop intelligent, efficient devices.

An example could be a GPS-dependent sprayer that decides the amount of fertiliser applied per plant based on ‘need’. Similar developments would end up reducing costs for the farmer while significantly increasing productivity and revenue.

Entrepreneurs and large corporations need to work on these technologies to solve real-life problems. The need of the hour for making India an innovation destination is to use these cuttingedge global technologies to solve very local Indian problems in a cost-effective and efficient manner.

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