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Why India always misses the innovation bus
December 12, 2021

Opinion: Sanjib Pohit


Fearing the risk of failure, very little R&D funding goes towards innovative ventures and emerging technologies.


Over the last decade, the government has been encouraging domestic firms to come up with innovations in product manufacturing and services. The focus of the NDA government’s programmes like ‘Make in India’ is not only on manufacturing in India but also producing goods that are indigenously designed.

To promote innovation, policymakers have made attempts lately to increase India’s expenditure on R&D. It is now significantly below 2 per cent of GDP, which is the benchmark value that most innovating countries spend on R&D.

While India ranked only 46th in the latest Global Innovation report, it has climbed two spots over the previous year’s standing. And, the performance is labelled ‘above expectations’ against the yardstick of the level of development. However, Asian countries like Malaysia, Vietnam, Thailand, and even some of the East European countries like Bulgaria, Estonia, Slovenia and Hungary, scored above India. Thus the notion that Indian entrepreneurs lack innovation culture continues to hold good.

At a micro level though, Indian entrepreneurs function effectively in implementing quick fixes, commonly called “jugaad”, which serve as low-cost, innovative workarounds or solutions to problems.

While India seems to score low in innovation in multiple areas of technology, there are two sectors that stand apart. These are technologies related to atomic energy and space science. Incidentally, both these areas are under direct control of the Prime Minister’s Office and many of the standard rules of audit, including Right to Information Act, do not apply to them.

R&D centres

In the Indian context, innovations are carried out primarily by public sector or government R&D centres. Of late, however, a number of R&D centres have been set up by multinationals (MNCs) and funding for them has been increasing. Elsewhere in the world, the private sector, particularly MNCs, plays a significant role in ushering innovation. Why the same is not happening in the R&D centres of MNCs in India?

As fDi Markets database indicates, of the three heads of R&D — Design, Development and Testing (DDT), Education and Training (E&T), and Core R&D — support for Core R&D, one that focusses on making real innovations, is limited in India. Thus, one cannot depend much on private FDI to help India have a significant presence on the innovation map.

The R&D in public sector or government labs is governed by standard rules (audit, Right to Information Act, etc), even though, at best, only 5 per cent of the attempted innovations results in success. This is probably true in other countries as well. Thus, one needs to understand that experimenting with innovative ventures can be a total failure.

Typically, the committee members responsible for allocating funds for innovation are government employees. So, there is always a chance of them being questioned by the CAG (Comptroller and Auditor General) if there is recurrent failure of innovative ventures. Hence, it is not surprising if they are risk averse and do not support blue sky innovative ventures. The chances of failures are low/limited in incremental innovation and so most of the funding of public R&D centres goes for same. As Indian Space Research Organisation is not governed by mundane rules, the progress of Indian space research has been amazing and on a par with those of developed countries.

Hence, to imbibe a culture of innovation, the rules need to be amended and failures need to taken in their stride. The gains from one blue sky innovation would be enough to compensate the losses in all other cases. India has never really made a forward looking strategic plan to channel R&D expenditure on emerging technologies. As a result, India is usually a late entrant to a new technology. By the time India puts its imprint on a technology, the world has moved up the technology ladder, or the technology has moved in a different direction.

Thus, Indian firms find little space to enjoy the gains of innovation. By contrast, industrialised countries, including Korea and Taiwan, adopt a strategic plan based on Technological Forecasting exercise to direct their R&D expenditure.

Unfortunately, India has never attempted a serious endeavour of this kind, barring half-hearted attempt by the Technology Information Forecasting and Assessment Council. So, it is not surprising that India has not been able to leapfrog on the technology front.

The writer is Professor, NCAER. Views are personal.


Published in: Business Line, December 12, 2021