Cut to 2013, and reality paints a strikingly different picture. After a string of policies and legal actions undermined internationally-accepted intellectual property (IP) laws, the global business community is beginning to lose trust. One of the most important indicators of business confidence in an economy is the ability to attract foreign direct investment (FDI). Unfortunately for India, this investment pulse of the country dropped from $35.1 billion in FY12 to $22.4 billion in FY13, a detrimental 36% decrease.
So what caused this sudden change of course
It is well-documented that strong IP systems lead to even stronger FDI inflow. The Organisation for Economic Co-operation and Development (OECD) has reported that for every 1% improvement in a countrys IP environment, a 2.8% increase in FDI follows.
Yet, doing business in India is now particularly troublesome for investment-heavy IP-intensive companies. In misguided attempts to benefit domestic interests at the expense of innovative global companies, India consistently fails to respect intellectual property rights in a wide array of sectors from information technology and software to innovative medicines and solar energy.
India is one of the top-10 countries in the world for online piracy of movies, causing heavy losses to the motion picture industry. The recording and music industry lost an estimated of $431 million to piracy in India. The countrys reported rate of PC software piracy was 63%, with an estimated commercial value of $2.9 billion. And perhaps most importantly, over the last two years, India has denied, revoked, and compulsory licenced patents for more than a dozen innovative medications and products. In the International IP Index, published by the Global Intellectual Property Center, a study that reviews the IP environment of a number of countries, India consistently finished lasteven behind Russia and China.
IP rights provide incentives to innovative companies and individuals, something which may require significant up-front costs and decades to create new products. In no sector is this more important than in pharma, where bringing a single life-saving treatment to the market requires, on an average, about $1.3 billion in investment and 10 to 15 years of research and development. Just think of the countless deadends encountered and the millions of man-hours scientists and doctors have spent to make even the slightest improvement to healthcare! In the absence of IP rights, millions of people suffering around the world and in India wont have access to cures because the capacity to pursue this kind of risky research will be disrupted.
Damaging policies like these are contrary to international norms and long-standing global trade rules. They are alienating the very businesses and investors India needs to help stabilise a slumping economy.
The relationship between the United States and India is critical, but Indias weakening IP system is only serving to reverse years of progress and growth. In order to restore confidence, India must implement IP protections that encourage business to invest in India.
The author is the executive vice-president of the Global Intellectual Property Center at the US Chamber of Commerce