Column: Weak IPR regime a deal-breaker

May 03 2014, 04:22 IST
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SummaryUS investors are getting turned off by India’s poor IPR record, as recent FDI figures show

Economic experts have repeatedly demonstrated that a robust intellectual property (IP) system leads to greater investment, economic growth, and overall innovation. By striking the right balance between the interests of innovators and the wider public, the IP system aims to foster an environment in which creativity and innovation can flourish. So, the debate isn’t about whether or not promoting a robust IP environment will help India, but rather about how to do so.

 India is the world’s largest democracy, a close ally of the United States, and the second-largest market by population. Today, India boasts a $1.8 trillion GDP—larger than Australia, Canada, and Mexico. It is a rising economy, a G20 member, and an important voice on the global stage.

The US business community has long been a partner in India’s growth and development. As India pursued economic reforms in the 1990s, most notably the transition period to implement the WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights, innovative and creative industries expanded bilateral commercial ties. From 1995 to 2005, foreign direct investment (FDI) from pharmaceutical industry alone increased by four-fold.

Unfortunately, despite India’s progress toward a more open economy, the business community is seeing a series of policy, regulatory, and legal decisions that undermine the ability of US and other foreign companies to compete fairly in India. This trend is already reversing India’s past successes.

Based on government of India reports for FY12, FDI inflows from the United States were approximately $994 million, down from $2.2 billion just two years prior. The most recent data show that the decline is continuing. In FY13, US FDI in India fell by almost half from the previous year, reaching $478 million. The lack of IP protections in the country has, in large part, led to declining interest on the part of US investors.  

As noted in the US government’s Special 301 Report released earlier this week, weak IP protection and enforcement in India is casting doubt on the future of the innovation across multiple sectors and disciplines. When benchmarked against 24 other countries in the US Chamber’s International IP Index based on factors that directly influence a company’s decision to invest in a given market, India’s IP environment received the lowest score due to an increasing piracy rate, weak patent protections, and lax enforcement mechanisms. 

However, with the election, there is an opportunity for the new Indian government to take a look at these IP issues, partner

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