Despite President Obamas reported comments on the need to improve the US education system and innovation capacity to prevent being overtaken by China and India, innovations like Nano remain an exception rather than the rule. Indias total filing of patents is less than 0.5% of the total number of patents filed in the world, which is led by Japan, followed by the US. Of these patents, two-thirds are filed by foreign firms with R&D centres in Indiaclearly foreigners are leveraging Indian talent more than the Indians themselves. This state of affairs is driven by the fact that, like many other key areas, innovation does not get enough investment as India spends less than 1% of its GDP on R&D compared to 2-4% for the developed countries.
The challenges in improving the R&D environment in India are well understood by the different stakeholders, and many reports have been prepared on this subject by the government and its bodies like the Council of Scientific and Industrial Research (CSIR). These reports mention, among many areas, the need to enhance both public and private investment in R&D, improving the research capability in our universities, improving collaboration between research institutes and industry, and strengthening and evolving the IP regime to reward risk-taking. While the government has taken many steps to address some of these challenges, there are some strategic issues and choices that we face as a nation that have not been adequately answered.
First and foremost is a fundamental question. Given the stage of Indias industrial development, how important is the strengthening of R&D capability for our nation I ask this as a somewhat rhetorical question as I remember my father, who retired as a senior scientist in a CSIR laboratory, lamenting about the response of Indian businesses to indigenous researchthey preferred to buy old technology and second-hand plants from abroad rather than new technology developed by research centres in India.
If we believe that this is a critical objective for India, is the government then willing to use terms of trade to fully leverage the growing demand in the Indian market and mandate the import and localisation of technology, at the very least, in areas considered strategic for the country, like defence and different types of industrial equipment While many do not view China as the best benchmark on this topic, the fact remains that they have the highest growth among all nations on filing patents and, if they maintain this rate, they will become the most innovative nation in the world. They have imported and assimilated technology faster than any nation in recent history. A great example is their path to a global position in high speed trains (HST). For their first HST project between Beijing and Tianjin, they contracted and imported German technology. Their second project was built with the help of Japanese technology, and their third and fourth projects were built with indigenous technology based on imported and assimilated foreign technologies. Today, they are bidding for tenders for HSTs across the world. For China, developing global standards of technology in Railway Rolling Stock was an important national objective and they orchestrated all their policies to achieve it.
The second issue is posed by the complex nature of the environment required to foster innovation. It is not just one or two policy areas that have to be addressed, but an entire ecosystem that has to be built and strengthened. The most well-known parts of this ecosystem are the research capabilities of Indian universities and R&D capabilities of Indian businesses, and the linkages between the two. It also includes science parks that support R&D communities and fiscal incentives given to promote R&D. However, the role of technical standards and testing organisations is less recognised in India, whereas global experience shows that they play an equally important role. For example, can India set its own standards for the proposed National Broadband Programme to be tested at local testing centres This will put pressure on potential telecom technology suppliers, both local and foreign, to innovate for and in India.
My final point is on the potential for the innovation culture to become a transformative force for the development of Indian industry. It is accepted by all that the level of investments in R&D has to increase very significantly if we want to go up the global innovation ladder. Can we not think big, as we did in the case of NREGA and UID, and create a multi-billion dollar innovation fund that is managed by experts Such a fund would be the executing arm of government policies to promote innovation, and could have a mandate to support the development of specific strategic technologies, foster university-industry research projects or consortium research, provide fellowships and budget for returning NRIs, and even support the acquisition and development of critical technologies. Of course, the modalities will have to be worked out in detail, but such a policy measure will go a long way in showing commitment to this important national objective.
The ability to learn, change and innovate faster is the most sustainable of competitive advantages. As a nation, we have a long way to go to become an innovation-driven society. But, as an emerging economic powerhouse aiming to become a leading manufacturing country in the world, now is the time to bring these issues and potential solutions to the front and centre of our policy making. This will go a long way in building a strong R&D environment and innovation culture in the country.
The author is managing director, the Boston Consulting Group, India. These are his personal views