"India, with its youthful population and thriving information and communication technology (ICT) industry, can become a leading knowledge-driven economy as long as regulatory, education, and infrastructure barriers are overcome," ADB said in its report 'Innovative Asia : Advancing the Knowledge-Based Economy'.
The report said pro-poor technologies, growing investment in ICT, advantage in audio-visual services as an outsourcing hub for animation and other skill-intensive industries are few of the promising areas for India.
"By leveraging its strengths in human capital and ICT services, India can become a major global knowledge-based economy," said Bindu N Lohani, ADB Vice-President for Knowledge Management and Sustainable Development.
However, India will need steps such as supportive laws, improved infrastructure, removal of barriers to trade and investment, up-skilling of labour force, higher spending in R&D and innovative financing for small businesses and enterprises, Lohani said.
The knowledge based economies use ICT, innovation and research, and higher education and specialised skills to create, disseminate, and apply knowledge for growth.
Currently, developing Asia ranks well below the OECD average in the World Bank's Knowledge Economy Index.
ADB said that advanced Asian economies such as Japan, Korea, Singapore, Taipei and China have successfully shifted from agriculture to manufacturing to knowledge-based industries.
China and India, have built pockets of knowledge-based growth, but have not yet translated this into a broader economic model, the report said.
Countries such as Bangladesh, Myanmar, and Lao have yet to really embark upon knowledge-based growth.
"A shift to innovation-based growth would help countries avoid the middle-income trap and also address rising income inequalities," added the report.
Established in 1966, ADB has 67 members of which 48 are from the Asian region.
It works towards reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration.
In 2013, ADB assistance totalled USD 21 billion, including co-financing of USD 6.6 billion.