Editorial: Undermining innovation

By: | Published: January 28, 2016 12:38 AM

Many Indian policies are at cross-purposes with R&D

Given the metrics of measuring countries’ impact on global innovation, as per a new study by US-based think-tank Information Technology and Innovation Foundation (ITIF), include “innovation detractor” policies like low intellectual property rights protection and protectionist trade and investment norms, India, thanks to its export subsidisation, compulsory licensing, etc, stands an unsurprising third from the bottom in a ranking of 56 nations, together responsible for 90% of the world economy. It is, however, the contradictions evident in the indicators that the study deems “contributory” (policies) to enriching global innovation that the country’s policy-makers need to take note of.

India’s rank for “contributions” (44), while low, does not scrape the bottom as its overall rank does. This is because many of its policies have impacts that work at cross-purposes with each other, and, eventually, with R&D in the country and innovation. For instance, while India has the most generous tax credit (of 44%) for private sector investment in R&D, it also has one of the highest effective corporate tax rates in the list. Contrast this with, say, Sweden, which has one of the highest overall positive impact on global innovation. While Sweden doesn’t give any credit for private sector R&D investment, it has one of the lowest corporate tax rates. With high effective tax rate crunching the room for companies to invest in R&D, tax credits for such investment are of little use. Similarly, in terms of human capital, while the country has a relatively high number of science graduates—with 1.23 such graduates per 1,000 citizens, it isn’t far behind leader New Zealand (1.47)—it has one of the lowest number of researchers per 1,000 population (0.15, a far cry from leader Finland’s 7.41). Part of the reason for this could be that government expenditure on per capita university research and overall per capita R&D are shockingly low (at $12 and $464, respectively)—category leaders Korea and Singapore spend over 4 times and 31 times as much, respectively! This gap in government funding could have perhaps been filled the private sector but, to India’s loss, it doesn’t have incentives that promote corporate-university collaboration for research. And even if such collaboration did happen, the lack of legislative facilitation of transfer of knowledge from universities to corporates prevents commercialisation, a strong pull for corporates. Similarly, the lack of a Bayh-Dole-like law—the US’s Bayh-Dole Act eases transfer of ownership of knowledge produced in universities through government funding to the universities themselves—severely retards Indian innovation as universities are unable to commercialise the outcomes of government-funded research.

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