India must strengthen R&D for leveraging the fruits of innovation-led endogenous economic growth

The Economic Survey projects that India’s real Gross Domestic Product (GDP) would register a growth of 11 per cent in 2021-22. It reflects a faster recovery for the economy which has been crippled by the pandemic. Driven by the visible dynamism of economic activities with the roll out of the Corona vaccines, the survey highlights that the growth will further be reinforced by various reforms and easing of regulations, rising infrastructural investments, spur in manufacturing sector through the productivity linked incentive schemes.

The survey also underlines how India’s rapid surge on the Global Innovation Index (GII) from 81 in 2015 to 48 in 2020 among 131 countries was realised during the last five years. It also reflects the correlation between high-income economies and the high innovation index, which corroborates the Solow model on endogenous economic growth. Drawing reference to the GII 2020 report, the survey further drills down on sub-parameters of the overall innovation index, capturing how India fares on the seven parameters of innovation like 61st in institutions, 60th in human capital and research, 75th in infrastructure, 31st in market sophistication, 55th in business sophistication, 27th in knowledge and technology outputs and 64th in creative outputs.

This indicates that barring knowledge and technology outputs, we are lagging across other parameters. We must invest more and work in a synergistic mode to enhance our global positioning in institutions, human capital and research, infrastructure and business sophistication. Moreover, India’s spending in Research and Development (R&D) has been low at around 0.7 per cent of the GDP, which is noticeably lower than the top five R&D spenders globally in 2017. Like 4.3 per cent for the Republic of Korea, 4.2 per cent for Israel, 3.3 per cent for Japan and 3.2 per cent for both Switzerland and Finland and even lower than the R&D spend by other BRIC countries. This must be raised to a reasonable level of two per cent to rev up innovation momentum in the country.

The more contrasting factor according to the survey is that the Government spends 56 per cent of the gross expenditure on R&D, which is three times the average contributed by governments in the top ten economies, while the private sector contributes much less (about 37 per cent) in comparison to their counterparts in the top ten economies (68 per cent). In terms of the share of total R&D personnel, public sector contributes 36 per cent, the highest among top 10 economies, while the private sector’s contribution to the total R&D personnel is 30 per cent, which is far less than the average 50 per cent of the top 10 economies. The hallmark of India, according to the GII 2020 survey, is the knowledge diffusion sub-pillar, which ranks 10, of knowledge and technology outputs. And the most prominent dimension under this sub-pillar is the ICT services exports where India ranks first in the world.

While the Indian IT industry has displayed a tremendous performance among global counterparts, the other industries are falling back on scores. The other industry verticals should focus on research and innovation, adopt emerging technologies, infuse process and business sophistication. It’s imperative now to empower startups to co-create innovations in collaboration with the industry in a more synergistic manner. The Indian startup ecosystem has defied the pandemic and created a record number of 12 unicorns in 2020. This is a testimony to the innovation mettle of Indian startups. What’s critical for India now is to bring in synergy between the Government and the private sector to collaborate and build a systemic innovation culture across the board to foster translational R&D by increasing investment, connecting academia and industry to address real-life industrial challenges.

(The writer is Director General, Software Technology Parks of India. The views expressed are personal)