“India is one of the fastest growing countries in Asia, backed by strong knowledge intensive sectors – pharmaceuticals, chemical automotive, telecommunications, and aerospace to name but a few,” says DEIP Programme Coordinator Dr. Michiko Iizuka. “India is also exploring new models of development that are applicable to other countries, including frugal innovation and service sector led development. But for India to achieve anywhere near its full potential, all the major actors of her National System of Innovation — business enterprises, government and educational institutions — need to align their actions strategically.”
This was the background to our latest workshop on the ‘Design and Evaluation of Innovation Policies’ (DEIP), co-hosted in Pune, India, March 2017 by UNU-MERIT, the Centre for Technology, Innovation and Economic Research (CTIER), and the Confederation of Indian Industry (CII). This five-day course gathered around 25 policymakers from across the sub-continent, along with innovation experts from around the world. In terms of format, the workshop created a platform for representatives from different backgrounds to find common understanding from theoretical and practical aspects of innovation. Looking to the future, there are plans afoot to launch a new wave of workshops, delivered by Indian trainers ‘schooled’ on this programme.
To put things in perspective, we spoke with two experts who were instrumental in this workshop: former UNU fellow Prof. Sunil Mani, now Director of India’s Centre for Development Studies (CDS); and Janak Nabar, Chief Executive Officer of CTIER.
SUNIL MANI, CDS
What are the particular challenges India is facing right now in terms of Science Technology and Innovation (STI) policy?
India is considered to be one of the fastest-growing large economies in the world. It has got a rate of growth rate of approximately 7% per annum and it is believed that this growth is to be backed with contributions by technology much more than contributions by increased use of capital and labour. So the importance of science and technology for maintaining this high growth rate over a long period of time is very well understood in India.
Our current STI policy dates back to 2013. This particular policy favours the increased innovative activities of business enterprises, which are supposed to commit more resources to R&D, for instance, and one way to increase innovative activates is to make business enterprises much more innovative. From that point of view the biggest types of instruments that are available for starting innovation in business enterprises and evaluating the effectiveness of these policies is very much in need – and this is what the DEIP programme discussed.
So is the private sector the main focus?
Yes however, what is being performed by the private sector is financed by the Indian Government so one is not leaving out the other actors when we talk about increased innovative activities by private sector. Both the government and higher education have important roles to play – because the private sector depends on the availability of scientists and engineers, which come out of universities, so education policies are also important. The DEIP programme discussed how all of these actors have to develop policies.
What particular sectors are being pushed right now?
The service sector, which accounts for two-thirds of India’s economy, is the main sector being pushed. Within that, the most important subsector is computer software – which is really driving exports out of India. There are also attempts to give more importance to the manufacturing sector. The emphasis right now is to raise the share of manufacturing to almost 25% of India’s GDP (from the current 15%) by 2022.
Within the manufacturing sector, a lot of added-value is created by knowledge-intensive sectors; for instance, the pharmaceutical industry is number one, followed by the chemical industry and automotive industry. In the pharmaceutical sector, we are moving to biopharmaceuticals and the life sciences industry. We also have a big push for the electronics industry, particularly in telecommunications; also, aerospace with a particular emphasis on astronautics. In short, the emphasis is on the manufacturing sector, particularly in the knowledge-intensive manufacturing sectors.
Is the Indian Government pioneering in this respect? Or is it learning from neighbouring countries, for example?
It is learning from the region and the models for India right now are China, Korea and Japan. We are looking at our Asian neighbours because they have big and highly competitive manufacturing sectors, as shown by the amount of R&D investment and patents. For us China is a great role model in terms of the size of its manufacturing sector. This is framed under our ‘Look East and Follow the Asian Dream’ policy. This, of course, doesn’t mean that Western Europe and the United States are not important examples – but recent manufacturing growth does come from this region, so they are a natural candidate for us to look at.
On the workshop itself, what were your main experiences and takeaways?
The most important added value of the DEIP India 2017 is that while in the past DEIPs were more lecture-intensive programmes (with a traditional classroom setting), in this edition we tried a different model, whereby we had only lectures in the morning and in the afternoon we had actual cases in the form of industrial visits which highlighted the lectures. To give you an example, when we had a lecture by Prof. Pierre Mohnen on R&D tax incentives, the same afternoon we visited a company which had taken advantage of R&D tax incentives in India. So the participants could understand how R&D taxes actually work at a company level and what the challenges are.
All these practical issues were available for policymakers to learn in the afternoons. We also visited the National Chemical Laboratory of Pune (NCL), which is one of the biggest laboratories in India. This allowed the participants to understand how large laboratories engage with the local economy and explore the linkages with universities and so on. These illustrative case studies we had in the afternoons enabled participants to appreciate the theoretical lectures much more – which increased the added value of DEIP in general.
In addition, this DEIP had a lot of participants who themselves are trainers. We had 20 people who could then become trainers of other people. We had people who actually did policy evaluation using indicators and so on and they could familiarise themselves with the indicators they could use, how data can be obtained, and how policies could be evaluated in-house. Overall there was a clear multiplier effect – it was a real training for trainers.
JANAK NABAR, CTIER
What are the particular challenges facing India in terms of Science Technology and Innovation (STI) policy?
One of the main challenges facing India is the low level of R&D being performed in the economy. India’s investment in R&D has been stuck in a range between 0.6% of GDP and 0.9% of GDP for over 30 years. Much of the R&D being performed in India is being done by the public sector, which accounts for around 61% of India’s expenditure on R&D, while the private sector accounts for around 35%. The higher education sector accounts for around just 4% of total expenditure on R&D. India is an outlier compared to economies like the US, Germany, South Korea, Japan and China where a significant share (over 70%) of their research is undertaken by the private sector while expenditure on R&D in the university system is around 10-15% of total R&D expenditure.
If India has to raise its level of expenditure on R&D to 2% of GDP (and higher), much of this will have to come from the private sector. If it is to increase its share of manufacturing in GDP to around 25% by 2025 from 16% currently, there would need to be a significant increase in the amount of R&D undertaken by Indian industry. Increasing spending on research in the university system would also need to be undertaken to produce better qualified and trained graduates for our workforce.
What are the specific advantages of India in terms of its STI structure? What sectors are currently driving the economy? Are they likely to be overtaken by other sectors a decade from now (and if so, by which sectors)?
India has a large pool of science and engineering graduates. This has attracted a large number of multinational companies (MNC) to set up R&D centres in India. In fact companies like GE and Bosch have some of their largest R&D facilities in India. The advantage of low cost and qualified graduates for the purpose of R&D and to improve their competitiveness needs to be taken up by Indian industry too. The openness to global MNCs and their R&D centres and the push for ‘Make in India’ is an important step towards building technical capability in India. Inclusive innovation and the development of ‘frugal’ innovation products are increasingly becoming a focus area – not only is this important for the Indian market but also has the potential to address many needs in developed countries that are facing headwinds to economic growth.
As mentioned above, the public sector accounts for a large share of the R&D expenditure in India. Within the public sector, some of the key areas of focus are defence, space, atomic energy and agriculture. India is among the top nations in space competitiveness, both in terms of successful orbital launches as well as spacecraft manufacturing. India’s space agency, ISRO has been in the news for a number of achievements in recent years – the Mars orbiter mission as well as the successful launch of 104 satellites in a single flight. ISRO’s research efforts are critical in the development and use of communication satellites that will aid in the country’s development objectives from disaster management to financial inclusion.
Turning to industrial R&D, if one looks at the top global industrial R&D intensive sectors (based on the top 2500 global R&D spenders), India has a presence mainly in three sectors – Pharma & Biotech, Auto, and Software & Computer services. When it comes to R&D, Indian firms have virtually no presence in sectors such as Electronics & Electrical equipment, Technology & Hardware and other top areas like Healthcare Equipment & Services. There is significant scope for India to diversify across sectors and also ensure technological deepening within sectors where Indian companies are already globally competitive.
One sector that has the potential for further technological deepening is healthcare (where there is potential for a lot more public and private R&D expenditure to be incurred). This is not only because of the significant demand for healthcare, but also because there already exists an industrial base and an innovative pharma industry (currently largely concentrated in the generics drugs space). An increased focus on healthcare equipment & services for instance would not only help in technological deepening within healthcare, but could also assist in the provision of affordable and accessible healthcare through new ‘frugal’ medical devices.
Another sector that has the potential to see further technological deepening is India’s IT industry. Indian IT companies are coming under pressure from increased automation and are also facing visa restrictions in some of the countries where they operate. The IT industry should focus on moving up the value chain by spending a lot more than they currently do on R&D and aim to provide services that would prepare India for next generation manufacturing.
Is the Indian Government seeking inspiration or guidance from other countries in its STI policy (and if so, by which countries and in what ways)?
India with its goal of inclusive innovation has much to offer other countries. It also has much to learn from the other countries where R&D has played a pivotal role in that country’s development. The Department of Science & Technology along with the Confederation of Indian Industry has established the Global Innovation & Technology Alliance (GITA) – a not-for-profit organisation that is working towards promoting collaborative industrial R&D programmes between India and other innovative countries.
GITA offers financial support as well as a platform for matchmaking industries and institutes in India with those in other countries. There are several bilateral initiatives being handled by GITA – with Canada, Israel, Spain, the UK, Finland, the Indo-ASEAN S&T Development fund and Indo-Taiwan Cooperation programme for the exchange of scientists. GITA is also tapping into two multilateral initiatives with the EU – the Enterprise Europe Network and the INNO INDIGO initiative.
On the workshop itself, what were your main experiences and takeaways? What is the unique added value of DEIP?
The timing of this programme was particularly pertinent, given the government’s push to improve India’s ranking in the global innovation index as well as the recent launch of the India Innovation Index. The class size was intentionally kept small (to around 20) which helped facilitate greater dialogue and debate during the sessions on India’s innovation system. The participants included representatives from government – both central and state level officials, academics working on technology policy and representatives from industry.
The lectures covered a wide range of topics: from gaining a systemic perspective in understanding the generation and diffusion of innovation, to the study of new and conventional indicators for measuring innovation. The participants also had a glimpse of the tools and techniques used in academic literature to evaluate policies – and the key takeaway was the need to define a framework and the role of indicators in tracking the progress of policies that have been introduced to promote innovation.
The unique feature of the Pune DEIP programme was the first-time introduction of three industry visits that were organised to complement the classroom discussions. The industry visits provided the participants an opportunity to appreciate innovative activities within industry and the public research system – and also to identify bottlenecks that may require certain policy interventions to ensure a smoother functioning of India’s R&D ecosystem.
The opinions expressed here are the authors’ own; they do not necessarily reflect the views of UNU.