India has great potential to emerge as a leader in innovation | So Good News

Iinnovation, introduction of new technologies was the main source of economic progress. Innovations help to increase the productivity of people and capital, contribute to rapid growth of production and affect the welfare of the population. The introduction of the steam engine is considered the beginning of modern innovation. The steam engine, electricity, modern medicine, space technology, semiconductors and modern 3D printing are some of the most important innovations that have changed the course of human progress. Innovative policy, the process of generation and application of new technologies turned out to be the main direction of economic policy. Governments around the world have implemented many programs, from research grants and loans to venture capital and tax incentives, to stimulate an innovative business environment and respond to market needs.

Innovation policy is important because of the spillover effects that innovation creates. The research and development (R&D) activities of one company can affect the performance of other firms in the same industry or in different sectors, domestically or internationally. Knowledge is known to be a non-rivalrous and only partially excludable good. However, any innovation is a risky endeavor. It should be adopted by various stakeholders such as firms/manufacturers who produce products using the new technology and consumers who use it. Also, the new technology must be subject to the regulatory framework of the Government. Most new technologies are the result of systematic coordination between national governments, academia and industry. Risky innovation efforts increase the marginal cost of research and development (R&D), resulting in underinvestment in R&D and ultimately market failure.

The World Intellectual Property Organization (WIPO) Global Innovation Index (GII) 2022 report has some interesting observations for India. India has made significant progress in moving up the innovation ladder, with its ranking rising from 81st.^Art In 2015, it increased to 40 in 2022. It ranks first among lower-middle-income countries, as well as in Central and South Asia. Innovative initiatives in India span a wide range of fields such as space technology, smart cities, universal healthcare and telecommunications. India’s recent advances in vaccine development and the use of COWIN for the COVID-19 vaccine are due to the concerted efforts of the pharmaceutical industry and the government.

India has made remarkable progress compared to Brazil, South Africa and the Russian Federation. The latter managed to maintain its position, while Brazil significantly improved its rank. China had the best performance, reaching 11^th position and become the highest ranked country in BRICS. India, Brazil and Russia have moved up their positions. However, South Africa has dropped three positions in the ranking for the period 2018-2022.

In addition, India overtook Vietnam (48th place) to become the most innovative economy among low-middle-income countries. India’s achievements in the last seven years warrant attention. India has emerged as the third largest startup economy in the world. As it turns out, India is a leader in information and communication technologies (ICT), ranked 12th^th in the growth of labor productivity and 14^th place in the diversification of domestic industry. India has four of the world’s top 100 science and technology clusters, including the Mumbai cluster, which has risen three places since 2015. Although we have made good progress, we still lag behind many countries. This requires sector-specific policies to promote technological innovation. Innovative policy initiatives are important for increasing factor productivity and economic growth.

The experience of Covid-19 shows us that the government needs to provide subsidized capital to stimulate innovation. In this context, India faces some serious challenges to emerge as a significant innovation economy. Interaction between academia and industry is still very low in India. India scores low on infrastructure (78), science and technology intensity (34) and business complexity (54), and produces without significant patenting activity from academia (52). The diffusion of innovation is also low, which slows down labor productivity and impairs long-term economic growth. The informalization of industry and labor also poses important challenges to the innovation environment. Regional disparities also threaten long-term economic growth. Innovation policy in India is seen to be failing to effectively address the problems of high job attrition, low venture capital funding and lack of viable business plans. Moreover, failure to capitalize on the demographic dividend is perhaps the biggest flaw in India’s innovation policy.

Providing soft loans, subsidies and tax breaks may not be enough to alleviate the challenges of innovation. The strong interconnection between academic institutions and industry needs immediate attention. Also, the government should encourage the promotion and development of basic scientific research, where India is lagging behind other leading countries. Clearly, concerted efforts are being made to apply knowledge gained in education and health to other areas. We conclude that India has great potential to emerge as an innovation leader that requires systematic institutional efforts to develop environment-friendly technology.

(Dr. Sastri is Associate Professor, Chetana HS College, Mumbai, Retired. Chakradhar is Assistant Professor, Center for Economic and Social Studies (CESS), Hyderabad)