Can India Blast Off Into 21st Century?
Innovation and entrepreneurship are two key building blocks of any fast-growing economy, and these two drivers of growth are playing a bigger role in today’s growth agenda.
The Fourth Industrial revolution has given a new face to globalization, innovation and entrepreneurship. The fast pace of digital innovation, declining cost of communication, and rapid exchange of ideas have enabled many developing countries to climb the technological ladder.
Google, Facebook and Twitter have generated global benefits for everybody and made us much more productive. We no longer need to go to the library to search for hours, queue up in congested streets to buy goods, or connect with our friends in different cities and do so globally.
The productivity gains from digital innovations are huge. It is estimated that 50 per cent of the difference in per capita income between developed and developing countries is not explained by investments and physical capital, but by the accumulation of knowledge and innovative capacity of a country.
Startup India
India is home to the second largest internet subscription market in the world. Digital innovation has gained popularity in the policy circles, with the launch of Atal Innovation Mission, a flagship innovation program, which is aimed at scaling start-up incubation centres and promoting innovation culture.
Delphix Corp., a Silicon Valley-based MNC that has changed the dynamics of managing and consuming data for Fortune 100 companies, has decided to launch a new research and development center in India.
India is becoming a global hub for state-of-the-art R&D, with some of the brightest minds in the world, which offers a unique blend of massive market opportunity, technical competencies, and a highly scalable workforce.
In the 21st century, innovation has become the heart and soul of economic policy. Developed and developing nations alike are in the race to leave industrialization behind, adapting instead to technology-focused entrepreneurial societies.
The battle for control of the global economy in the 21st century will be won and lost over the control of innovative technologies.
India has scaled up its policy focus on 'innovation diplomacy' and forging economic ties with other nations. The theme of innovation, R&D and start-ups has been an important agenda point in almost all the bilateral visits of Prime Minister Narendra Modi. His visit to Houston captured the global diaspora connections for a rapidly expanding modern services sector in India.
The launch of the India-Israel industrial R&D and technological innovation fund, and India’s hosting of the global entrepreneurship summit reflect the importance India has placed on digital innovation diplomacy.
Twists and Turns
The global innovation march ahead will be a long one, with twists and turns. Unfortunately, India is not yet amongst the top innovative nations in the world, whether it is measured by the efficiency of tertiary education, patent activity, researcher density, or spending on research and development.
India currently ranks 52 among 130 economies in the Global Innovation ranking. However, India has experienced one of the fastest improvements in global innovation rankings.
India’s investment in R&D is extremely low at 0.7 per cent of GDP, compared to China which has managed to scale up its R&D investment from 1 per cent in 2006 to more than 2 per cent in 2022.
The stagnation in India’s R&D intensity at less than 1 per cen of GDP, and low levels of efficiency in tertiary education are serious concerns.
The number of articles published by China’s scientific community has grown at a furious pace, but India’s has remained comparatively static. Unless more investments are made in education, skill shortages are likely to become a constraint to growth.
India needs to close the gap between various stakeholders in the science and technology space within the country, with the private sector, and integrate more with the rest of the world. Currently, there is no collaboration between CSIR labs and private labs in India.
India will also benefit from launching the Indian equivalent of the small business innovation research program, similar to the platform launched in the US that has benefitted small entrepreneurs.
New Growth Drivers
Innovation has become more global than it once was, and it has shifted from the industrial to the digital revolution. The old Industrial Revolution ushered in the factory system, mass transport, and electricity.
The digital revolution is shaping a new future, as emerging technologies reshape entire industries, transform jobs, and change the way we relate to one another.
Five decades of rising capabilities and falling costs in digital communications, information storage and data processing have given rise to a number of powerful, multi-use technologies, such as machine learning algorithms, secure and distributed forms of data sharing and management, advanced materials, biotechnologies and neuro-technologies, among many others.
Intellectual assets, including human capital, patent valuations, brand value, and firm-specific knowledge, are rapidly becoming the key to value creation. Investment in software has contributed significantly to business performance and economic growth, accounting for as much as one-third of the contribution of ICT capital to GDP growth.
Unlike in China, where demographic trends are ageing rapidly before it gets rich, India’s population structure is such that it will remain “young” for the foreseeable future. Young demographic trends tend to boost education, innovation, and savings. India will also benefit from very strong diaspora links with the global and U.S. entrepreneurial community.
India’s trade patterns are much more oriented towards modern services, particularly information technology-related business services.
Our fear that India’s de-industrialisation will restrain growth may not be the case, as new digital growth escalators have already emerged. Services are now contributing more than manufacturing to India’s output growth, productivity growth, and job growth.
What to do?
Innovation and entrepreneurship are the two drivers of future growth and job creation. Policymakers need to look at a broader array of investments in innovation and knowledge creation, including a more prominent role for the private sector, that is necessary for transforming investments in innovation and knowledge into growth and jobs.
India needs to give a bigger push to “e-governance” to improve access to and the quality of public services delivered to citizens and businesses.
Much more user-centred service design can be introduced so that citizens have access to digital services that they prefer to use, leveraging widespread mobile technologies by transforming business processes to be digital from end-to-end, using authoritative data rather than documents for decision-making, introducing and using common services consistently across government by renewing their ICT architecture, upgrading their ICT infrastructure and consistently moving to the cloud, and much more aimed at developing new leadership on e-governance models.
