The story of Kodak is a cautionary tale that illustrates the dangers of neglecting innovation, for it can lead to the downfall of even the mightiest of companies. Just as a ship that overlooks to chart new waters will become stranded, so will a nation that fails to invest in research and development find itself stuck in the doldrums of economic stagnation.
Innovation and technical progress are prerequisites for economic growth. At the heart of growth through the Schumpeterian Paradigm of ‘creative destruction’ is the idea that “new innovations render former innovations obsolete”.
Thus, for an economy to grow, there is a constant need to innovate. In India, the government undertakes 60 per cent of expenditure on R&D, unlike other nations where private enterprise takes the lead. Despite efforts to boost R&D, the country’s spending on R&D has remained stagnant at around 0.7 per cent of GDP.
The government’s domination in R&D spend is akin to a magician pulling a rabbit out of a hat, conjuring up new and exciting advancements for the nation to prosper. But like any magician, the government must be careful not to rely too heavily on this trick, for lack of private enterprise in the field of R&D could be detrimental to the nation’s growth.
Thus, unlocking the mystery of why the private sector in India hesitates to invest in research and development is crucial in fostering progress and innovation.
Historically, India’s patent system had a reputation for being weak and unreliable when it comes to safeguarding commercial innovations. This has created a sense of unease among firms, as they fear that their intellectual property may not be adequately protected, leaving their potential profits vulnerable.
The main obstacle for firms when it comes to innovation is the risk of imitation by local competitors, which further disincentivises investment in R&D. One of the other reasons that private firms invest more heavily in R&D than the government in the US and China is the calibre of talent that their higher education institutions attract. Both nations recognise the crucial role that these institutions play in driving innovation.
The State of US Science and Engineering Report 2022 acknowledges that federal funding is particularly vital for basic research and research conducted at higher education institutions. This highlights India’s need to develop its higher education institutions to attract top talent and drive innovation.
The Prime Minister’s Science, Technology, and Innovation Advisory Council’s startling finding is that out of the approximately 40,000 higher education institutions, less than 1 per cent actively participate in high-quality research, spanning both scientific and social science research. This implies that 99 per cent of HEIs are not contributing to the country’s high-quality knowledge creation. Even among the 1 per cent of HEIs responsible for the majority of scientific innovation, various factors hinder the conduct of high-quality research.
In recent years, the government has made a concerted effort to impose fiscal discipline on States and educational institutions, introducing measures to increase transparency and accountability in financial matters. While these intentions are noble, some of these rules have suffocated the research ecosystem at institutions like IISc, IITs and IISERs. These regulations and guidelines were implemented without considering the specific needs and nuances of the R&D ecosystem.
Researchers have been facing challenges in navigating through the current process flow due to the implementation of certain rules like having a zero-balance account for every single research project and bringing IITs and IISERs under the Treasury Single Account (TSA). In the last year, researchers have reported difficulties accessing the grants already awarded to them. The Finance Minister has subsequently made the changes to provide respite to the researchers.
Procuring laboratory equipment can be a nightmare for researchers. The present system is like a game of red tape roulette, where researchers must first try their luck with Indian manufacturers. If fortune does not favour them, they must embark on a labyrinthine journey of paperwork through a Global Tender Enquiry (GTE), that leads them through the research institute, to the line ministry, and finally to the secretary of that ministry for consent. The game has been made less restrictive than before, but the delays are still crushing.
The Ministry of Health recently issued a list of items that are GTE-exempt. Still, it is just a drop in the ocean, as most of the equipment on the list is for diagnostic purposes, leaving researchers stranded in a sea of bureaucratic red tape. This should change.
There is another capacity issue. Shockingly, according to a recent EAC-PM paper, a mere 56,771 patents were filed in India in 2020, which is just 4 per cent of the number filed in China and 9.5 per cent of the number filed in the US. The reason for this is simple. The Indian Patent Office had only 860 patent examiners and controllers as of March 2022.
This disparity is substantial when compared to China’s 13,704 and the US’ 8,132 examiners and controllers, which has left the Indian Patent Office grappling to handle the demand. Recognising the problem of understaffing, the government has taken measures to mitigate the situation by creating over 500 additional positions within the patent office.
Innovation in India is akin to a resource allocation problem. The complexity of managing the allocation of resources is a formidable challenge in the journey of fostering innovation. For starters, the public expenditure on R&D activities, especially in HEIs, should be increased to at least 1 per cent. Even this is well below the global average.
The writer is Additional Private Secretary (Policy & Research), EAC-PM. Views expressed are personal.
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