National Council of Applied Economic Research
Opinion: Sanjib Pohit
Fearing the risk of failure very little R&D funding goes towards innovative ventures and emerging technologies.
Over the last decade the government has been encouraging domestic firms to come up with innovations in product manufacturing and services. The focus of the NDA government’s programmes like ‘Make in India’ is not only on manufacturing in India but also producing goods that are indigenously designed.
To promote innovation policymakers have made attempts lately to increase India’s expenditure on R&D. It is now significantly below 2 per cent of GDP which is the benchmark value that most innovating countries spend on R&D.
While India ranked only 46th in the latest Global Innovation report it has climbed two spots over the previous year’s standing. And the performance is labelled ‘above expectations’ against the yardstick of the level of development. However Asian countries like Malaysia Vietnam Thailand and even some of the East European countries like Bulgaria Estonia Slovenia and Hungary scored above India. Thus the notion that Indian entrepreneurs lack innovation culture continues to hold good.
At a micro level though Indian entrepreneurs function effectively in implementing quick fixes commonly called “jugaad” which serve as low-cost innovative workarounds or solutions to problems.
While India seems to score low in innovation in multiple areas of technology there are two sectors that stand apart. These are technologies related to atomic energy and space science. Incidentally both these areas are under direct control of the Prime Minister’s Office and many of the standard rules of audit including Right to Information Act do not apply to them.
R&D centres
In the Indian context innovations are carried out primarily by public sector or government R&D centres. Of late however a number of R&D centres have been set up by multinationals (MNCs) and funding for them has been increasing. Elsewhere in the world the private sector particularly MNCs plays a significant role in ushering innovation. Why the same is not happening in the R&D centres of MNCs in India?
As fDi Markets database indicates of the three heads of R&D — Design Development and Testing (DDT) Education and Training (E&T) and Core R&D — support for Core R&D one that focusses on making real innovations is limited in India. Thus one cannot depend much on private FDI to help India have a significant presence on the innovation map.The R&D in public sector or government labs is governed by standard rules (audit Right to Information Act etc) even though at best only 5 per cent of the attempted innovations results in success. This is probably true in other countries as well. Thus one needs to understand that experimenting with innovative ventures can be a total failure.
Typically the committee members responsible for allocating funds for innovation are government employees. So there is always a chance of them being questioned by the CAG (Comptroller and Auditor General) if there is recurrent failure of innovative ventures. Hence it is not surprising if they are risk averse and do not support blue sky innovative ventures. The chances of failures are low/limited in incremental innovation and so most of the funding of public R&D centres goes for same. As Indian Space Research Organisation is not governed by mundane rules the progress of Indian space research has been amazing and on a par with those of developed countries.
Hence to imbibe a culture of innovation the rules need to be amended and failures need to taken in their stride. The gains from one blue sky innovation would be enough to compensate the losses in all other cases. India has never really made a forward looking strategic plan to channel R&D expenditure on emerging technologies. As a result India is usually a late entrant to a new technology. By the time India puts its imprint on a technology the world has moved up the technology ladder or the technology has moved in a different direction.
Thus Indian firms find little space to enjoy the gains of innovation. By contrast industrialised countries including Korea and Taiwan adopt a strategic plan based on Technological Forecasting exercise to direct their R&D expenditure.
Unfortunately India has never attempted a serious endeavour of this kind barring half-hearted attempt by the Technology Information Forecasting and Assessment Council. So it is not surprising that India has not been able to leapfrog on the technology front.
The writer is Professor NCAER. Views are personal.