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India and the Global Rungs of Innovation

engineering students 1526005069

Around the world, innovation and knowledge is heralded as the way forward in driveing economic progress, well-being and addressing critical societal challenges of health, the environment and urbanisation. India is no exception to this. However, how does India fare when it comes to innovation?

The 2015 Global Innovation Index was recently released, demonstrating in comprehensive fashion how countries fare on the creation and deployment of knowledge and the key enablers of knowledge. Out of 141 countries India is “middle of the road” at 81st place, down from 76th place in 2014. Various reasons are posited for this decline, including data and methodological issues and the emergence of new entrants.

India’s 81st place masks some important strengths and weaknesses. On the plus side, the innovation efficiency ranking, which measures a nation’s capacity to translate innovation inputs into outputs, has India in 31st place. Despite its apparent weaknesses in many dimensions on the input side (institutions are 104th, business environment is 130th, regulatory environment is 81st, education is 126th, infrastructure is 87th and environmental performance is 126th), India does manage to turn these constraints into solid performance on the knowledge output side (knowledge creation is 59th and knowledge diffusion to the wider world is 34th). Best of all, India is number one in the world on the exporting of communications, computer and information services. Years of investment in the computer and ICT services, especially through outsourcing and increasingly moving up the value chain is paying dividends.

However, there is much more to be done. Urgent attention on the input side in improving the business and regulatory environment, including ease of starting businesses which is strangled by red tape and addressing the complexity of taxation arrangements, is required as these are key inputs critical to further unlocking and leveraging India’s innate capabilities.

Another key challenge is to improve India’s environmental performance, which is languishing in 126th place. Dilemmas abound here in terms of economic development and job creation priorities versus the environment, and energy choices around renewables versus fossil fuels. Yet there need not necessarily be trade-offs. A well-developed green industries and green jobs plan would be most pertinent for India. This is not to undersell the myriad of activities that are going on at national and local levels to promote sustainability and the environment.

A further issue emerging from the rankings is that while India performs relatively well (34th) on the diffusion of knowledge externally (e.g. income from royalties, high technology exports), India fares far less well on knowledge absorption (99th), which is its ability to identify and access knowledge from the rest of the world. Countries simply cannot undertake everything at home, particularly as science and technology becomes more costly, complex and requires multiple specialisations.  As such, being open to the world’s best ideas is important to India. The relatively weak performance on knowledge absorption appears to be related to the legacy of an inward looking innovation and science and technology orientation. It should be noted however, that Indian’s R&D performance is 44th in the world and knowledge creation (e.g. patents and articles) is 59th, reflecting greater research output from institutions in recent years. Meshing India’s knowledge base with the world’s best would unleash even further gains.

Similarly, and of growing importance is co-operation and collaboration at home. India performs quite well on clusters (geographic concentrations of firms and suppliers, particularly relevant to small-medium sized enterprises) at 25th in the world. Policy makers in India have paid significant attention to the need to build size and scale and diffuse cost and risk through industry and enterprise clusters. However, India fares less well on university-industry research collaboration, which is 48th in the world (although better than India’s overall ranking of 81st). Improving the connectivity between education institutions and industry through industry focussed, applied research outcomes is a key moving forward.

Despite the very high reputation of India’s elite Institutes of Technology, the overall performance of education (126th) and tertiary education (123rd) remains problematic. Investing in quality improvement, facilities and ensuring wider access to education in the community, for both higher education and earlier years, is and ought to be a key priority.

Sustainable, value added job creation remains somewhat elusive. India is ranked 132nd on knowledge workers. Therefore positive indicators on knowledge creation are not being translated into strong employment outcomes. One of the keys to this could be improving job specific training. India is ranked 98th in the world on firms offering formal training.

To put India’s overall performance into further context, and using the other BRICS countries as reference points, India’s 81st position in the world is still behind China (29th), Brazil (70th), Russian Federation (48th) and South Africa (60th).

In short, India’s performance, while comprising many positive features, does suggest that the job is far from complete!