INNOVATION IN INDIA

Status, Emerging Trends and Challenges

A report submitted in partial fulfillment of the requirements for the term project in

Indian Economy
By
Group 5 Bahniman Rynjah (PGP/16/137) Bala Meenakshi R. (PGP/16/138) Chhavi Gupta (PGP/16/139) Nitin Narsaria (PGP/16/151) Vardan Walia (PGP/16/177)

ACKNOWLEDGEMENT
We would like to extend a warm hand of gratitude to Prof. Sthanu Nair, Indian Institute of Management Kozhikode for his valuable advice and consistent guidance without which the course of the project could not have been defined.

We also would like to thank all students of the senior batch and our fellow classmates for their valuable insights and encouragement during the entire project.

Bahniman Rynjah Bala Meenakshi R. Chhavi Gupta Nitin Narsaria Vardan Walia

INTRODUCTION

Innovation is increasingly being seen as the most essential requirement of 21st century for both development and sustainability. It involves thinking differently, creatively and insightfully to create solutions that have an impact on social and economic values. There are multiple aspects to innovation, such as creation of new and unique applications of old technologies, developing new products and services, organizational creativity or simply enhancing the delivery of these products and services to the end user. It has been rightly identified that the future growth and prosperity of India in this age and a knowledge economy will depend on its ability to generate new ideas, processes, products and services and through the process of innovation, convert the abundance of knowledge in the country in both social and economic wealth. With the announcement of the Science, Technology and Innovation Policy 2013, it was announced that the aim was to position India among the five global powers by the year 2020. The government would, the resolution said, foster, promote, and sustain, by all appropriate means, the cultivation of science and scientific research in all its aspects pure, applied, and education. Through this project we aim to analyze the current status of Innovation in India, where we stand against the other countries in the world, the measures taken so far to promote innovation and its importance in the future for sustaining the economic growth in the country.

LIST OF FIGURES

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Innovation Intensity for Large Firms Innovation Intensity for SMEs Innovation in India for Large Firms, Areas of Business Comparative Study of India and other Countries India and other Countries Research and Development

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TABLE OF CONTENTS

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ACKNOWLEDGEMENTS... INTRODUCTION. LIST OF FIGURES................................................................... TABLE OF CONTENTS...

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INNOVATION IN INDIA WHERE DO WE STAND? ............................. GOING GLOBAL INDIAS POSITION IN THE WORLD...................... PAST INITIATIVES TAKEN. FUTURE PROSPECTS AND DEVELOPMENT.. CASE STUDIES CONCEPT OF JUGAAD INNOVATION. REFERENCES.

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INNOVATION IN INDIA WHERE DO WE STAND?

India ranks 64th in terms of Global Innovation Index while USA and China rank 10th and 34th respectively, which shows a lot of scope for improvement. In terms of Research and Development, 63% of the expenses are borne by the government. The government has invested in various industries to promote innovation in these segments. Business enterprises now account for 30% of the innovation expenses. Analyzing the R&D spending of the Government, we note that pharmaceutical and automotive industries have been the major focus areas. The focus on the pharmaceutical industry can also be observed by the fact that of the 23 domestic firms having patents by USTPO, 22 are pharmaceutical firms. In addition, by 2007, 72% of all patents filed were in pharmaceutical and IT sector. Also, India has the second largest growth rate in patenting amongst BRICS countries at 20.98% (behind China at 27.86%). More than half of the increase in market share, competitiveness, profitability and reduction in costs due to Innovation has occurred in SMEs due to three types of Innovation new products, new processes and new services. In spite of all the progress that India has made on this front and the initiatives taken by the Government, Sadly most of the patents taken out by India have been by MNCs though the number of Indian patents is also on the rise. Some of the other observations are as follows, Firms with their primary market abroad are highly innovative (i.e. have introduced more new to world Innovations)

Firms with their primary market in India have higher Innovation Intensity than those with primary markets abroad

SMEs have greater Innovation Intensity than large firms This can be observed in the trends given below with respect to Innovation Intensity for Large firms [1] and SMEs [2]

Figure 1

Figure 2

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INDIAS POSITION IN THE WORLD

Some of the key highlights of the Indian Innovation with respect to the world and other countries can be noted as follows, Only the industrial sector has increased its total share in the R&D performance of the country Foreigners have taken more patents in India than Indians at the India Patent Office Top five multinational R&D centers in India have generated 1,021 US patents in the last five years - The 38 laboratories of CSIR have notched up only 432. Gross enrollment rate in higher education in India is under 15 percent (compared to about 60 percent in the US and Canada). India produces about 400,000 engineering graduates and about 300,000 computer science graduates every year, just about 20,000 masters degree holders and fewer than 1,000 PhDs in engineering graduate each year, which shows the low emphasis on research in India India had about 156 researchers per million in the population, compared with 4,700 per million in the United States China had 1,423,000 researchers, second internationally to the United States, which had almost 1,571,000. India by comparison had 154,800.

Indias spend on R&D in 2007-08 was about US$ 24 billion compared with Chinas investment of about US$ 104 billion back in 2006 and the United States US$ 368 billion

Figure 5

This data can help us understand better the global ranking of India in the world with respect to Innovation and Technology as compared to United States and China.

INITIATIVES TAKEN SO FAR

One of the main problems that were identified was the Supply and Demand gap in terms of skilled labor across various industries and domains. Some of the initiatives that the Government has taken with this regard is to promote the establishment of new universities across the country to produce greater skilled labor. The main aim of this was to increase the number of Science graduates in the country who would boost the research and development front. The next initiative was to boost R&D spending to more than the current 1% of the GDP as compared to China and South Korea whose spending is over 10%. There were many Federal Policy initiatives as well, such as the establishment of MSMEs, TUFS, NABARD, SIDBI etc. and to provide them with timely access to capital and labor. The Government also encouraged collaborative R&D and Public Private Partnerships to facilitate easy access to technology and skilled manpower. A number of incentives were provided to SEZs and Software Parks, to promote their development which in turn would boost the research and development in the country. However, there were a lot of debates against these new policies. Increasing the number of institutes in the country instead of promoting the existing ones, would compromise on the quality of education and research. It was just considered a shortcut to producing hundreds of PhDs every year. This also resulted in the lack of funds to promote existing research and development facilities across the country.

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FUTURE PROSPECTS AND DEVELOPMENT

Despite all the measures adopted there are still some challenges faced by the country which hinders its growth in this segment. Some of them are the lack of proper incentives that would boost investment in the R&D segment of the country. Over years, there has always been a separation of research from teaching. It was however observed that teaching plays a vital role in terms of promoting new and innovative ideas amongst people which in turn affects the R&D. There has also been excessive red tapism in the research units in the country, which has hampered its growth to a large extent. And finally, lack of communication and infrastructure is the key factor contributing to the slow growth of R&D in India. There were many solutions proposed to mitigate these issues, which are as follows; the first was to hire PhDs in droves, fund research in universities, further and sharp reduction in protection from external competition. Huge investments in universities were also encouraged to upgrade infrastructure and attract talent. It was also made mandatory that research leaders to share value of the intellectual property they produce. In terms of communication and infrastructure development, providing ubiquitous and cheap broadband internet was a major incentive. The next was an initiative adopted by the National Innovation Council that was established to promote the growth and development of innovation in the country. The solution proposed was to establish Innovation Clusters. They are basically the geographic grouping of firms to strengthen the innovation in the immediate environment with effective linkages and sharing mechanisms. It was felt that for inclusive innovation to take place, it was essential to include new uses for existing technologies in new processes and models. Universities were declared to be the focal point of cluster. Thus collaboration with local institutions, Government, NGOs, industries was vital. Virtual clusters

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were also established which was needed for high speed internet, customized resources to overcome language barrier, knowledge of IT. There is also the benefit of the presence of presence of professional services like lawyers, accountants and venture capitalists, apart from meritorious human capital, readily available capital and infrastructure and last mile connectivity. The National Knowledge Commission also proposed certain recommendations to the Government which is expected to be implemented in the near future. The main focus of these recommendations was to bridge the gap between the importance of Mathematics and basic Sciences for the growth of India as a knowledge society and the growing alienation of students from a career in these disciplines. To invite eminent personalities from various universities across the globe, research institutes, NGOs, National Science Colleges, to attract more students to Mathematics and Science. Financial investment and a systematic and innovative approach was felt to be the need of the hour. So measures have to be adopted to invest in upgrading existing infrastructure & promote sharing of resources, revitalize teaching profession to attract and retain quality teachers, revamp teacher training & development of teaching aids to retain student attention, restructure master and graduate degrees to promote career flexibility, reform science curriculum to keep up with the times & increase research component, change the evaluation system to discourage rote learning, access to quality science educational material at all levels, rebrand & promote careers in basic sciences, science out-reach programs for parents and students alike, industry participation to promote science at all levels.

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CASE STUDIES

Let us now analyze some case studies which re iterates that innovation is the key component that drives the success and growth of the industries. The first case is of Bosch India. The problem faced by the organization was that older engines were to be modified to be compatible with highpressure pumps The breakthrough innovation that was proposed was to change the pump itself to meet Euro IV, V and VI norms with a mere 20-Euro pump. Thus Bosch India was the center for PF pumps till 1990s when Common Rail (CR) pumps took over. Its mission was to build a PF pump which is as effective and compatible as CR. Hence, an agreement with Deutz was signed to develop an exotic system. The result of this breakthrough innovation was that it instilled the confidence in Indian team. The powerless team broke the conventions of the game and developed a completely new and innovative mechanism. Thus we can see that innovations can sometimes be the most simplest of things around us. The next is the case of Titan Edge. In 1994, with just 7 years of existence, the company dreamt of creating the slimmest water-proof watch in the world. Creating a 3.5mm- thick as a floppy disk- and water resistant to top it was considered almost an impossible task. They came up with one of best innovative solutions for the same and the outcome was that they sold over 500,000 watches since it launch in 2000; contributed 6 per cent to Titans turnover of Rs. 918 crores in 2001. The greatest challenge again was to instill the belief in the team that this seemingly impossible task could be achieved. Thus one of the key learning from this case is enrolling to a cause- take initiative to do the right thing.

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CONCEPT OF JUGAAD INNOVATION

Jugaad innovation can be defined as an innovative fix that is born out of ingenuity and cleverness. It follows a bottom up approach to develop rapid prototyping techniques to ensure sustainability. The importance of Jugaad Innovation arises from the fact that its cheap, as it provides new solutions by building upon existing solutions, affordable that exploits emerging markets, adaptable to the dynamically re-inventing business, inclusive, so that all margins of the society are benefitted, and most importantly, fast as there is no linear or pre-planned time consuming R&D processes. Why is this concept important in the present day scenario? The watch words for all organizations today Affordability and Sustainability. They aim for goal attainment through speed, agility and cost efficiencies. This concept mainly views challenges as an opportunity to innovate and overcome high resource constraints in dynamic environments to provide creative solutions to Socio-Economic Issues. Developed economies in the world today have begun to exhibit many of the aspects of scarcity, diversity, unpredictability, and interconnectivity, making these principles relevant to companies around the world. It was noted that structured approach to innovation spawned big budgets, standardized business processes, and controlled access to knowledge. Some of the big firms across the world that have adopted this technique are as follows, Yes Bank- Jugaad solution to Money transfer via mobile to people even without bank accounts. GE Healthcare - jugaad solution to providing affordable healthcare to rural locations especially to cancer patients. With growing competition and limited resources, Jugaad Innovation has become the need of the hour.

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REFERENCES AND BIBLIOGRAPHY

GoI,Planning Commission,Report on Technology Innovation and Venture Capital, July 2006 GoI, National Knowledge Commission,Attracting talented students to Maths and Science, May 2008 GoI, Public Information Infrastructure and Information, University Innovation Clusters-draft concept paper, April 2011 GoI, Public Information Infrastructure and Information, Creating a roadmap for A Decade of Innovation-strategy paper, March 2011 GoI, Department of Science and Technology,India as a global leader in science, August 2010 GoI, National Innovation Council, Report to the people-First year, November 2011 Gautam R Desiraju, Science Education and Research in India, Economic and Political Weekly, June 2008 Sunil Mani, Is India becoming more innovative since 1991? Some disquieting features, Economic and Political Weekly, November 2009 N.S. Ramnath, He's on a search, find and fund mission, Forbes India, September 2011 Mark A Dutz and Carl Dahlman, The Indian context and enabling environment http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/2235461181699473021/3876782-1191373775504/indiainnovationchapter1.pdf

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