Indias Innovation System

1
Indias Innovation System

• Sunil Mani and Parveen Arora

2
Outline

• Performance of Indias Innovation System
• RD Investments (PA)
• Patents (SM)
• Technology content of exports(SM)
• Growth of RD outsourcing (SM)
• Technology import (SM)
• Components
• Overall policy framework (PA)
• Physical technological infrastructure (PA)
• Financing of innovation (SM)
• Supply of scientists and engineers(SM)
• Intellectual property right protection (SC)

3
Relative performance of India wrt Patenting in
the USA
4
Share of local patents in the total number of
Indian patents in the USA
5
Technology-wide distribution of Indian Patents,
1995-1999
6
Technology-wide distribution of Indian Patents in
the US, 2000-2004
7
Technology-wide Distribution of Indian Patents
in the USA Differences between the two sub
periods(Sub period 1 1995-1999 Sub period 2
2000-2004)

• First of all the there has been a significant
  increase in patenting during the second period by
  almost 370 per cent
• Second, the share of the top 15 per cent has
  increased during the second period to nearly
  two-thirds from 57 per cent during the first
  period.
• Third, Pharmaceutical patents account for a
  significant share in both the periods, although
  its share in the top 15 have decreased in the
  second sub period and
• Fourth, as a corollary of the above, the
  composition of the top 15 has undergone some
  changes in the second sub period. As against just
  one IT and electronic technology (including
  software) class during the first period, there
  are now 6 such technology classes in the second
  period. This shows the breadth of patenting by
  Indian inventors has increased.

8
Technology content of Indias Exports

• Studies have shown that only about 7 to 8 per
  cent of Indias manufactured exports can be
  termed as high tech. Most of it is accounted by
  pharmaceutical products
• But the sustained growth of IT exports is
  changing the story.
• IT exports have two variants. The first one is
  direct IT exports and the second one is indirect
  IT exports in the form of remittances of
  knowledge workers
• The direct IT exports now account for over 20 per
  cent of merchandise exports and over 13 per
  certcent of total exports.

9
Technology content of Indias Exports
10
Growth of RD Outsourcing

• Two variants
• RD outsourcing per se and growing clinical
  trials.
• No time series data as the phenomena is very new-
  just two years old, but on definite growth path

11
Growth of RD outsourcing

• Evidence of high-end outsourcing is evident from
  the large number (over 150) established RD
  outsourcing centres in India. In fact RD
  outsourcing existed even before outsourcing
  became a fad.
• The RD story dates back to 1985-86 when Texas
  Instruments was the first to set up a center in
  Bangalore. GE and Intel soon followed suit, as
  did other global technology and telecom companies
  like Cisco, Microsoft and Motorola. The trend
  gained strength as not just large but medium,
  small and even startups set up research bases in
  India.
• The RD outsourcing market for IT in India is
  estimated to grow more than 8 billion by 2010
  from 1.3 billion in 2005, at a CAGR of 30 per
  cent according to some industry estimates.
• Outsourcing models for RD vary, from captive to
  third party to contract assignments.
• The pioneers of RD outsourcing were from
  information technology. RD centres in the
  telecom sector came next, and automobiles,
  pharmaceutical and biotechnology are the emerging
  areas where RD outsourcing is bound to increase.
  
• This growth of RD outsourcing brings to our
  attention two important dimensions.
• First of all, it shows that if RD as a
  profession is incentivised, it is possible for
  the country to effect considerable increases in
  its RD investments. The fact that foreign MNCs
  are able to establish contract RD centres is a
  clear example of this possibility. Second
  contract RD centres can be an important learning
  tool for the contract research organisations to
  emerge as important manufacturers in the future,
  provided that government is able to leverage this
  important opportunity through appropriate policy
  support. Such a policy support does not exist as
  of now.

12
Trends on technology imports to India during the
post liberalization period(Number of
collaboration agreements)
13
Payments made for technology import during the
post liberalization period does not show any
growth
14
Components of Innovation Policy Overall policy
framework
15
Salient features of the New Innovation Policy of
2003

• Optimal utilisation of existing infrastructure
  and competence
• Strengthening infrastructure for ST in academic
  institutions
• New funding mechanisms for basic research
• Human resource development
• Technology Development, Transfer and Diffusion
• Promotion of Innovation
• Industry and Scientific RD and
• Fiscal measures

16
Public sector allocation to ST over the Indian
five year plans
17
Composition of Indian RD personnel(number)
18
RD Personnel

• Both in absolute number and in density terms the
  number of RD personnel in the country is very
  small
• There is an explicit recognition of this fact in
  the new ST policy of 2003.
• In my view it is more of a demand side phenomena.
  More on this point in my presentation on human
  resources.

19
Financing of Innovation

• The country has three broad schemes
• Research grants
• Tax incentives
• Venture capital

20
Research Grants
21
Research Grants

• Large number of research grants administered by a
  plethora of organizations
• Most grants are targeted at public sector
  research institutes and enterprises
• The Matthew effect in grant disbursals owing to
  the principle of accumulative advantage

22
Tax Incentives

• There are five different types of tax incentives
  
• Considerable year to year changes in its scope
• Has not very effective in raising RD investments
  with the notable exception of pharmaceutical
  industry.

23
Venture capital

• Venture capital was introduced in 1988
• The country has a very vibrant VC industry
• The investment pattern of the VC industry
  represented an ideal model in phases I and II but
  no longer appears to be so.

24
Indian VC industry in historical perspective

• Phase I - Formation of TDICI in the 80s and
  regional funds as GVFL APIDC in the early 90s.
• Phase II - Entry of Foreign Venture Capital funds
  between 1995-1999
• Phase III - (2000 onwards). Emergence of
  successful India-centric VC firms
• Phase IV US VCs increasing appetite to invest
  in India

25
India Venture Capital Investment Trends
Source IVCA/AVCJ