Innovation and R&D in India

World Bank has recently published a report on India - “Unleashing India’s Innovation: Toward Sustainable and Inclusive Growth”.

Indian economy is growing at a stupendous pace. But what exactly is needed to sustain this rate of economic growth ? What does India need to do to become more competitive ? How to spur and motivate innovation and research in India ? There are just a few questions addressed in the report.

Below are some of the interesting statistics included in the report:

* Aggregate domestic R&D spending in India has never exceeded 1 percent of GDP, and 75â€“80 percent of this comes from the public sector

* Of the top 50 applicants for patents in India between 1995 and 2005, 44 were foreign firms. Only six were Indian; three of these were public institutions and one, a public corporation. Just two were private Indian firms, both in the pharmaceutical
industry. See my earlier post on patent statistics in India here

* India produces fewer than 7,000 PhDs a year in the faculties of science, engineering, and technology.Indiaâ€™s higher education system needs to produce more scientists, engineers, and other Masters and PhD graduates with skills matched to the needs of the innovation economy

* Some 2 percent of Indiaâ€™s population lives abroad. Their aggregate incomes are roughly equal to two-thirds of Indiaâ€™s GDP

* Teledensity in India in urban areas is 40 percent, compared with 2 percent in rural areas

* Less than 3 percent of the Indian workforce is in the modern private sector, while roughly 90 percent is in the informal sector.
This resonates with Alan Greenspan’s views on India as part of this latest book - “Age of Turbulence: Adventures in a New World”

And finally, the report also addresses the topic of early stage funding in India, by dedicating a chapter - “Enhancing Innovation Finance” to the topic.

To deepen early-stage venture capital, India should consider both supply- and demand-side reforms. On the demand side, besides increasing ESTD, more efforts need to be undertaken to increase techno-entrepreneurship. Entrepreneurship
training should be incorporated more systematically into engineering training. Greater incentives should be provided to young scientists, engineers, MBAs, and 0ther professionals to launch technology-based companies. On the supply side, despite a significant number of major venture capital funds being created in India in the past 12â€“18 months, biases remain toward larger funds, the IT sector, and more proven business models. New efforts in seed and angel funding trying to fill the gap are insufficient. Taking into account the amount of funding available at the post-early-stage phase, the total funding available at the seed and early stage, especially under $2 million, is a serious bottleneck.