Driven by a variety of factors ranging from a large talent pool, government initiatives, and a growing start-up ecosystem, India is fast consolidating its position as a powerhouse of innovation and technology. This is evident in the country’s advancements in areas such as IT and artificial intelligence, and its growing global influence in intellectual property.
India has made significant strides in technological innovations, positioning itself as an emerging global power. With its huge human resources, the largest in the world, and a relatively high segment of the youth population, researchers of Indian origin are making an impact on the global theatre. India’s innovation landscape has been on a remarkable upward trajectory, as evidenced by its climb from 81st to 40th position in the Global Innovation Index between 2015 and 2022.
Government initiatives such as Digital India, Startup India, and the recently announced Anusandhan National Research Fund with a budget of Rs 1 lakh crore, are laying a robust foundation for innovation. Key sectors, including information technology, biotechnology, and renewable energy, have spearheaded this transformation, positioning India as a potential global leader in innovation.
Flagship programmes Digital India and Startup India have created a conducive environment for tech innovation and entrepreneurship. The success of startups is not only driving innovation but also creating a ripple effect, inspiring more entrepreneurs and attracting talent to the innovation sector.
With 240 start-ups valued at Rs 10,500 crore incubated over eight years, IIT Madras is India’s hi-tech haven. According to the Economic Survey 2023-24, over 45% of the start-ups emerged out of Tier 2 and Tier 3 cities.
India’s geographical diversification is democratising innovation, tapping into diverse talent pools, and addressing region-specific challenges. India’s unique market conditions are fostering a culture of frugal innovation, creating high-quality, low-cost solutions that are increasingly finding global applications. The ‘Jugaad’ innovation approach is now being systematised and scaled. For instance, Bengaluru-based Biocon’s ‘ALZUMAb’ for Covid-19 treatment, developed at a fraction of the cost of similar drugs, exemplifies this trend.
The success of such innovations is attracting global attention, with multinational companies such as GE and Siemens setting up R&D centres in India to develop products for global markets.
Commercialisation Challenges
Despite a surge in patent registrations, with over one lakh patents granted in 2023, the journey from patent publication to commercialisation remains arduous. This results in many innovations failing to make a tangible market impact. Addressing these challenges, particularly by bridging the gap between research institutions and industry, and fostering closer ties between academia and the private sector, will be crucial for India to fully harness its innovation capabilities and compete on the global stage.
Government initiatives such as Digital India, Startup India, and the Anusandhan National Research Fund with a budget of Rs 1 lakh crore, are laying a robust foundation for innovation. Key sectors, including information technology, biotechnology, and renewable energy, have spearheaded this transformation, positioning India as a potential global leader in innovation
To address the under-utilisation of patents, India should establish a robust patent commercialisation framework. This could involve creating a national patent marketplace, similar to Denmark’s IP Marketplace, which has facilitated many technology transfers since its inception. Implementing a system of innovation vouchers, like the UK’s Innovation Vouchers scheme, could encourage SMEs to collaborate with research institutions for patent commercialisation. Additionally, expanding the scope of the Patent Box regime to include a wider range of IP-derived income and offering higher tax concessions for the first few years of commercialisation could incentivise patent utilisation.
Academia-Industry Collaboration
While still evolving, the collaboration between academia and industry is emerging as a crucial driver of innovation. The collaboration between academic institutions and industry in India remains suboptimal, hindering the flow of knowledge and innovation. This disconnect is evident in the low number of industry-sponsored research projects in universities and the limited commercial application of academic research.
The lack of industry-relevant curricula and limited faculty involvement in industrial projects further exacerbate this issue. While initiatives like the Prime Minister’s Science, Technology, and Innovation Advisory Council (PM-STIAC) aim to bridge this gap, tangible results are yet to be seen on a large scale. To bridge the academia-industry gap, India should mandate that all centrally funded educational institutions allocate a significant amount of their budget for industry-collaborative projects. Implementing a national ‘Professors of Practice’ programme, bringing industry experts into academia, could enhance practical learning.
Establishing Innovation and Entrepreneurship Development Centres (IEDCs) in all higher education institutions, similar to the Kerala Startup Mission’s model, which has set up over 300 IEDCs, could foster an innovation culture. Additionally, introducing a policy requiring publicly funded research to have at least one industry partner could ensure research relevance and applicability. Establishing sector-specific R&D funds, co-funded by the government and industry, similar to Israel’s MAGNET programme, may drive collaborative research.
Significant Skill Gap
Despite having a large youth population, India faces a significant skill gap in emerging technologies. As technology evolves and adoption increases multi-fold, the World Economic Forum predicts that 50% of all employees will need reskilling by 2025 to stay relevant. This skill mismatch is particularly acute in areas such as AI, data science, and IoT. While initiatives like Skill India and the New Education Policy 2020 aim to address these issues, their impact is yet to fully materialise. The skill gap not only hampers innovation but also affects India’s ability to leverage its demographic dividend effectively.
To tackle the skill gap, India should launch a separate National Digital Skills Mission under Skill India, aiming to upskill professionals in emerging technologies. This could be modelled on Singapore’s SkillsFuture initiative. Implementing an AI-driven national skills forecasting system, similar to the EU
Skills Panorama could help align education with industry needs. Establishing Centres of Excellence in emerging technologies across all states, in partnership with leading tech companies, could provide cutting-edge training. Additionally, brain drain continues to be a challenge. To curb ‘brain drain’, India should introduce a ‘Reverse Brain Drain’ scheme, offering attractive packages to bring back talented researchers and innovators from abroad.
While initiatives such as the Prime Minister’s Science, Technology, and Innovation Advisory Council (PM-STIAC) aim to bridge the academia-industry gap, tangible results are yet to be seen on a large scale. For this, India should mandate that all centrally funded educational institutions allocate a significant amount of their budget for industry-collaborative projects
Lack of Risk Capital
While India’s start-up ecosystem has seen significant growth, access to risk capital, especially for deep-tech and hardware start-ups, remains a challenge. For instance, according to the report for the year 2023, funding for Indian deep-tech start-ups decreased by 77%. The lack of domestic venture capital and limited participation of institutional investors in early-stage funding further compounds this issue.
While government initiatives such as the Fund of Funds for Startups (FFS) have provided some support, the scale of funding available for high-risk, high-impact innovations remains inadequate compared to global innovation hubs. To boost R&D spending, India should implement a multi-pronged approach. Introducing a weighted tax deduction of 200-250% for R&D expenditure in priority sectors such as clean energy, biotechnology, and advanced manufacturing could stimulate private sector investment. The government should aim to increase public R&D spending, with a clear roadmap in place to reach the 2% target. Implementing a national R&D credit scheme, modelled on the US R&D Tax Credit, could further incentivise corporate R&D spending.
To improve access to risk capital, India should establish a Deep Tech Fund of Funds to catalyse investment in frontier technologies. Implementing a programme similar to Israel’s Yozma initiative, which transformed Israel’s venture capital industry, could attract global VC firms to India. Introducing a ‘Startup Stock Exchange’ for easier public listing of innovative start-ups could provide an alternative fundraising avenue. Creating sector-specific innovation funds, co-invested by the government and industry leaders, could target strategic areas such as quantum computing, advanced materials, and biotechnology.
Regulatory Complexities
Despite improvements in India’s ‘ease of doing business’ ranking, regulatory complexities continue to hinder innovation, especially in emerging technology areas. For instance, the drone industry faced significant hurdles until the liberalisation of drone rules in 2021. Similarly, the cryptocurrency and blockchain sector operates in a regulatory grey area, hampering innovation in fintech. The time and cost involved in regulatory compliance divert resources from core R&D activities.
To tackle the skill gap, India should launch a separate National Digital Skills Mission under Skill India, aiming to upskill professionals in emerging technologies. This could be modelled on Singapore’s SkillsFuture initiative. Implementing an AI-driven national skills forecasting system, similar to the EU Skills Panorama, may help align education with industry needs
To address regulatory hurdles, India should implement a ‘Regulatory Sandbox’ approach across all sectors. Introducing a ‘One Nation, One Permit’ system for start-ups, which would allow them to operate across states with a single license, could ease compliance burdens. Implementing an AI-powered regulatory compliance assistant for start-ups could simplify the regulatory navigation process. Additionally, mandating that all new regulations undergo an ‘Innovation Impact Assessment’ to ensure they don’t inadvertently hinder innovation could create a more supportive regulatory environment.
India’s innovation landscape has made remarkable strides, driven by proactive government initiatives, a thriving startup ecosystem, and growing academia-industry collaborations. By addressing various issues through targeted reforms, stronger partnerships, and enhanced skill development, India can solidify its position as a global leader in innovation. The path forward requires a holistic approach that aligns market needs with cutting-edge research and entrepreneurship.
– The writer is a senior journalist and media consultant. The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda.
