This article originally appeared in The Economic Times on August 12, 2022. You can read the original post here.

We are witnessing a new era of lunar innovation, with breakthrough mRNA vaccine technology enabling a historic pandemic response, the commercialization of artificial intelligence capabilities, and a global wave of investment in R&D and industrial capacity as that countries compete for geopolitical influence and collaborate globally. challenges. In this new era of innovation, India is expected to be among the youngest, largest and most dynamic economies, endowed with scalable research capacity and a huge pool of talent in its 1.5 million holders of a graduate degree. With the right innovation-friendly policy reforms, India could seize this moment and become a global R&D capital.

The Indian government’s flagship development initiative “Make in India” has had a mixed record. While the share of manufacturing industry in the economy has been fall further from its target of 25% of GDP, the program still succeeded in stimulating exports, attract FDI in manufacturing and improving the ease of doing business. However, Make in India’s own production-related incentives are gap by persistent tariff barriers, and the program has failed to deliver on its promise to increase employment — especially among India’s better-educated workers, whose unemployment rate is approaching double that of their counterparts with a secondary education at 19.1%.

“Make in India” can be improved by focusing on employment in more labour-intensive industries, increasing India’s global trade competitiveness, and by the Indian government fully embracing an ancillary “Innovate in India” campaign aimed at facilitating India’s rise as a global R&D center and creating jobs for highly skilled workers.

Global companies are already hungry to develop R&D capabilities in India. GE Healthcare just opened its first 5G innovation lab in Bengaluru this month. Medtronic, maker of the life-saving ventilators delivered to India during the Delta wave, opened Asia-Pacific’s first surgical robotics center in Gurugram last year; Global food company Cargill and medical device maker Stryker also opened new R&D facilities in the city this year. Walmart Global Technology has entered into a research partnership with IIT-Madras and will conduct R&D at the IIT Madras Research Park, alongside pharmaceutical titan and vaccine maker Pfizer. Medical technology leader Boston Scientific recently opened its second R&D center in Pune. In addition to dozens of large research and innovation centers, the number of Global Capability Centers (GCCs), which provide R&D and IT support functions, employ more than a million people and are made to grow up to more than 1,900 by 2025—of these GCCs, approximately 65% owned by American companies.

This intense interest from global industry is occurring despite continued obstacles to expanding capacity in India – an underdeveloped IPR regime, systems that discriminate against foreign companies and uncertainty around data protection – which only serve to illustrate the more fundamental strengths that make India a prime candidate for R&D investment. Delhi can realize India’s full R&D potential by making a concerted effort to address these disincentives. Data regulation should avoid imposing restrictions on data flows that hinder service quality and innovation and the government should start leveling regulatory incongruities that undermine efforts to attract FDI. Additional measures to strengthen India’s innovation ecosystem include reforming the patent opposition process to prevent abuse and undue delays and revamping the therapeutics pricing system to reward intellectual properties instead of penalizing them with price controls that focus on immediate costs rather than promoting a virtuous circle. of reinvestment.

A logical next step would be to supplement successful production-related incentive programs with the design and Research-related incentives, reward global companies that expand research capabilities in India. A comprehensive RLI program can encourage even more global companies to open R&D centers in India, creating thousands of highly skilled jobs. Currently, India spends among the lowest worldwide on R&D as a percentage of GDP, falling to 0.7% in the most recent figures. This is mainly due to private sector underspending – investments and incentives are long overdue.

These incentives can hasten the solution to India’s extremely high unemployment rate among graduate degree holders. Currently, unemployment among well-educated people is thrice the national average because ambitious young people cannot find jobs that match their skill level. Innovation in India, propelled by research-related incentives, could provide an answer by attracting a large number of high-skilled jobs.

The transition of India’s educated youth from classrooms to careers will also require reforms to strengthen links between industry and academia. As part of Innovate in India, the Indian government is expected to spearhead a university reform initiative that encourages institutions to pursue intellectual property creation, licensing relationships and the creation of commercially viable inventions, as well as to integrate into the programs the best world practices in the process of research and training on international relations. standards, product testing and certifications.

To reap the full benefits of these academic reforms, the Indian government should also continue its spirit of creating digital public goods and establish the India Stack, a central repository of research serving as an electronic auction portal for innovations. Here, individuals and institutions could upload research and product designs to sell or license to buyers in an online marketplace, thus boosting the transfer of innovations between academia and industry.

As we enter a new era of opportunity, now is the time for reform, and we have the opportunity to leverage India’s human capital to make the nation a global R&D capital.

About the authors

Arjit Roshan

Coordinator, Communications, US-India Business Council

Agnideep Mukherjee

Agnideep Mukherjee

Director of Policy, Life Sciences, Food and Agriculture, US-India Business Council