india’s innovation system

India’s Innovation System

Sunil Mani and Parveen Arora

Sunil Mani, BRICS, Aalborg2

Outline

Performance of India’s Innovation System R&D Investments (PA) Patents (SM) Technology content of exports(SM) Growth of R&D 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)


Relative performance of India wrt Patenting in the USA


Share of local patents in the total number of Indian patents in the USA


Technology-wide distribution of Indian Patents, 1995-1999

Technology Class

Technology

Cumulative Number of

Patents Granted, 1995-1999 Class 514 Drug, Bio-Affecting and Body

Treating Compositions 31

Class 435 Chemistry: Molecular Biology and Microbiology

26

Class 424 Drug: Bio-affecting and Body Treating Compositions

25

Class 549 Organic compounds-Part of the Class 532-570 Series

20

Class 540 Organic compounds-Part of the class 532-570 Series

14

Class 502 Catalyst, Solid Sorbent, or Support Therefor: Product or Process of Making

10

Class 568 Organic Compounds-Part of the Class 532-570 Series

8

Class 326 Electronic Digital Logic Circuitry

7

Class 528 Synthetic Resins or Natural Rubbers-Part of the Class 520 Series

7

Class 585 Chemistry of Hydrocarbon Compounds

7

Class 264 Plastic and Nonmetallic Article Shaping or Treating: Process

6

Class 510 Cleaning Composition for Solid Surfaces, Auxiliary Compositions Therefor, or Process of Preparing the Compositions

6


5


5

Class 623 Prosthesis, Parts thereof, or Aids and Accessories Therefor

5

Total for the above 15 Cumulative total of all technology classes

182

316


Technology-wide distribution of Indian Patents in the US, 2000-2004

Technology Class

Technology Total number of patents granted, 2000-2004

532 Organic Compounds (includes 532-570) 272 424 Drug, Bio-Affecting and Body Treating

Compositions 246

435 Chemistry: Molecular and Biology 89 520 Synthetic Resins or Natural Rubbers-

(includes classes 520-528) 45

327 Miscellaneous Active Electrical Nonlinear Devices, Circuits and Systems

28

502 Catalyst, Solid Sorbent, or Support Therefor: Product or Process of Making

28

423 Chemistry of Inorganic Compounds 25 707 DP: Database and File Management or Data

Structures (Data Processing) 24

426 Food or Edible Material: Processes, Compositions, and Compounds

15

702 DP: Measuring, Calibrating, or Testing (Data Processing

15

345 Computer Graphics Processing and Selective Visual Display Systems

14

510 Cleaning Composition for Solid Surfaces, Auxiliary Compositions Therefore, or Process of Preparing the Compositions

14

709 Multicomputer Data Transferring or Plural Processor Synchronization (Electrical Computers and Digital Processing Systems)

14

341 Coded Data Generation or Conversion 13 324

Electricity: Measuring and Testing 12

Total for the above 15

(2000-2004)

854

Total for all technology

classes (2000-2004)

1262


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.


Technology content of India’s Exports

Studies have shown that only about 7 to 8 per cent of India’s 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.


Technology content of India’s Exports


Growth of R&D Outsourcing

Two variants R&D 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


Growth of R&D outsourcing

Evidence of high-end outsourcing is evident from the large number (over 150) established R&D outsourcing centres in India. In fact R&D outsourcing existed even before “outsourcing” became a fad.

The R&D 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 R&D 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 R&D vary, from captive to third party to contract assignments. The pioneers of R&D outsourcing were from information technology. R&D centres in the telecom

sector came next, and automobiles, pharmaceutical and biotechnology are the emerging areas where R&D outsourcing is bound to increase.

This growth of R&D outsourcing brings to our attention two important dimensions. First of all, it shows that if R&D as a profession is incentivised, it is possible for the country to

effect considerable increases in its R&D investments. The fact that foreign MNCs are able to establish contract R&D centres is a clear example of this possibility. Second contract R&D 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.


Trends on technology imports to India during the post liberalization period(Number of collaboration agreements)


Payments made for technology import during the post liberalization period does not show any growth

0

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150

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In m

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-60

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Gro

wth

Rate

(%

)

Total Tech Payments 319 170 323 291 417 471 317 166 250 312 235 361 352 444

Growth Rate -46.71 90.00 -9.91 43.30 12.95 -32.70 -47.63 50.60 24.80 -24.68 53.62 -2.49 26.14

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04


Components of Innovation Policy Overall policy framework

Year Policy Initiative 1958 Scientific Policy Resolution 1970 Indian Patents Act 1983 Technology Policy Statement* 1985 R&D Cess Act 1988 Venture Capital Guidelines Announced 1995 Technology Development Board Act 1996 CSIR 2001: Vision and Strategy Announced

Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996**

1999 The first amendment to the Indian Patents Act (IPA) 1970: to put in place a mechanism for accepting product patent applications covering pharmaceutical and agricultural chemicals from January 1, 1995 (better known as the mail-box provisions) and to provide exclusive marketing rights if certain conditions are fulfilled

2000 New Millennium Indian Technology Leadership Announced

2002 The second amendment to the IPA to bring it in conformity with all the relevant provisions included in the TRIPS Agreement, barring a solitary exception. This exception viz., introduction of product patents in the area of chemicals, pharmaceuticals, agricultural chemicals and food.

2003 New S&T Policy Announced 2005 The third amendment to the IPA extending

product patents to chemicals, pharmaceuticals, agricultural chemicals and food.

Notes: * A draft new technology policy was announced in 1993, but this was not adopted; ** Effectively replaced the guidelines of 1988


Salient features of the New Innovation Policy of 2003

Optimal utilisation of existing infrastructure and competence; Strengthening infrastructure for S&T in academic institutions; New funding mechanisms for basic research ; Human resource development; Technology Development, Transfer and Diffusion; Promotion of Innovation; Industry and Scientific R&D; and

Fiscal measures


Public sector allocation to S&T over the Indian five year plans


Composition of Indian R&D personnel(number)

1980 1998

Total R&D personnel (a +b+c)

184096

308392

a. Personnel engaged primarily in R&D 64875 95428

b. Auxiliary personnel 58142 100656 c. Administrative

61079

112308

Ratio of R&D (a) to Non-R&D (b + c)

0.53

0.45


R&D Personnel

Both in absolute number and in density terms the number of R&D personnel in the country is very small;

There is an explicit recognition of this fact in the new S&T policy of 2003.

In my view it is more of a demand side phenomena. More on this point in my presentation on human resources.


Financing of Innovation

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


Research Grants

TePP

Prototype Phase

HGT

Technology Proving Phase

Proving of commercial viability by demonstrating the

technology at pilot scale level

TDB and PATSER

Initial Market Launch of New

Technology


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


Tax Incentives

There are five different types of tax incentives; Considerable year to year changes in its scope; Has not very effective in raising R&D investments with

the notable exception of pharmaceutical industry.


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.


Indian VC industry in historical perspective

Phase I - Formation of TDICI in the 80’s 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


Source: IVCA/AVCJ

20 80

250

500

1,160

937

774900

590

0

200

400

600

800

1,000

1,200

1,400

96 97 98 99 '00 '01 '02 '03 '04

India Venture Capital Investment Trends

india’s innovation system

Documents

usa sunil mani

total number of indian

parveen arorasunil mani

solid surfaces

aalborgshare of local

solid sorbent

auxiliary compositions

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