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Confederation of Indian Industry India Development Foundation

I D F



Confederation of Indian Industry India Development Foundation

I D F



This is a study prepared for the Confederation of Indian Industry (CII). We acknowledge the

comments and suggestions received from CII's Advisory Committee on National Innovation

Mission, the IBM team and, officials from the Ministry of Science and Technology. This study is

the outcome of numerous discussions held with various people covering industry, academics,

practitioners, policymakers, students, parents, NGOs, etc. The names of specific individuals

are listed at the end of the report. All remaining errors are the authors' responsibility.

Innovate India: National Innovation Mission

India Development Foundation316, Qutab Plaza,

DLF Phase – IGurgaon - 122001

Tel : 0124-4381691

Email : [email protected]

Confederation of Indian Industry I D F

Confederation of Indian Industry249-F, Sector 18, Udyog Vihar,Phase IV, Gurgaon - 122 015,Haryana, INDIATel: +91-124-401 4075 / 401 4060-67

Fax: +91-124-401 4057 / 401 4080Email: [email protected]: www.ciionline.org




Messages 1

Dr. A. P. J. Abdul Kalam, President of India 1Mr. Kapil Sibal, 3

A Citizen's Charter Aimed At Encouraging Innovation In India 5

Executive Summary 9

Background 13

Hon'bleMinister for Science & Technology and Earth Sciences, Government of India

1. Defining innovation and the innovation process 17

2. The Innovation Situation in India 25

2.1 Developing a framework to measure and monitor innovation 25

2.2 Human capital and education 282.3 Technology 31

2.4 Service Infrastructure 33

2.4.1 IPR and the innovation process 34

2.4.2 Data Protection 35

2.5 Organizations, incentives and linkages 36

2.6 Government and Public sector: Innovation and intervention 38

2.7 Society and consumers 41

3. Designing and Building an Innovation Eco-system - A dynamic system 43

3.1 Innovation ecosystem - a static representation 43

3.2 A dynamic innovation ecosystem - value generation and destruction 44

3.3 A dynamic innovation ecosystem - what incentives? 46

4. Innovation strategy, roadmap and monitoring the eco-system 49

4.1 The Gap-current and future states of the innovation ecosystem 49

4.2 The Strategy 51

4.3 The road map and milestones 54

5. Specific recommendations 59

Tables 65

1. Innovation Situation in India - Quantifying Indicators using Indicators : Education 67

2. Innovation Situation in India - Quantifying Indicators using Indicators : Expertise 69

3. Innovation Situation in India - Quantifying Indicators using Indicators : Innovation

Related Output 71

Annexures 73

I. Examples of Innovation 75

II. Details on the Data Collection and Compilation Methodology 77

III. Consultations : CII Advisory Committee on National Innovation Mission 81

List of Respondents 83

INNOVATE INDIA: CONTENTS



MESSAGES

Dr. A. P. J. Abdul KalamHon'ble President of India

Innovate India: National Innovation Mission 1

I am happy to know that the Confederation of Indian Industry is bringing out a Report on "InnovateIndia" on the occasion of its Annual General Meeting onMay 22-23, 2007 at New Delhi.

I am sure the Report shall work out a strategy andaction plan for making India into an innovative society,

which will lead the nation to become economicallydeveloped.

I extend my warm greetings and felicitations toall those associated with the Confederation and wish theReport all success.

(A.P.J. Abdul Kalam)

New DelhiMay 18, 2007

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MINISTER FOR SCIENCE & TECHNOLOGY

AND EARTH SCIENCES

GOVERNMENT OF INDIA, NEW DELHI

Innovation is a major driver of progress in any country, playingpivotal roles in economics, business and technology.

Innovation is necessary in products, processes or services,and is indispensable for organizations to remain competitive.

Open economy leads to competition, but if it lacks innovation,the purpose of opening the economy may not be served.Countries have benefited only by managing the innovation andleading the innovation in knowledge driven sectors of economy. Innovation-based economic development is thusthe key for progress now even in developing countries.Desired frameworks are being put up by these countries for thepurpose.

Often interactive learning paves the way for innovation.However, the institutional framework influence one to one or

group to group interaction - in fact in such establishmentshuman interaction is governed by a set of rules, code of communication, language and culture. These vary fromcountry to country and even within the country. The NIS(National Innovation System) of any country thus has animportant role to play in enhancing the pace of innovation. Thepolicies are important and important is their evolution, whichmostly depends on the succession of demand on the societyand resources available on disposal to achieve the desiredgoals.

India too is innovating and is moving ahead to becomeknowledge superpower. Socio-economic structure which

facilitates innovation is building up. Stakeholders are playingenabling role. However, new policies and programmes thatwould enable high quality accelerated growth throughinnovation are needed with such mechanisms, which wouldenable innovation across firms and organizations unfetteredby boundaries.

This report entitled “Innovate India” addresses indeed some of the issues and suggests remedial measures. I take thisopportunity to congratulate all those involved in this initiative,which is timely. I am sure the report will be instrumental inbuilding “Innovative India” in a “Team India” spirit..

(Kapil Sibal)

New Delhi

May 15, 2007

Kapil SibalMinister for Science &

Technology and Earth Sciences,

Government of India




A CITIZEN'S CHARTER AIMED ATENCOURAGING INNOVATION IN INDIA

We, the citizens of India, resolve to make India a

Knowledge superpower by taking a leadership rolein the twenty first century. We wish to capitalize on

the favourable demographics in the country and

seize the moment to leverage the explosion of talent

and entrepreneurship to foster innovation and

catapult this dynamic young country to the status of a

leading nation. There is an urgent need for India to

bring in an environment that supports innovation. We

call upon industry, policymakers and parents to take

proactive steps to catalyze the immense human

potential that is being unleashed within India. The

need is to ensure that these steps involve the entire population. It is important to build on the continued

success of the service sector, the more recent robust

growth in industry and extend this to the agricultural

sector which supports the most vulnerable sections

of our population. Let us overcome the bottlenecks

that prevent India from reaching its tryst with destiny.

It is for all of us to make India a hotbed of innovation

and fresh thinking.

We must create the minds that will ignite the fires of

innovation and develop the expertise that will keep them

burning. Research institutes must generate an environment

that fosters imagination and provides incentives that reward

successes and overlook failures. Schools, colleges,

universities and vocational institutes must develop training

programmes that encourage problem solving with local

resources. Flexible curricula must respond to changing

realities with teachers being rewarded for the challenges

they throw at students.

The demographic transition in India has given us a young

population ready to take on a globalizing world. It is only fair

that we give them the tools and the environment in which

they can realize their dreams -- an environment that allows

them to freely experiment with new ideas and do so without

fear of failure and, tools that help them explore new

grounds, walk new paths, and take new risks.

Let us reform the education and training system to have the

same impact on society that de-licensing in 1991 brought tothe economy.

Human Capital and Creativity




Collaboration

IPRs

Flexibility

For innovation to be fostered and taken forward, it isessential to have a platform that engenders collaboration. A

necessary condition is the need for common platforms and

standards that enable innovation across firms,

organizations, individuals and groups unfettered by

national and organizational boundaries. Standards ensure

competition and facilitate the growth of networks. Standards

also enable multi- disciplinary approaches to problem

solving. We need to take a proactive approach and show

dynamism and openness in the setting of domestic and

international standards.

Let us work towards the generation of open networks that

allow people to move in and out at will with their ideas

protected by law. We will make collaboration a most

rewarding activity.

One of the critical institutions for R&D and subsequent

applications is the protection of Intellectual Property.

Patents and other IPRs encourage innovation, ensure

returns to the innovator and, at the same time, put allknowledge in the public domain. India already has a state of

the art legislative mechanism for the protection of IPRs, but

it is important to be dynamic in this regard, ensure new IPRs

are quickly recognized, data privacy ensured, business

methods respected and know-how protected to the fullest

extent possible. If networks are to be the foundation for

collaboration, new forms of shared IPRs are required. At the

same time we must work towards an IPR mechanism that

reduces delays and compensates owners fully against

trespass.

An innovative environment requires flexibility in all factors of

production - capital, management and labour. Capital

market flexibility in India has already shown impressive

results. An efficient managerial market encourages

entrepreneurship. A mobile and flexible workforce is not

only productive, it is also innovative. Towards this, we

quickly need to amend bankruptcy laws and labour laws,

encourage entry and venture capital funding, and allow for

easy exit for businesses with support to labour during the

process of transition.


There is an urgent need todevelop an environment in

I n d i a t h a t w i l l f o s t e r innovation and help catapult the country to a leadership

position in the next few years.This can be achieved only if we

focus on reforming theeducation system, encouraging creativity, providing opennetworks, providing flexibilityof labour and capital, ensuring

transparency and devising a strong intellectual propertyregime. Needles to say, anincentive system that helps

foster research is essential.



Our regulatory authorities need to recognize the new

challenges and harness India's potential by doing away with

several outdated rules and regulations that were relevant

for a different culture in a different country.

On this front, we recognize that the government has been

making the right moves. The Right to Information Act has

already worked wonders on various fronts. This year's

budget signals the government's sincerity even more as it

declares its commitment to e-governance. We encourage

the government to take this forward and ensure promptness

in service delivery through reforms in public services and

through increased use of technology in service delivery that

must reach the length and breadth of the country. Towards

this, it would be really important for the country to ensure

that its institutions that are responsible for technical

education, higher education and research be made

accountable and responsible for meeting their objectives. It

is also important that the education sector be as free as

other sectors in the economy to be able to open universities

and institutes and provide training to the vast number of

students passing out of our schools. We commit ourselvesto further encourage and participate in this move towards

openness and transparency.

wish to underline the need for urgency in bringing

in these changes. If India does not move towards an

innovation eco system quickly, it will very soon lose

any advantages it may have gathered in the last

couple of decades. A new attitude needs to be

brought in that would accept, incubate and strongly

encourage innovation in India. We all need to

together ensure that the young Indian today thinksafresh, does not fear failure and is rewarded for

thinking out of the box. We reiterate our commitment

towards building this new India.

Transparency

We


Shanker AnnaswamyCo-Chair, CII Advisory Committee

on National Innovation MissionManaging Director, IBM India (P) Ltd.

R. SeshasayeePresident, CII

Lt.Gen (Retd) S. S. MehtaCo-Chair, CII Advisory Committee

on National Innovation MissionDirector General, CII

Sunil B MittalVice President, CII

T. RamasamiSecretary, DST



Innovation has been defined as the intersection of invention

and insight that leads to commercial and social value. In

India, there are many instances where innovation, as

defined, has occurred and is occurring. However, these are

not enough, given the size of the country and the number of

problems India is grappling with as it embarks on a path of

rapid, sustainable and inclusive growth. Higher growth in

India is the outcome of its productive energy, of which, there

were many instances prior to 1991. However, industrial

delicensing in 1991 unleashed this energy. To sustain the

consequent growth, we now have to unleash India's

innovative energy, taking it beyond sporadic instances and

making it integral to all productive activity.

A careful analysis of the innovations suggests that the

translation of new ideas into value generation is not a simple

process. Though innovation starts with the idea and ends

with value, there are a number of intervening steps that an

innovator has to go through. There are no roadmaps that a

person with ideas can follow to reach one's destination.

Hence, to nurture innovative ideas, it is essential to have an

innovation eco-system that opens up a large network of

roads on which an innovator may possibly travel.

In other words, instead of directing innovation, the eco-

system has to enable it. A number of enablers can be

identified and they cover, among others, institutions, laws,

infrastructure, mind-sets, incentives and culture. For

instance, while outstanding researchers may happen in

spite of the system, the level of an average researcher

improves with a good research environment. In this context,

the number of PhDs in India is far less than it should be and

dwindling. The research environments in universities and

institutes must attract researchers back into their fold and

employment opportunities for such PhDs must be madecomparable to what they can otherwise get.

Not only should we produce more PhDs in existing

disciplines, we should get some of them in new disciplines

also.This will mean the development and implementation of

new courses that will develop skills required in the future.

One example is the new initiative being talked about

regarding a services science syllabus. Some of the best

minds in the best universities and organizations are taking

exploratory steps in this direction. We need to develop and

adopt some of our own.

EXECUTIVE SUMMARY




Focus on our problems and solutions starts at the schooling

stage - freedom and encouragement to try, nurture

experimentation and out of the box thinking, and allow

failure. This mind-set of experimentation must extend to

skill generation and its continual upgrading. Vocational

training and modular courses are therefore important too.

Capacity for imparting education and skills must be

augmented while allowing for competition amongst the

providers.

An innovator must be empowered to experiment and fail. It

is not enough to make entry easy for start-ups with venture

capital and small business loans, though they are essential.

Simultaneously, the social and economic costs of failure

must be brought down. Failed entrepreneurs must be able

to exit easily. Labour from these units must get support

during transition. While flexibility in reallocating resources is

desirable for all producers, it is a must for start-ups and

young firms where the failure rate is high.

The other characteristic of innovation, and this is becoming

more and more important in the global world, is that it works

best if groups of people, or organizations, come together.

And, equally significant, innovation is no longer restricted tothe R&D laboratories of large organizations.

For such collaborations to succeed, two things are

essential. First, proper recognition has to be given to all

those who participate in an innovative venture --- be it in

research, commerce or in social initiatives. India should

think innovatively on a patent regime that supports open

collaboration. Shared patents such as patent commons are

one example.

Second, to maximize the number of individuals andorganizations participating in the process, common

platforms need to be built so that a collaborator can move in

and out of the process seamlessly. The operative word here

is “open”; no one knows from before who one's collaborator

will be. Defining and developing standards for technology

and services will enable people to work on common

platforms, reduce duplication of effort and enhance

compatibility.

One such common platform stems from e-governance

filing online tax returns encouraged small businesses toembrace information technology for taxes and then beyond


Innovation happens when something new that has value iscreated. What restrains us fromcreating new ideas? Are we

satisfied with the state we arein, or are we afraid of failure?The former is certainly not true

since India is grappling withachieving inclusive growthwhile the latter unfortunately

seems to be true. The fear of failure seems strange in acountry that is known for itsentrepreneurial spirit.

Translating new ideas intovalue involves a number of

steps that can be successfullycarried out provided theenablers, such as institutions,l a w s , i n c e n t i v e s ,infrastructure, etc, are in place.

A t t h e s a m e t i m e , a nenvironment has to be provided where people are encouraged to exper imen t and no t

penalized harshly for failure. An ecosystem has to be provided that has a basenetwork over which other networks are built. This will increase the number of

participants involved in the process and help develop standards for technology and services.



to other aspects of their businesses boosting efficiency and

transparency. Such innovation leadership, especially from

the government, has multiplier effects.

This eco-system of open networks, private or public, has to

be supported by a base network or an Indian Innovation

Network. We recommend a paradigm shift in the nation's

goal-setting (like what happened in 1991 when the

economy was opened up) that is not to “drive” innovation

but instead generate an attitudinal change in people's mind-

sets like greater tolerance to failure, going off the beaten

track, looking for solutions encountered in daily life, etc. It

will also encourage the public, government and other

organizations to create an innovative eco-system in

whatever they control. Most importantly, it will foster

experimentation.

Simply put, if we do not innovate, we perish.




The objective of this monograph is to work out a strategy

and consequent action plan that enables India to become

an innovative society. The first aim is to understand what

breeds innovative ideas among large groups of individuals

and organizations in society --- the institutions, culture,

attitudes, incentives, etc. The second is to work out

strategies to develop an eco-system that makes innovation

an integral part of what everyone, or every organization,

does every day.

It is important to grasp the urgency of making India an

innovative society. About 65 per cent of the population is in

rural India where the major activity is agriculture.

Unfortunately, agriculture adds only 19 per cent to GDP. In

addition, there is a large amount of under-employment, or

disguised unemployment, in rural India which supplies

more than 50 per cent of the Indian labour force. In general,

development leads to shrinkage of the agricultural labour

force and growth in the industrial labour force but, in India,

the organized industrial labour force has been declining.

The service sector has been growing but the more

productive jobs in this sector require training and skills that

are not usually available in rural labour. Lack of any

employable skills, at a time when the economy is on agrowth fast track, can lead to socio-economic disruptions.

This can have serious consequences for social and political

stability in a democracy.

The world is fast globalizing and so is India. This opens us

up to competition in a way that has never been seen before.

Our competitors like China have moved far ahead of us and

other developing countries are fast catching up. Two

decades ago India was insulated from the world economy;

today social and economic shocks outside India have

immediate implications for our economy. If we are preparedfor such unforeseen shocks, it can become an opportunity

for growth and development; if we are unprepared it can

lead to serious dips in economic activity and consequent

destabilization of serious proportions.

The need of the hour can be summed up as follows:

• greater industrial growth to generate employment;

• rural development through rural industrialization

and other non-agricultural activities;

• harnessing of youth power to enable the realization

of the demographic dividend and the prevention of major social disruptions; and

BACKGROUND




• the delivery of basic services to the vast majority of

the under-served population. Our biggest and most

valuable resource is our population and they must

be enabled to solve their problems. Increasing the

scale of what we have been doing so far will not be

sufficient. We need to think out of the box and this

can be done only if our eco-system rewards

innovation.

It is not enough to see how other societies have innovated

and implement their experiences for India. This is because

India is inherently different from other innovating societies.

It would not be enough to take the innovation strategies of

other societies (US, China, Taiwan, etc.) and adopt any one,

or a combination of these, in India. To highlight some of the

differences, consider the fact that the US school system

produces a relatively low number of students with science

and mathematics capability. Yet, rectifying this is not among

the most urgent actions recommended for boosting

innovation in the US; what is highlighted instead, and

repeatedly, is the R & D capacity and the number of

scientific papers produced. This apparent anomaly is

explained by the intake of foreign born students at the

university level, quite a few of whom stay back in US. InIndia, on the other hand, the pool of potential students for

college degrees (and for future innovators) is the pool of

Indian students graduating from the Indian school system.

Hence, the US focus on enhanced research in universities

and colleges cannot work in India unless we increase the

(potential) pool of quality students and researchers

graduating from the school system in India. India's focus on

building the innovation eco-system must, therefore, start at

the lowest levels and go all the way up to enhancing

research capability.

The Chinese have made great leaps in their contribution to

scientific research. One way they have done so is by

allowing a different salary scale for returning Chinese

scholars who have already established their reputation

abroad, compared to home bred scholars who have not

established an international reputation in research.

Simultaneously, many of its enterprises, though competing

with each other, are set up by local governments and are

essentially state owned enterprises. India, on the other

hand, will face tremendous political opposition from the

academic community to any attempt at dual salary scalesand much of its enterprise activities are in private hands. In




Taiwan, most of the patents are owned by small scale

enterprises while India's enterprises are starved of credit,1

technology and skilled labour. In this report, we keep in

mind this difference in the Indian environment and use it as

the backdrop within which initiatives have to be undertaken

to develop an innovation eco-system.

This monograph is the result of the efforts of many people.

To begin with, an Advisory Committee was formed along

with the research team entrusted with completing this

report. After the structure was loosely decided upon, a

number of interactions took place between the research

group and people hailing from different walks of life. These

interactions happened both individually, and in groups.

Different versions of the report were circulated for inputs to

a large number of stakeholders.

More precisely, the exercise began with putting down initial

thoughts and then brainstorming with experts from various

spheres. The initial brainstorming led to more focussed

interactions via roundtables and formal discussions. As we

collected opinions and re-organized our thoughts, we

produced interim reports. These reports were circulated

and feedbacks obtained. We reflected, considered anddebated more. At each point, our thinking and organization

of thoughts got more refined. The following report is an

outcome of this process. However, it is not a treatise on

innovation or, definitive steps on how to develop an

innovative eco-system. Instead, it is the start of a thought

process which, to be fruitful, must be refined further with

inputs coming in from all who want to see an innovative

India.

In particular, the report

• identifies innovation and the processes that lead toinnovation;

• takes stock of where India is in terms of innovation;

• designs an innovation eco-system, bench-marking

US and relevant countries;

• identifies the potential gaps that need to be bridged

and draws up a roadmap for getting to the eco-

system; use the eco-system mapping to continually

monitor and inform us how quickly we are closing

the gaps; and

• makes specific recommendations for various

stakeholders and milestones.


1“What Ails the SME Sector?” IDF Report sponsored by DFID-India, March 2004

To foster innovation in thecountry, we need to start fromthe lowest level --ensuring highquality education in schools tod e v e l o p i n g r e s e a r c hcapacities. We have a hugeadvantage as far as the

p r o p o r t i o n o f y o u n g population to the total isconcerned. We need to tap this

youth talent and aspiration bynot only ensuring that they area part of the education system,but also creating an ecosystem

that makes innovation anintegral part of everyone'slives. Before we get into how tocreate an enabling ecosystem,let us identify what innovationis and see what characterisesinnovation.



Innovation is a new idea or a new way of doing something

that is value generating. The National Innovation Initiative

(NII) of the U.S.A. defines innovation as the intersection of

invention and insight, leading to the creation of social and

economic value. Insight provides the basis for application

of the invention. Then, the solution must be tested and

demonstrated to be useful and viable, and finally, it must be

commercially or socially produced. Only then is social and

economic value created.

If we accept this definition, India has innovated in a number

of different ways. Using insight to solve everyday problems

abounds in the form of “ jugaad ” that translates into

experimentation with a problem-solving focus,

resourcefulness, a quick-fix solution that overcomes

current constraints and is effective in the short run. The

creativity and insight intrinsic to “ jugaad ” can be harnessed

and extended to solutions that are durable, scalable and

commercially, or socially, applicable. Such extension to

value-generating solutions will require using science,

technology, research, invention and then marrying these to

insight.

An outstanding recent example of an Indian innovation isthe pre-paid SIM card for cell-phones. This was devised as

a means to address provision of service amidst limited

budgets. Given that much of Indian labour gets paid daily,

weekly or fortnightly, it is difficult for them to undertake

lumpy payments at longer intervals than their income

periods. So, one needed more divisibility in the payment

stream, something that is more in keeping with their income

periods.The pre-paid card addressed this issue in a unique

manner. It allowed low up-front cost and a fixed monthly pre-

payment for the service. Starting initially with monthly

validity and few rental-talktime choices, this service hasexpanded in scope and variety to serve different customer

needs. From buying the initial SIM card and re-charge

coupons from designated stores, the system has moved to

one where these cards have become available from a large

number of stores and users can re-charge them from their

homes. It is an excellent example of a service that has

consistently enhanced convenience with affordability. It has

improved customer satisfaction, expanded the cell-phone

users' market, increased revenues and profits. At the same

time, it has improved social value by connecting people all

over the country. In short, it has generated considerablevalue in a country where people are culturally averse to

1. DEFINING INNOVATION AND INNOVATION PROCESS


When you invent something,and use your insight to applythe invention, the result is'innovation'. You can come upwith quick - fix solutions(jugaad) in the short run, and can extend these solutions tovalue generating ones using

your inst inct and your calculations! We study someexamples of innovation in the

Indian context and what c h a r a c t e r i z e s t h e s einnovations.



running up huge pending bills (as would be the case with

post-paid connections) and where a large number of people

get paid small amounts but at more frequent intervals of

time.

Another example is that of Sona Koyo Systems. It is one of

the auto component suppliers to Maruti Suzuki, the Indian

joint venture of Suzuki Motors. With the entry of auto majors

such as Daewoo Motors, Hyundai Motors, and Visteon with

Ford Motors and, along with them other foreign auto

ancillaries in the Indian domestic market, domestic auto

ancillaries were compelled to upgrade themselves to ward

off competition. Sona Koyo through its tie-up with Koyo

Seiki of Japan had access to a strong R&D base. Sona

Koyo successfully adopted Total Quality Management

(TQM) and Total Productive Maintenance (TPM) practices

on the shop floor. From this overall environment of

manufacturing excellence, built to keep competition at bay,

emerged an improved product. Sona Koyo redesigned the

steering system used for a Maruti-Suzuki small car (the

Alto) --- combining three components into one --- and

reduced the weight of the system by 15 percent. The

company is now supplying steering systems to auto majors

other than Maruti Suzuki such as Toyota, Mitsubishi, andHyundai in India. It is also building up exports and moving

up the value chain. The innovation of the improved steering

system established Sona as a place for manufacturing

excellence with the skills to re-engineer existing products to

save costs.

The first example was a pure Indian initiative, while the

second was a partnership between an Indian and a foreign

player. An example of a foreign company using Indian

resources to innovate within the country is the McDonald's

chain.To succeed in a very competitive snack-foods marketin India, the McDonald's food chain introduced new variants

(for McDonald's but similar to other Indian forms) of

vegetarian (“aloo”) patties for their burgers. This form of

“ jugaad ” has been institutionalized in the form of a

McDonald's food development centre in Mumbai. The

prototypes developed here have been adopted for mass

production and retailing, and commercialized profitably

across McDonald's outlets in India and other countries.

Government institutions have also been innovative. To

combat illiteracy, the government has been running adulteducation programmes and, for out-of-school children,




alternate education systems. However, despite such

programmes, these persons remained out of the purview of

formal education. The National Open School provided

persons who were hitherto out of the formal schooling

system, another chance to enter it, take modular courses,

pass the standard “board” examinations and obtain regular

certification. This is also an example of an innovation that

produces social and economic value.

To combat lack of skills, the CII's skills initiative identifies a

menu of skills (plumbing, electrical work, car maintenance

and repairs, beauty services, baking services) that a

candidate can enrol for; helps each candidate to make a

good match; provides training of about six months; a

monthly stipend of INR 5000 and, most importantly,

provides certification from an internationally established

institution and an initial placement through its member

industries. The certification is established via a smart card

provided to each person which any prospective employer

can verify using the internet/web. Thus, the employability of

the labour force is enhanced by creating more brown (rust)-

collar workers, marketability is enhanced within India and

abroad due to certification, and the cost per person is much

lower than in public programs such as the NREGA (INR10,000 per person).

This is an innovation that needs a bit more elaboration. For

one, it integrates the Indian labour market. Currently, a

skilled plumber in one part of the country cannot be

employed outside the immediate neighbourhood simply

because there is no way the plumber can credibly signal his

expertise. Graded certification by an internationally reputed

institution, which is not involved with the training process,

allows the plumber to credibly communicate his skill level to

an unknown employer. This enables the private sector tofind optimal locations without having to worry about the local

availability of labour.

To provide healthcare, not only new cures via biotechnology

based drugs and therapies but also new ways of ensuring

healthcare delivery are required --- both financing (health

insurance) and cost-effective means of delivery. The

reverse pharmacology approach to new drug discovery

would reduce cost and time to produce new drugs relative to

the current process in advanced economies. In U.S.A,

where health insurance is widely available, almost one-thirdof the health expenditure is due to paperwork. With the use


The Prepaid SIM Card highlights the solution to the

problem faced by people using

cell phones, who did not haveenough incomes to pay for the post paid connection. Using their partnership with a foreign

player, the Sona group came upwith an innovation in the faceof stiff competition to survive inthe Indian market. Not only did they survive, they are now oneof the leading suppliers of

steering systems in the country.Some government initiatives

such as the adult education programme, CII's initiatives in skill development and the Aravind Eye Care systemhighlight the point that is it

possible to create both social and economic value by using creativity and insight and harnessing these to come upw i t h v a l u e g e n e r a t i n g

solutions.



of information technology, devices such as the health smart2

card will enable (i) bypassing or reducing these costs, and

(ii) patients to have more control over their health

information through secure, private, and portable medical

records.

Providing high performance at a low price is possible.

Leveraging the population size and following a hub-and-

spoke model, the Aravind Eye Care System provides

surgery services cataract operations at low costs. While

the US costs are USD 2500-3000 per surgery, Aravind Eye

Care costs USD 50-300 per surgery. High quality is also

achieved comparing UK national survey on adverse events

during cataract surgery versus Aravind Eye Care on five

indicators,Aravind Eye Care incidence of adverse events is

lower.

In a country with a decentralized governance structure and

as large as India, there is often a problem with implementing

social programmes targeted at weaker sections of the

population. Identifying pockets of such populations and

monitoring assistance to these is a difficult task. In part, this

has led to leakages from the social programmes such as

poverty alleviation programmes to undeservingbeneficiaries. Small area estimation (SAE) is a relatively

new technique that leads to generation of poverty maps or

estimates of poverty at local levels, as local as villages.

These estimates can be further combined with GIS maps to

provide a powerful tool to policy-makers and programme

implementers to improve effectiveness of programmes. The3

technique is under pilot testing in India.

Is there a common pattern to these examples of innovation?

If we can isolate these characteristics, it will help us in

identifying what are the features that enabled them and,hence, give us pointers on what needs to be done to make

these examples happen more often and more pervasively.

Some of the characteristics that we have been able to

identify are given below. These characteristics are more or

less present in all the examples cited above.

• Innovation is cross-disciplinary and arises from

the intersection of different fields or spheres of

activity. For example, the pre-paid SIM card arose2

Health Smart Card, IDF Presentation, India Development Foundation, Gurgaon,Haryana, 2006.3Small Area Estimates of Selected Welfare Indicators, IDF, November 2005.




from the need for connectivity, customers'

constrained budgets, technological factors (SIM

card with deducting balance, recurrent SIM card re-

charging over the phone), distribution mechanisms

(company outlets to third party retail outlets),

marketing (new packages of rental and talk-time),

and a responsive regulatory authority TRAI

(changed regimes from license fees to revenue

sharing enabling telecom firms to survive, innovate,

and grow).

• It is collaborative, requiring openness, active

cooperation, communication, and feedback among

scientists, engineers, and designers and between

creators and users. Innovation rests on invention

and hence hinges on research and development.

India has a number of state research institutions

(CSIR etc.) and some private ones (TIFR).

Research and development efforts are expanding

and becoming increasingly collaborative in an

attempt to systematically innovate in India and for

India both through product development and

through collaborative research with Indian

academia. For example, the new food items of McDonald's are successful due to such

cooperation. The “on-demand” business model

practised by IBM is also predicated on active and

open collaboration between the service-providers

and the clients; in India, a notable success of this

collaboration is the outsourcing model followed by

Bharti-Airtel.

• It is becoming global in scope, with

breakthroughs coming from centres of excellence

around the world and the demands of millions of new consumers. A high-powered research team

from International Development Enterprise (IDE)

observed Maharashtra cotton farmers using

drinking straws in a novel way for drip irrigation and

developed a material that is more suited for this

activity. It is now distributed worldwide as a

commercial product with an in-built technology that

is more appropriate for small and marginal farmers.

Also, the maintenance of the system can be carried

out within the village, creating indirect employment

within the village. Thus, in addition to beingcommercially useful, it generates social value by




targeting poor farmers and rural labour.

• Innovation is not something that is triggered in

R&D laboratories alone. A major stimulus arises

from workers and consumers embracing new ideas,

technologies and content, and demanding more

creativity from their creators. The CII skills initiative

is a novel experiment wherein non-government as

well as non-employer training is being accepted as

worthwhile by workers. Similarly, farmers have

accepted and embraced internet based information

in e-choupals. With the increasing spread of internet

and screen-based reading, e-books and e-

newspapers may become a reality reducing the

need for paper and helping to protect our trees and

the environment.

• It is diffusing at ever-increasing rates, with

adoption times (by a quarter of the population in

U.S.A.) dropping from about 50 years for the

automobile to 20 years for the television set to less

than 10 years for the internet. The adoption gap of

new technologies between U.S.A and India is

shrinking rapidly with some new products being

launched in India before U.S.A. (e.g., smaller cars).

• Innovation follows from an ability to experiment.

The Government has an important role here, of

fostering an enabling environment for innovation

through active policies and through the creation of

enabling institutions. To give a simple example of

how the government can carry out its functions in an

enabling fashion, consider an economy that could

commercially operate activities. However, some of

these activities, let us say of them, decided under

some dec i s i on mak ing ru l es (e l ec tedrepresentatives or constitutionally or dictatorially),

society wants stopped. These could be activities like

trading in narcotic drugs for instance. The

government has two options --- it could pass a law

allowing only the good activities, or a law that bans

the activities. In a static world, both options have

identical outcomes. However, in a dynamic,

innovative world, the two approaches are not

equivalent (in outcomes). In a changing world, new

activities are discovered. The st activity in a world

that “allows” the activities will never beexperimented with; a society that bans the activities




will allow experimentation with new activities. For

instance, TRAI's role in telecom industry specified

what could not be done and, hence, enabled many

new initiatives in the telecom sector.

• Innovation can be a direct result of government

actions. Governments as providers of public goods

have to be innovative themselves --- about public

administration and service delivery (for instance,

promotion of the development of the health smart

card and the National Open School) --- both aimed

at generating social value and greater inclusion. In

particular, where benefits of innovation are not

uniformly distributed, governments enable hitherto

non-beneficiaries to develop capacity to absorb

innovations and realize gains.

Measuring and monitoring innovation is a challenge since it

is only after commercial and/or social success, or value

generation, that an idea or an invention can be recognized

as an innovation. However, as the list of common

characteristics mentioned above suggest, innovation is not

a simple one-step cause-and-effect observation, but a

series of steps that individually have no value but is of immense significance if all the steps are synchronized with

each other. It is an entire process chain starting from

demand or problem identification, passing through an

existing invention or a new idea that till now may have

appeared unrelated to the identified problem, insight into

the process that generates the problem, application of the

idea to change this process, developing and designing the

prototype solution, demonstrating the power of the solution

through controlled experiments, fine-tuning the solution to

make it cost effective and, finally, replicating and scaling up

the solution to large-scale commercial or socialdeployment. Clearly, any attempt at devising a strategy for

promoting innovation must take into account this entire

process. It requires a monitoring system that ensures that

for each step the relevant resources and institutions are in

place.

This is because an important feature of any innovative

process is the inherent uncertainty in the types of steps that

may be taken as well as in the final outcome, or solution,

itself. In other words, the process and the end-product get

defined only after the solution is in place. There is noguarantee that an idea at any of the stages may actually


The common characteristics of innovative ideas that have been

successful are:

C om in g t og et he r o f different disciplines

• Building of networks• Touching customers from

around the world • Moving beyond research

labs• Getting consumers to adopt

the idea at a rapid pace• Experimenting with ideas

till they reach a value generating point

• Government playing anenabling role

Should all innovations haveo n e o r m o r e o f t h e s ec h a r a c t e r i s t i c s ? N o t necessarily. Innovation will

succeed if any two or all theabove characteristics that enable an innovation to

succeed are synchronised well.



translate into an innovation. Thus, failure is also an inherent

feature of the innovation process. In short, innovation

cannot be decreed, or a blueprint developed for it. It is,

therefore, necessary to devise an eco-system that ensures

that all possible steps that could lead to a solution are

available to the innovator. An innovative economy is, of

necessity, an enabling one rather than a prescriptive one.

And, hence, the monitoring process must focus on how

enabling is the eco-system.

An important aspect of innovation is the use of new

technologies to solve age-old problems. For instance, the

mobile phone technology suddenly made it possible to add

commercial value to the Kerala fishing communities'

activities and social value by giving connectivity to large

sections of the poor and remotely placed people in India.

Among the major technologies contributing to and

underlying innovation today are information technology,

nanotechnology, and biotechnology. Measuring progress in

development and leveraging of key technologies is an

important component of the innovation process. Key areas

of innovation go beyond products and services to business

process design, business model, organization and

management. We are progressively moving from anindustrial-services economy to an economy driven by

innovation in much the same way as we earlier moved from

agrarian economies to industrial and industry-services

economies, where new technologies along with new

organizations for enterprises unleashed a whole new set of

solutions to festering problems.

As manufacturing and international trade have been the

engines of growth for the industrial economy, internet and

electronic exchange are the engines for service-economy

growth. In this context, an innovation economy might bedriven by services based innovation and network based

exchange of information on ideas and processes. The

networks may be closed or internal as in an automobile

maker networked with its auto ancillaries across all its

locations (Suzuki Motors with ancillaries such as Sona

Engineering in India and Koyo Seiki in Japan) or an IT-

solutions provider networked with both customers and

service-providing partners (IBM networked with its clients

as well as partners - vendors, consultants, universities to

identify/sense demand and provide on-demand solutions)

or it may be open or external (e.g., e-Bay or the internetitself).




In India, growth, productivity, higher standards of living, and

emerging leadership in a world with globalization along with

removal of poverty have been driven largely by investment,

both in industry (notably, automobiles, mobile phones,

consumer non-durables such as beverages and snacks)

and services (IT, banking and financial services, consulting

etc.). Investment, including foreign investment, is powering

India and helping to catch up with the advanced economies.

Since economic reforms in 1991, the expansion has been

accompanied by efficiency gains and enhanced quality in

Indian businesses. For further growth and more importantly

sustained growth, while continual efficiency and quality

improvements will be necessary these may no longer be

sufficient for the competitive edge. Being as efficient and as

good as the best may not be good enough. Achieving

inclusive growth with wide-spread rise in living standards

will increasingly be possible only with innovative

approaches --- identifying gaps in the range of products and

services available, finding new ways to satisfy these gaps,

formulating a plan to implement the idea, and executing the

plan. Tinkering with existing products and services or

following others in the global arena may not help much in

either sustaining high growth or in solving the challenges

facing India.

So, does India have innovative approaches? Is the Indian

society oriented towards innovating? The examples in the

earlier section suggest that indeed it is so. However, are

these mere pockets of innovation with gains being limited

mostly to these pockets or are these innovations occurring

across many spheres with gains being wide-spread? To

begin answering these questions, we require a systematic

framework that allows us to evaluate where we are in terms

of innovation, where we would like to be given our goals and

objectives, and how do we get there. The first step in thisdirection is to have a set of indicators that can help quantify

the extent and depth of innovative processes in India.

We identify several factors than can either enable or

impede innovation; these are listed below. We

provide a list of indicators based on these factors

that can be either enablers of, or their absence

barriers to, innovation. Indicators give us a sense of what exists and to what extent they exist. The

2.1 Developing a framework to measure and

monitor innovation

2. THE INNOVATION SITUATION IN INDIA


We have entered the phase of gearing ourselves towardsbeing an innovative economy,but to achieve inclusive

growth, we need to come upwith increasingly indigenousa n d v a l u e g e n e r a t i n g

solutions.



4enablers we have identified are:

• Human capital

o Education system

o Expertise and skills

o Creativity and application

o Innovation leadership harnessing and

nurturing

o Empowering workers in a changing world

o Value systems, culture, and attitudes fear of

failure and risk-bearing

• Technology

o Promoting frontiers of technology

o Leveraging technology

o Building frontier multi-disciplinary research

capabilities new curricula like services

science is an example.

o P r o m o t i n g s t a n d a r d s t o e n a b l e

collaboration

• Service infrastructure

o IPR, patents, and data protectiono Financial markets, venture capital and risk-

taking

o Land, infrastructure and innovation

infrastructure

• Organizations and incentives

o Innovation orientation in organizations

§ Structure of hierarchy in organizations

§ Incentive structure in organizations

§ Promoting innovation leadership

o Research organizations

o Linkages between industry/services-

researchers-academia

• Government and Public sector

o Innovation orientation

o Policy and regulatory structure

4 This list is the outcome of our own investigations as well as the directsuggestions of participants (drawn from various walks of life) at our roundtablesand what we could cull out from the discussions there. Professor Rishikesha T.Krishnan of IIMB has been especially helpful with his comments and we havealso drawn on his published work.




o Public administration

• Society and consumers

o Attacking local issues/challenges e.g., small

customer budgets

o Being “glocal” thinking global and acting

local

We illustrate the importance of the enablers in the

innovation process by using the example of the

business process outsourcing (BPO) industry-

service in India. Business process outsourcing grew

out of data entry processes conducted in locationssuch as India for clients in advanced economies

such as the U.S.A.; data would be processed and

shipped in electronic media at a fraction of the cost

in U.S.A. Processing of routine and repetitive back-

office transactions, however, was a daily

requirement and could not be batch processed in

remote locations and then shipped back. However,

with the advent of the internet and using the time

difference between U.S.A. and India, such

transactions could be processed and sent back by

the next business day. This idea spawned the initialdemand for BPO services. The technology ---

internet --- was an enabler. Given the demand and

the technology, the initial innovators (e.g., GE's

BPO, now Genpact) envisaged organizations with a

relatively flat hierarchy and a variable pay structure

with performance based incentives. They required

the knowledge workers to accomplish the task. The

problem was night shifts --- getting employees to the

BPO unit and back to their homes at odd hours when

no commercial transportation was feasible.

The idea of pick-up and drop-off facility emerged.

Though seemingly innocuous, this small

component of the business process design in

providing BPO services was a new way of doing

something already being done (getting employees

together at the production-service location). Indian

laws could have been an impediment. For industrial

workers, women were not allowed in night shifts. For

commercial workers, hours were restricted to late

evening (around 7:00 p.m.). The government could

have intervened, enforced any of these laws, and




choked off the emerging growth in BPO; the

government stayed away and in this way (specifying

only what cannot be done, not what can be or how;

also amending what cannot be done as the

economy and society changes) also acted as an

enabler. Further, society itself responded by

allowing young workers, including girls, to venture

out of their homes at night. This enabling

environment helped to make the initial BPOs a

success and generated economic value. The

virtuous cycle continued, more BPOs formed, more

workers were employed and more value was

generated. The innovation of pick-up and drop-off

facility continues to help expand the value

generation spiral.

Each enabler in itself is important. The absence or

the inadequacy of any one can impede innovation --

- technology, government, entrepreneurial insight,

society in the above BPO example. It is their

synergistic interaction that helps produce

innovation and generate value.

Based on data, prior studies, and the roundtables,

we present the indicators relating to human capital

(please see tables 1 3) below.

o Education system

§ Number of high school graduates

§ Proportion of high school graduates in

population aged 18-24

§ Number of science and technology (S&T)

graduates§ Proportion of science and technology (S&T)

graduates in population aged 20-24

o Expertise and skills

§ Number of science and technology

doctorates

§ Personnel in research and development

(R&D) establishments

o Creativity and application

§ Number of scientific and technical journalarticles

2.2 Human capital and education


As we move towards aneconomy that is innovation led,the standard factors of

production (land, labor and capital) become less concrete.The factors used for enabling innovation are availability of human capital, technological inputs, service infrastructure,orientation and incentive

structures in organizations,and the role of the government,

public sector, consumers, and society assumes importance.

The synergy among these f a c t o r s h e l p s p r o d u c einnovation that is value

generating.



§ Number of citations (of papers)

§ Number of patent applications filed

§ Number of patents granted

§ Number of new designs

On education, the picture that emerges from the

indicators (see Table 1) is that in terms of basic

education (schooling up to class 12), India's

performance is very low. The proportion of high5

school graduates in the relevant population group

of age 18-24 is as low as 2.5 per cent and remains

below 4 per cent. This is similar to China but is much

below the data found for U.S.A. (28 per cent to 34

per cent in various years). However, since the

population size is large, in absolute numbers, India

has not been severely constrained --- in 2003-04

India had 5.6 million graduating from high school,

China 5.5 million, and U.S.A. had 8.9 million.

While India is constrained at the general schooling

level (that could potentially impact innovative

activity in terms of diffusion of innovations), in terms

of an indicator for higher education, namely, the

number of science and technology (S&T)graduates, India produces over 2 million S&T

graduates every year or over 2 per cent of the

relevant population group aged 20-24. This is

comparable to both China and U.S.A. that also

produce about 2 per cent S&T graduates; however,

in terms of numbers, both India and China

outnumber U.S.A.

The situation is reversed when it comes to

expertise. We have chosen the number of S&T

doctorates as one of the indicators for expertise(while S&T graduates are included in higher

education). India produces less than 10,000 S&T

doctorates while U.S.A. produces around 400,000

S&T doctorates.

This disparity in expertise is reflected in innovation

related output or our enabler category 'creativity and

application'. In year 2001, India produced 11,000

S&T related journal articles, China produced about

20,000 and U.S.A. produced over 200,000 articles.


5The data for India relates to high school enrolments. Data on actual graduates is not

yet available. Drop-out rates are reported to be about 60 per cent.



Even though our Science and T e c h n o l o g y g r a d u a t e s( i n d i c a t o r s o f h i g h e r education) are sizeable, the S and T doctorates, which are an

indicator of expertise, areabysmally low. This translatesinto lower innovation related output as compared to Chinaand the US. Experts believethat dismal numbers in higher education, and, hence qualityarises from a weak schooling

system that does not encouragecreativity and questioning.

Similarly, in terms of the number of patent

applications filed, for the year 2002 when data for all

three countries are available, India filed about 9000

applications, China about 180,000, and U.S.A.

about 380,000. For the number of patents granted,

India has approvals around 2000 versus over

100,000 for China.

Design is considered as the glue between

inventions (or, new ideas) and commercial

application. Design helps to convert ideas and

research based products/services into tangible and

effective offerings. Through designs, an idea and

invention can be customized to achieve a high

degree of fit for the target audience and cultural

milieu. Hence, output of designs is a relevant

indicator for innovation. India's record on the

number of new designs is abysmal 39 versus

53,000 for China in the year 2002.

Thus, the human capital pyramid in India narrows at

higher education levels in science and technology,

that is, for graduates and post-graduates; narrows

drastically for doctorates in science and technology.This translates into weaker (intermediate)

outcomes, in terms of the number of scientific

articles/papers written, the number of applications

for patents, and the number of patents granted. At

first glance, the lower human capital attainment of

the population may have some bearing on the

intermediate innovation outcomes relative to both

the U.S.A. and China.

The views of stakeholder-participants expressed in

the “Innovate India” roundtables corroborate theevidence above. There is a widely held belief that

the bottom of the innovation pyramid, the school

education system, is weak in India (the bulk of the

population has education attainment below the

elementary level). Improving education attainment

and further improving skill levels is therefore

imperative to make persons employable and able to

absorb innovations (e.g., adapt and work with new

technologies).

Among those who make it to higher education, thereis a strong preference for engineering, technology




and medical streams. Most, however, want to keep

away from pursuing careers in the basic sciences.

This also shows up in the drop in the number of

doctorates produced, adversely impacting the level

of research and development in India.

India's system of learning by rote may be destroying

India's innate creativity captured in “jugaad”. We

need to promote a culture of innovation that takes

the creativity and systematically exploits it to

produce value. From the deliberations with experts,

it also emerged that value systems and culture feed

into attitudes and attitudes respond to the economic

environment and incentives. Just as the non-

resident Indians have done well in a more open and

enabling economic environment the world over, so

have the resident Indians whenever they have had

such opportunities. This is manifest in the telecom

industry, the IT and IT-enabled services sectors, and

now in retail services.

Developmental efforts in frontier fields such asinformation technology, biotechnology and6

nanotechnology exist in India; however, application

to India's non-commercial needs is low.To leverage

technology to solve problems that generate social

value, promoting experimentation within an

enabling environment is very useful. For instance,

the pilot studies done for the health card referred to

earlier was made possible because of the support

given by India's National Aids Control Organization

(NACO) and the doctors and management of

private and government hospitals.

The biotechnology field is on the rise in India with

both investment and number of employees

registering double-digit growth over the past few

years. Two issues crop up. One, relative to U.S.A.,

employees in biotechnology lag far behind; in 2004,

Indian biotechnology companies employed about

11,000 persons compared to about 187,000 by US

companies. Hence, the gap in technology

2.3 Technology


6“Nanotechnology promises new cancer treatment, cheaper and purer water, but the latest

products offered to public were more airtight balls, transparent sun block lotion and stainresistant trousers.” Meridian Institute (www.nanoandthepoor.org), quote from Dr.Mashelkar's presentation, 2006.



deployment exists and needs to be bridged.

Second, while the base of personnel employed is

low in India, the supply of trained persons lags

behind even more.

Successful leveraging of technology is intricately

related to the level of human capital. This is

becoming more and more evident in the current

service sector dominated global economy.

Knowledge and skill in classical disciplines,

developed in an “industry-manufacturing-

commodity” world, are fast becoming insufficient to

improve productivity and growth. The importance of

services in delivering value has to be recognized

and existing curricula need to be re-worked

emphasizing the issues faced in the service sector.

For instance, a motor vehicle can be treated as a

commodity that allows people to commute to work.

On the contrary, a motor vehicle may be treated as a

means to deliver a service --- transportation to and

from work. Then, along with the details of a vehicle,

one will need to know how to optimize on the

provision of a public transportation system.

We need people who are knowledgeable about

business and information technology and the

human factors that go into a successful services

operation, in addition to the technicalities and

rigours of the basic training they currently get in the

old disciplines. This will determine the new waves in

computer science, engineering, IT, business

management and administration, operations

research and, industrial and systems engineering.

This will give us an opportunity to be among the7

pioneers in tomorrow's world.

An important enabling element in promoting and

leveraging technology for innovation is the

development of standards. Already, industries are

governed by technical and transaction

specifications. When similar specifications are

adopted widely, they become standards. It is this

adoption of standards that enabled innovative value

addition in many spheres --- electrical appliances

and electronics, telephone and TV networks, credit

and debit cards, global financial markets --- and by


7Harvard Business Review lists services-science among the "Breakthrough Ideas for 2005.”

Technology plays a leading role in fostering innovation.

However, for the technology to succeed, we need skilled people in that domain and development of standards asthese enable people to work on

common platforms and reduceduplication of work.



extension, all the other business and public services

that use them. This will enable people to work on

common platforms, reduce duplication of effort and

enhance compatibility. Since innovation is a

collaborative endeavour among various people and

the outcome of putting together insights from

various disciplines, it is imperative that what

happens somewhere can be used somewhere else

by a different person. Such standards have to be

accepted by all and cannot be the exclusive

preserve of any one company, or entity.

The Bureau of Indian Standards (BIS) is the prime

Indian outfit involved in the development of

technical standards (popularly known as Indian

Standards), product quality and management

system certifications and consumer affairs and, is

nurturing the standardization movement in the

country. While BIS has initiated several steps

towards enhancing the efficiency of its operations

and upgrading of services, there is ample scope for

collaboration with private industry, academic

institutions and international standards bodies. BIS

should look beyond its boundaries and activelyparticipate in the formulation of international

standards. Indeed, given the growth of the Indian

economy, and its emerging role in the new

technologies, India can take a leadership role in

such activities.

One of the key resources for innovation that is in

short supply is finance. Many stakeholders feel that

there is a dearth of venture capital funding outsidethe sphere of IT and IT-related sectors. A key gap

seems to be early stage funding. However,

anecdotal evidence garnered from the roundtables

suggests that in the past two-three years, there has

been entry of new venture capitalist funds in India.

Lack of finance for new companies is a big barrier to

innovation. Recall that innovation can be observed

only after it has generated value. Whether, or not,

something is of commercial value can be gauged

only after the activity is undertaken. On the other hand, as we have pointed out earlier, innovation is

no longer the reserve of big company R&D

2.4 Service infrastructure


A p a r t f r o m p h y s i c a l infrastructure, innovation

requires adequate service back up. This includes financial r e s o u r c e s , p r o v i d i n g i n t e l l e c t u a l p r o p e r t y

protection, linking public and private players, researchersand academics and theinnovator's ability to take risks



laboratories. So, how does a new company with an

innovative idea but no commercial track record get

off the block if no one is going to finance it?

Infrastructure constraints affect not just general

economic activity but also innovative activity. An

innovation infrastructure --- innovation hubs linking

industry, services, researchers and academics;

innovation extension centres for SMEs, national

and regional alliances --- is largely missing in India.

In India, the industrial policy of import

substitution had envisaged a great deal of

effort and investment in innovativeness.

Howeve r , because o f poo r IPR

implementation, Indian industry could only

obtain out-dated foreign technology instead

of state-of-the-art technologies. Coupled

with licensing and labour laws, this policy of

poor IPR implementation ensured that most

of the manufacturing sector remained

capital intensive and yet technologically

archaic. A notable exception is that of thepharmaceuticals industry that did benefit

from this policy, and grew from rudimentary

to world-class generics industry.

Recent trends in biotechnology and

information technology have brought to the

forefront a set of issues in the law and

economics of intellectual property. These

issues have to do with the problem of

rewarding multiple inventors in a setting of 8

cumulative innovation. That is, is it possibleto provide optimal incentives for innovation

simultaneously to the producer of a first

generation product and a second-

2.4.1 IPR and the Innovation Process


8See Headley (1995) for an interesting discussion of the political/legal history of the idea of

extending droit de suite to cover scientific inventions during the earlier part of thetwentieth century. This idea essentially foundered on a reluctance to impose compulsorylicensing on inventors into the far future and the consequences such a move might have for the publication of the results of scientific research. total welfare), but it is very difficult toidentify potential partners ex ante in practice.9Scotchmer (1996) shows the following: Ex post licensing agreements, entered into after

the cost of first innovation is sunk can increase the profits available for the two innovators, but cannot achieve the first best, because it is impossible to give the total surplus to each party separately using this (or any other) mechanism, as would be required to invent each

of the innovators separately. Ex ante cooperative R&D investment (RJVs), entered into before the R&D cost is sunk generally will achieve a more efficient outcome (in terms of total welfare), but it is very difficult to identify potential partners ex ante in practice.

A robust IP regime helps foster innovation and providesincentives to people to createand use new technology. Oneway to stimulate ideas and creativity is to assure that theowner has monopoly rightso v e r h e r c r e a t i o n s o r inventions for a temporaryduration.



generation product that builds on it? The9

answer in general is no. The first invention

creates an externality for the second

inventor and therefore may be worth

developing even if the expected cost

exceeds its value as a stand-alone product.

However, broad patent rights for the first

inventor to ensure innovation do not leave

enough profit for the second inventor. One

solution to this problem is “internalizing the

externality ” via licensing.

India's intellectual property regime, post the

2005 amendments, is comparable to that of

advanced economies. Apar t f rom

infrastructural issues that remain, the

institutional framework is also in place.

However, the absence of laws against data

exclusivity may pose a serious threat to

innovation in India. This threat arises

because intellectual protection of databases

is a critical issue for science, research,innovation and creativity, given the

proliferation of information services.

Advances in technology have made digital

databases an essential resource for

innovation. The central issue here is that of

the balance between the concerns raised by

database creators regarding the provision of

incentives and protecting investment in new

database products and services and, that of

safeguarding customary access to the databy the scientific, education and research

communities. Indeed, the ability to access

existing databases and to extract and

analyze selected portions of them is an

integral part of the scientific process.

Further, digitization and the potential for

instant, low-cost global communication

have opened tremendous new opportunities

for the dissemination and use of scientific

and technical databases in developing

countries. This has vastly reduced the timebetween the production of research output

2.4.2 Data Protection




and its dissemination to the global scientific

community. Developing countries can,

therefore, in principle, start with, and

contribute to, the same knowledge base as

the advanced societies. While this is an

important opportunity for India, it will not be

possible if rights on the data use are not

properly specified. In India, there is no

protection to data.

While the IT industry has flat organizational

structures in place to promote both an easier flow of

information and ideas in the workplace and,

incentives such as stock options to reward

performance, organizations in other sectors may be

slow in adopting these flexible structures. Further,

even though these may perform effectively in their

current activities, they may not be doing enough to

promote an innovation culture in their organizations.

In part, this may be due to inadequate innovation

leadership within organizations.

In academic and research organizations, such

mechanisms are crucial. Most academic institutes

of higher learning in India are government funded

and have a tendency to follow bureaucratic

practices in their setup. For instance, one of the top

Indian institutions, with global reputation, took six

years to initiate a specialized Masters programme.

The fact that the programme was a successful one

is evident in the fact that the graduates of this

course, once started, were much sought after by

global and domestic companies, as well as by thevery best doctoral programmes in the world. The

reason for the delayed adoption of the course was a

prime example of the lack of an enabling framework

we have referred to earlier. The charter of the

organization specified the courses it could offer and

this charter was worked out more than 50 years ago!

So, until the charter was changed, the new

programme could not be started.

Another drawback to innovative research is the

incentive structure in these institutions. Mostuniversity departments have the “post” concept ---

2.5 Organisations, Incentives and Linkages




number of professors, number of associate

professors and lecturers with . The problem here is

that a young over-achieving lecturer has to wait for a

professor to retire so that an associate professor

can be promoted and open up a vacancy for the

lecturer to move up. This obviously destroys the

incentive to perform well at lower levels. Promotion

to higher levels should depend on the work done

and not on who, or how many, have been promoted

before.

The other major problem with higher learning and

research institutes in India is that many, or most, of

these are outside the university system. They have

more resources for research compared to what

most universities can even dream of. By being

outside the university system, this not only

duplicates infrastructure, it keeps teaching10

separated from research. A famous physicist

narrated the following story during his farewell

ceremony from the college where he had always

taught. He had applied for a job at a university after

finishing his PhD. At the job interview, given his

excellent thesis work, the interviewers were rather concerned that he wanted to give up a research

career and wanted to teach! The physicist taught in

an undergraduate college throughout his career and

is internationally reputed for his research work done

while he was teaching in this college. His

undergraduate students have later turned out to be

some of the leading researchers in the world of

physics. Unfortunately, he was an exception rather

than the norm.

India's R&D expenditure has been stagnant at about0.9 per cent of GDP for ten years now. In the mean

time, China's share has doubled to 1.4 per cent and

they have a much larger GDP than India. Our share

of total industry R&D is about 35 per cent, much

lower than most major economies, including China,

where the share is about 65+ per cent. Importantly,

most countries spend between 15-35 per cent of

national R&D in the university system, with China at

around 10 per cent and rising fast. Even by

generous estimates, we spend about 4 per cent and

the bulk of national R&D is still done in autonomous


10These institutes do have teaching programmes but they are mostly for doctorate students.



laboratories. Unless we address this fundamental

issue, all discussion of connecting public research

with industry is going to remain a peripheral activity.

Research organizations in India, both public and

private, have been akin to ivory towers pursuing

excellence in research but without substantial

application to India's problems. In addition to the fact

that universities lack adequate resources and

incentives, they have limited interaction with other

stakeholders, namely other academics, industry

(producers), consumers, and government so that

India's issues have remained largely un-addressed.

Linkages among inventors and researchers

(generating new ideas or new ways of doing things),

entrepreneurs, venture capitalists, and industry-

services are quite poor.

While the goal of research and development is a

laudable one, there is a broader philosophical issue

about what triggers innovation. More specifically,

what is the role of the State in any innovationprocess? Both theoretically, and empirically

through cross-country comparisons, the answer is

fairly obvious. Economies based on competition,

choice and market forces consistently out-perform

those where there are extensive State controls and

intervention. Often, such State intervention was

based on notions of market failure. But there are

two reasons why such a diagnosis was often

misplaced. First, market failure was assumed,

when there was no such evidence. With advances

in technology and possibilities of unbundling, manyclassically cited instances of natural monopolies are

no longer natural monopolies. In fact, they are

unnatural monopolies thanks to entry restrictions

imposed by the State. Second, in interventions

based on notions of market failure, the costs of State

failure tended to be under-estimated. This is not to

deny a role for the State in core governance areas

like health, education, some elements of physical

infrastructure, preservation of rule of law and

protection of property rights and an efficient dispute

resolution mechanism.Indeed, there is an additional role for the state ---

2.6 Government and Public Sector: Innovation and

Intervention


We need to link academic and research institutions with other industry, government, and consumers so that research

g e t s l i n k e d w i t h i t sapplications. This will allow

for people to work together and understand each other's needsbetter.



fostering an enabling environment for innovation

through active policies and through the creation of

enabling institutions. We have already discussed

how a “positive” list (permitting the good activities)

can be worse than a “negative” list (banning the bad

activities). The permit raj is an example of the first

option. In a certain world (with no innovation!), both

approaches lead to the same outcome. In an

uncertain world, where new activities get developed

with time, the first approach will slow us down for we

will need to change the law before we can start a

new activity. This will kill experimentation, the basis

for innovation. The issue is not how one decides on

good and bad activities but, once decided, have the

bad activities been stopped in an appropriate

fashion.

This idea is well explained by the court initiative to

bring down pollution in Delhi. The prescription of a

clean fuel, compressed natural gas (CNG), helped

to curb and reduce vehicular pollution in Delhi and

the decision was widely appreciated. However, the

specificity to CNG in the law precludes the adoption

of better fuels. Such adoption would require achange in the law; the costs of innovation in this

case become much higher.

There is a temptation to control and direct resource

allocation, both public and private. In the 1950s, in

India, this drove State intervention in sectors

regarded as core infrastructure sectors, such as

coal and iron and steel, and the State ended up

producing everything from cycles to cement.

Simultaneously, for the private sector, a system of

licensing was introduced. The 21st century hasvariously been described as a knowledge century

and India's strengths, in terms of both a

demographic dividend and core competencies in

education, skills, science and technology, have also

been talked about. However, if these are natural

comparative advantages, is there a case for State

intervention to specifically push specific forms of IT

or BT? Or is there a case for removing existing

licensing controls in sectors like education and

health, so that the demographic and knowledge

dividends are actually tapped?Government may focus on being an enabler,




providing infrastructure and key public goods such

as health and education, law and order, and good

governance. The private sector is robust and is

already innovating. The government could help by

innovating in public administration, e.g., e-

governance may help to leverage technology and

make its use wide-spread.

In this context, it is important to change certain

mindsets among our policymakers. When any

proposal for change is suggested, the usual

question asked by any policymaker is whether it has

been tried elsewhere. This, by definition, rules out

any innovative solution. Not surprisingly, micro-

finance institutions did not develop in India and we

are now spending huge resources to support such

institutions once the world started talking about

such institutions in Bangladesh.

As an example, consider the world-acclaimed

DOTS (Directly Observed Treatment: Short course)

treatment of tuberculosis. It was developed in India

by the Tuberculosis Research Centre, Chennai. The

study, known worldwide as The Madras Study ,showed the efficacy of treating tuberculosis patients

as outpatients (under direct supervision) and called

for a shift in public policy away from sanatoria.

However, this approach was not approved by the

Government of India as there was a lack of

precedence for DOTS in other countries of the

world! Years later, when this strategy was accepted

by most nations of the world, and endorsed by WHO

as a sure cure for tuberculosis, the Government of

India gave a green signal to DOTS to be11

implemented in India.

A similar “cautious” mind-set has been holding back

improvements in India's financial sector. The desire

to get regulations in place before institutions can

trade in new instruments developed elsewhere may

have the same results that we had in product

markets during the license raj. That system

hampered and delayed product and process

innovations. Similarly, a “regulation, and hence,

permission first” approach may result in Indian


11Review of the Revised National Tuberculosis Control Programme, IDF, February, 2006.

Governments play a key role intransforming societies. The

need therefore is to formulate policies that ensure the supplyof technically trained humanresources and technological infrastructure, and provideincentives to foster and not impede innovation.



12Gangopadhyay, Shubhashis and Praveen Mohanty (2003), Appropriate Regulatory

Institutions for Industry and Finance, ABCDE symposium volume.

financial markets following the expertise and

knowledge of the regulators, rather than being led12

by the creativity of the financial innovators.

While consumers provide the stimulus for demand

in many cases, society's response gives a boost to

the value generation spiral of innovation or renders

it stagnant and could even lead to value destruction.

However, the view from roundtables is that as in the

case of value systems and culture, society's

responses may be endogenous to the impulses of

incentives and economic environment. If we get the

economic and innovative impulses right, then

society and consumers (demand) will respond in

tandem.

Competitive pressures have compelled Indian

businesses, both large and small, proactively and

successfully to adopt new ways of production and

doing business. While being efficiency-conscious

and innovative has helped enterprises to withstand

competition and generate value, to continue valuegeneration and be business-leaders, innovation

itself will have to be sustained and not be sporadic or

confined to some pockets. Thus, innovation in India

will be required to extend its span.

• from urban to rural business; from services to

manufacturing, and beyond to agriculture; from

private business to public sector enterprises;

• from enterprise (productive activity) to social

sectors (education and training, health) and to

attitudes (values, culture and mind-set);• from regulatory structure (trade, licensing,

patenting, infrastructure communications,

transport, ports, railways and roads, power and

energy, water, irrigation) to public administration

(taxation, procurement, subsidies and transfers,

poverty removal and other social programs, law,

order and general governance); and,

• from enterprise (closed group) to networks

(open groups)

Innovative ideas originating from research labs,

2.7 Society and Consumers


For innovation to succeed, society has to respond positively to it. This can happenonly if the innovation is such

that it is in consonance with theeconomic environment. So,when the rura l soc ie tyaccepted the echoupal model of

ITC (buying grains directly from the farmer instead of mandis using ICT) it wasbecause they found somebenefits in it. Without their

support and partnership, themodel would not have been

such a roaring success.



research institutes and universities, workers and

individuals must be systematically harnessed

through links with business --- seed money, venture

capital, venture counselling --- and commercial

application. An eco-system for making India an

innovative society has to be developed such that the

number of innovations and contribution to growth

and well-being might be maximized.




We develop a system that is enabling as opposed to

directive, based on the current state of innovation enablers

and based on expert views of myriad stakeholders. Asexplained above, the system must be enabling as it is

inherently evolving in nature.

The enablers human capital (HK), technology

(Tech), other key resources (Other resources),

organizations and incentives (Organizations),

government and public sector (Govt.), and society

and consumers (Society) all together form the basisof the innovation ecosystem. The enablers

discussed earlier and shown here are all required to

work in synchronization for an invention or an idea to13

take birth and go through the various stages to

reach the form of an innovation. Any factor that is

lagging will become the weakest link dragging all the

others down. As the various examples highlight, the

seed of innovation can arise from a consumer

problem (connectivity), from a human capital issue

(skilling), from technology (internet), from

organizations (hierarchy), or from use of other

resources. These are represented by the spokes in

the wheel of the ecosystem.

3.1 Innovation ecosystem - a static

representation

3. DESIGNING AND BUILDING AN INNOVATION ECO-SYSTEMA DYNAMIC SYSTEM


13

The stages of the innovation process are - demand/problem identification, invention/newidea, insight invention*insight solution-generation (prototype) demonstration of thesolution piloting of the solution large-scale commercial or social deployment

43



The innermost circle represents a primary economy

wherein value is generated through production and

barter or limited trade. The next circle represents the

industry-services based economy where value is

generated through production and trade, both made

possible through markets. The value generated in

the industry-services economy is far greater than a

primary/agrarian economy, partly because markets

associated with this stage allow specialization and

engender efficiency. Hence, considerable

importance is attached to the development of

markets.

The third circle represents the innovative economy.

While this produces products and services as

before, the key difference is the way it operates.

Now, along with markets, networks are crucial.

Markets fostered value generation by allowing

discovery of price, marginal benefits and costs, and

hence marginal or individual rewards for individual

effort. Innovation, resting on ideas, depends upon

group effort where contributions to the development

of an idea will be difficult to apportion if not

impossible. The group that nurtures the idea andtakes it to fruition is represented by a network, which

may be wholly internal to an organization or, as is

becoming increasingly evident, have external

members too. Thus, in an innovative society,

networks will be crucial. Organizations may

metamorphose into a network or a network of

networks. How will networks interact with each

other? Will markets predicated on identification of

marginal benefits and costs suffice? This important

issue will be dealt with later.

If the enablers work in tandem and support each

other, a virtuous spiral of value generation is

obtained. It is pictured below. An example is the

BPO sector in India (see section 2.1 for a

discussion). Recall that a key enabling feature of the

BPO sector's success is that society responded by

allowing young workers, including girls, to venture

out at night to operate the night shifts at BPO units.This freedom to work is accompanied by security

3.2 A Dynamic Innovation Ecosystem - Value

Generation or Destruction


The enablers that foster innovation in any society arethe spokes in the wheel of theinnovation ecosystem. What links the spokes are thenetworks that are crucial for the idea to be developed.



considerations of night travel. If parents and

guardians are not assured of the safety of their

wards, they may react and prevent their wards from

joining BPO units. Acceleration of any such trend

might pose a threat to the growth of the BPO sector

and could even lead to a reverse spiral of value

destruction.This is represented by the spiral

superimposed upon the static innovation

ecosystem structure. Thus, the innovation system is

inherently dynamic. If it is not moving ahead and

generating value, there might be a risk of value

stagnation and reduction.




Among systems to describe innovation are the

usual supply-demand models. While the supply-

demand representation is apt for an industry-

services economy, in characterizing the innovation

economy, it does not highlight the importance of

networks or how these networks will function.

Further, in the innovation ecosystem developed

here for India, while we incorporate both supply and

demand factors, we also emphasize the role of

these factors supporting each other in nurturing an

idea, developing it into an innovation and, thereby,

generating value. Moreover, to promote an

innovation habit in India, change in supply factors

human capital, technology, venture capital,

infrastructure are likely to be more important.

In an economy defined by marginal contributions

and costs, marginal reward to individuals sufficed to

elicit effort and output/value. Ideas and inventions

are rewarded via patents. For innovationsdeveloped by one entity or one group, patents are

an appropriate mechanism. However, in the world of

ideas developed jointly that cannot be separated

into smaller contributions, this structure of

incentives will be inadequate. Who should get the

patent? One mechanism that has emerged is

shared intellectual property rights or shared-IP.

Forms of shared-IP include patent pledges and

patent commons. A patent pledge is a public

commitment by the patent holder not to sue other

parties for infringement, typically, in support of aspecific purpose/use. Patent commons are

communities that have access to patent resources,

also, usually for a specific purpose/use. This would

be an appropriate mechanism where the innovation

arises from within a network developed in

collaboration among the members of the network.

There is, however, a gap in the incentive structure

where the innovation arises from developments

across more than two networks. The openness of

the innovation process will enable another network(or organization) to co-opt the rewards from an

3.3 A dynamic innovation ecosystem - WHAT

incentives?


Networks help in adding value. A d y n a m i c i n n o v a t i o necosystem creates a spiral of value generation. If one of theenabling factors does not work,there is a risk of value

stagnation and reduction.



innovation. Whether this network shares those

rewards with the other co-producing networks is a

grey area. Intellectual property under this openness

is not adequately protected. A mechanism to share

rewards within a group/network and across

groups/networks where contributions are inexactly

defined is required. One option is a two-track patent

regime wherein shorter patents are granted,

especial ly for technologies with a high

obsolescence factor and short duration protection.

This provides an opportunity to small innovators to

register and protect their ideas for a shorter duration14

and at a lower cost.

For instance, IBM and seven leading U.S.

universities have recently announced new open

software research projects under a programme

designed in conformance with the Open

Collaboration Research Principles, a set of

guidelines announced previously to help promote

an open approach to overcome university-industry

intellectual property challenges. Under IBM's new

Open Collaborative Research program, results

developed between IBM Research and topuniversity faculty and their students for specific

projects will be made available as open source

software code and all additional intellectual property

developed based on those results will be openly

published or made available royalty-free. The

programme is intended to accelerate the innovation

and development of open software across a breadth

of areas, thus enabling the development of related

industry standards and greater interoperability,

while managing intellectual property in a manner

that enhances these goals.

Mechanisms that support the operation of networks

are

• Standards

• Contracts and contract enforcement

• Reputation capita

Standards will allow for portability and hence more

rapid diffusion of any innovation. If members within

a network or across networks devise contracts to


14From comments made on an earlier draft by Mark Dutz, The World Bank

Encouraging networks canlead to conflicts. It is necessaryto build a robust IP protectionr e g i m e . A l s o s t r i n g e n t

standards, enforcement of contracts, and leveraging of reputation capital are some

factors that help networksoperate smoothly.



share unknown gains in some ex-ante determined

manner, these contracts require speedy

enforcement and resolution in case of disputes.

Finally, the market for ideas and innovation will

operate across networks through reputation capital.

Any member or any network found to be reneging on

its commitments will be a pariah. This would still not

ensure prevention of theft of an idea or an

application in the first place. Reputation capital will

work best for repeated transactions or exchanges.




To enthuse India to be more innovative, a “grand challenge”

that fires the imagination of the youth and the productive,

and, galvanizes them for a push toward innovating might be

quite helpful. Such a challenge could be “landing an Indian

on the moon.” However, it is important for the rallying cause

to be connected to the people to matter to the masses, to

have the potential for eliciting their contribution to the

rallying cause, to have the actual achievement make a

difference to the masses. India has had several of such

issues that have successfully been deployed in the past.

Examples are “Dandi march” by Mahatma Gandhi for no tax

on salt by the British government, “garibi hatao” or remove

poverty by Prime Minister Indira Gandhi, and to a lesser

extent, the “technology missions” by Prime Minister Rajiv

Gandhi, or the polio drops campaign using celebrities such

as actors Amitabh Bachchan and Shah Rukh Khan.

Following the lead set by Prime Minister Manmohan Singh

in his “Bharat Nirman” programme, a possibility could be

“Pyas bujhao” or quench thirst, that is, ensure safe drinking

water to all in India --- find new ways to accomplish this, use

technology to not merely increase efficiency but to leapfrog

over current solutions, build partnerships to leverage

technology and to increase speed to market/delivery.

A rallying focus to achieve the goal of an innovative society

is a good starting point. To sustain the momentum thus

generated, a sound strategy needs to be in place. Given the

status --- the current state, the desired state, and the gap ---

we can draw up a set of objectives to be achieved in terms of

both process and outcome indicators, and, characterize

these in terms of targets to be achieved in a specified time-

frame. The strategy will then help to draw a roadmap and

also in specifying milestones to be accomplished along the

way. Regular monitoring will inform which areas are

lagging, learn and anticipate emerging weakness,determine what corrections to apply, e.g., monitoring the

price level in the economy, anticipating the impact of fuel

price rise, and reducing the propagation of the oil price rise

to a rise in costs across the economy.

Defined by the enablers, the state of the innovation

ecosystem is also determined by the state of the

enablers. In section 2, using available data and theconsidered views of stake-holders, we described

4.1 The Gap-current and future states of the Indian

innovation ecosystem

4. INNOVATION STRATEGY, ROADMAP AND MONITORINGTHE ECO-SYSTEM


How do you enthuse people to

innovate? To begin with, amission can be set. Then, anecosystem developed that is

goal focused. One has to beclear about the goal, theobjectives, the strategy that will help achieve them, and aroadmap for the strategy withmeasurable milestones. Then,the innovation ecosystem will

foster innovation that will helpin achieving the goal set, in

growing faster and bolstering India's leadership.



the state of some of the enablers. In the pictorial

depiction of the innovation ecosystem below, the

bold lines depict where India is relative to the

boundary of the outermost circle where we want to

be.The weakest or the most inward placed enablers

are human capital, service infrastructure (IPR,

venture capital, infrastructure and land), and

government and regulatory structure. Hence, these

are the enablers to focus on first while continuing to

expand all enablers.


To build an innovative society, India has to focus on

• Strengthening human capital

o Strengthen base of human capital -

secondary education

o Promote expertise for innovation - higher education, basic sciences

o Set specific research matrix e.g., set goals

for number of PHDs, patents and papers

o Promote multi-disciplinary research pilot

service science curriculum in select

universities

• Engendering creativity and application

o Address/ameliorate fear of failure

o Mechanisms to recognize achievement in

ideas, invention, innovation



• Providing appropriate incentives

o Rewards (patents) for intellectual capital

building and sharing

o Penalties in the form of loss - of reputation

capital, future collaborations and value

generation opportunities

• Allow both entry and failure

o Promote early-stage venture capital

funding, that is, promote entry

o Allow failure provide market-based exit

options within a specified period of time (say,

initially, up to five years from start of

operations)

• Building and fostering linkages and networks for

innovation promoting collaboration.

If we continue in the current state with the above

potential bottlenecks, we would experience an

increasing gap between our status and our own

desired state as well as other countries.

Alternatively, we could devise a strategy to reduce

the gap and achieve the optimum specified.

Given Given the goal of enabling India to become an

innovative society and the constraints of resources,

the innovation strategy for India must focus on those

aspects of the enablers that builds the critical mass

for a self-sustaining innovation process, produces

the maximum value at the least cost in the shortest

time possible, with the early gains being

demonstrated and publicized. It must set out asequence of actions to pursue to achieve this goal

while also indicating the actions to follow if this

sequence is broken at any point.

For an innovation ecosystem, the underlying

characteristic is “evolving.” Hence, the ecosystem

must be enabling and not directive. Yet, to enable

India to become an innovative society, objectives,

targets, and a plan would be required so, how does

one specify objectives and targets without

becoming directive and therefore restrictinginnovation itself? The answer begins with a

4.2 The Strategy


Some of the weak enablers int h e I n d i a n i n n o v a t i o necosystem are human capital,

service infrastructure (IPR,venture capital, infrastructureand land), and government and

regulatory structures. Until these are strengthened, the gapbetween the existing status and desired state will widen even

further.



network. Instead of having a “directive” organization

such as a ministry or a national commission,

innovation could be enabled by having a network of

thinkers --- an Indian Innovation network

Who should be responsible for the innovation

initiative in India? In the normal (equilibrium path)

course, direct or indirect government management

is to be avoided. In the event of minor deviations

(off-equilibrium path), the system structure

(incentives) would bring the system back to

normalcy. However, in case of a break or a

disruption, flexibility would require allowing some

State intervention. Given a self-sustaining eco-

system, the key is to determine if to intervene, when

to intervene, how to intervene, how much and where

to intervene? The State should step in to either form

an institution or restore the functioning of the

institution as the case may be; and, then allow

independent functioning.

Several networks aiming at enabling some part of

the innovation eco-system are in the process of

formation. The National Innovation Foundationunder the aegis of the Science and Technology

Ministry operates to support grassroots innovators

(including the excluded sections of the population).

The CII is in the process of establishing a National

Innovation Grid to bring inventors together with

entrepreneur-mentors, venture capitalists, and

innovators. However, they will not succeed if they

are to become like existing institutions ---

hierarchical, prescriptive and safety-first

bureaucratic organizations.

The strategy is to build credible institutions that have

two essential elements. First, they must foster each

(or a group of) sub-enabler(s) under focus. The

institutions must function in consonance with the

following principles.

• Allow simple and generic processes that are

adaptable to evolving situations since

innovation process is inherently uncertain

• Provide incentives (patents) to ideate,collaborate and innovate; disincentives




(reputation loss, punitive damages) for cheating

and reneging

• Provide opportunity for all to access the

resources of these institutions; enable special

access for weaker sections (whosoever they

might be at that time) and grass-roots

innovators

• Allow redress for grievances and wrong-doing

(e.g., idea theft); allow transparency by

involving the media.

• Require government intervention only when

there are disruptions to the institution

Second, the key enabling institutions must be inter-

connected and collaboration must be the guiding

principle for inter-connectivity. This is the Indian

Innovation network --- empowered by links to

directive authorities that can effectively intervene,

e.g., the Science and Technology Ministry. It may be

an executive group with a rolling membership, say a

two year term for each member. Members are to bedrawn from a broad section of thinkers/innovators,

all of whom are stakeholders in the innovation eco-

system. It must be empowered for decision-making.

To enable maximum play of ideas within the

network, the hierarchy must be a flat one. Powers of

decision-making can be entrusted to a smaller

collective of members. Once these decisions are

taken, they must be executed within a pre-

determined time frame by all who have signed up as

members, be they government or private bodies.

The activities of the innovation-enabling network will

be

1. regular monitoring and reporting

2. stock-taking and identifying actions

3. taking action or delegating action to an

executing (public/private) body

4. and again, monitoring and reporting


To reduce the gap betweenactual and desired states of theinnovation ecosystem, the

strategy has to be built around p r o v i d i n g i n s t i t u t i o n s / networks that are flexibleenough in terms of evolving

situations and access. Thiscannot be just another institution. It has to be

proactive and empowered.



4.3 The roadmap and milestones

India has to focus on the following elements of the

innovation eco-system that are lagging and acting

as barriers rather than as enablers. For each, we

specify process milestones and the actions required

to achieve them.

Strengthening human capital: Strengthen base of

human capital - secondary education; Promote

expertise for innovation - higher education, basic

sciences

• Determine the quantitative gap for proportion of

children out of secondary school, fill a fraction

(say, 10 percent) every year; provide resources

for filling this gap

• Determine gap for graduates in basic sciences

and fill a specified fraction every year (e.g., 20

percent); provide resources for filling this gap

• Promote expertise by encouraging doctoral and

research studies; provide resources and

incentives (increase salary levels in research

institutions)

To achieve these objectives, India would have to

allow increase in education capacity --- both schools

and colleges --- and foster competition among

schools. Hence, private schools must be allowed ---

at primary and secondary school stage and beyond

to higher education. In higher education, foreign

investment would augment domestic resources and

raise the level of research more quickly.

Engendering creativity and application: Address/ameliorate fear of failure; adopt

mechanisms to recognize achievement in ideas,

invention and innovation.

• Institutionalize contests and awards for ideas,

inventions, and innovations with associated

increasing monetary rewards.

o Romanticize innovation achievement (as in

music/dance and quiz contests on TV) and

motivate parents by using demonstration

effectso Highlight leadership in innovation e.g.,

Mr. Sreedharan of Delhi Metro




• Foster trial, failure, and re-trial through formal

schooling, organizational, and societal means

o Increase tolerance for experimentation and

allow failure of experiments; promote risk-

bearing capacity

o Promote out of the box thinking, nurture

exploration, engage with local knowledge

and local issues --- science fairs, innovation

contests

o Promote a strategic way of identifying

problems or anticipating problems

o Promote learning by doing (e.g., allocating

20 per cent time to employees to innovate),

foster here in India what non-resident

Indians (NRIs) achieve abroad

• Re-design course curricula to foster learning,

application and experimentation --- change

grading system, include case studies, projects

and problem-solving exercises

• Re-train teachers to orient them towards

innovation

• Create a culture of research and innovation

Providing appropriate incentives while

reducing risk: Rewards (patents) for intellectual

capital building and sharing; penalties in the form of

loss of reputation capital, future collaborations and

value generation opportunities

• Devise new forms of IPR or patents; examples

in the text are patent pledges, patent commons,

shorter duration patents in a two-track patentingsystem

• Monitor patent use; provide for compulsory

licensing where patent is lying un-used

• Institute an intellectual property policy regime

which strikes the appropriate balance between

protecting the economic rights of inventors and

meeting the needs of society by advancing the

progress of science

• Change rewards system for teachers, students,




parents, employees; use motivational tools

• Allow both entry and failure

o Promote venture capital funding, specially

early stage funding provision of seed

money, venture financing, bankability; that

is, promote entry

o Allow failure allow shutting down of an early

start-up (exit and stopping loss) with more

exit nodes for young ventures, so provide

market-based exit options within a specified

period of time (say, initially, five years)

o Amend bankruptcy laws so that companies,

especially the small ones, can exit at

minimal cost

• Provide venture counselling: address lack of

exposure (no business model even though

domain knowledge exists); highlight role of

design as the glue in bringing together an idea to

commercial application

Government role: A key role of the government is

to remove obstacles in the performance of other enablers, notably, in the education, building skills

and training sector.

• Improve governance (e.g., Right to Information

Act by the central government), enable public-

private partnership --- chaos in government

programmes discourages private sector

contribution

• Innovate in service delivery --- education,

healthcare access (telemedicine), use

technology (e-sewa centres employing

seemingly non-productive workers to providepublic services)

• Reduce remaining regulatory barriers, (e.g.,

gateway clearance of imports for technology

innovation)

Building linkages amongst researchers,

designers, venture capitalists, and industry:

India has pockets of innovation, some technology

sub-sectors are world-class. However, these

remain oriented more toward global needs than

Indian. While a bigger market is preferable, Indianneeds must be addressed.


Roadmaps for each of theenablers that India lags behind in have to be laid out. Unlesswe build our human capital ( qua l i t y and quan t i t y ) ,encourage people to becreative and feel free to applytheir creativity, reward people

for their creativity, allow bothentry and failure, where

government takes on anenabler's role, and most importantly , establisheslinkages between industry,academia , and ven turecapitalists, we will not be

successful in building a robust ecosystem that lays the path for innovations.



• Build hubs of innovation universities,

institutions, small innovators and corporate

firms

o National networks e.g., CII Innovation grid

o International networks e.g., CSIR with other

national research councils

The Indian Innovation network must take on the

responsibility of being the nodal network with its

members being both other networks, organizations

and individuals. The nodal network must achieve its

goal of fostering an innovative society by enabling

collaborations and nurturing these so as to solve

India's problems.

Recall that the purpose here is to provide an

enabling innovation eco-system that does not get

trapped in a directive mode (that may appear

relevant in the current innovation situation) and

hence become a barrier to future innovation. A

caveat is that this report is not a complete mapping

of all enablers that define and determine the

innovation eco-system. The mapping, monitoring,

and reporting on the state of enablers and providingrecommendations to act upon are an on-going

process that will become increasingly complete with

repeated use.




It is contradictory to ask for innovative ideas and then lay

down procedures for getting to them! These

recommendations are, therefore, ways of encouraging

organizations and individuals to innovate and, once they do

so, to ensure that they are rewarded for it. In other words,

the focus is on enabling innovation --- allowing

experimentation with incentives to do them.

Who will be responsible for implementing these

recommendations? Obviously, everyone has to be

involved. It has to become a national movement --- a natural

way of doing things for all Indians. One way to kick off the

process is to announce a “grand challenge” --- a rallying call

--- to solve a major national problem. The most, or a set of

the most, innovative solutions can be rewarded with a

special prize. This should attract participation. To create the

culture of innovation and encourage participation by all, the

grand challenge should not be something like putting an

Indian on the moon; instead, it should concentrate on more

mundane things like clean water or, public transportation.

The prize distribution should be given the greatest possible

exposure on television and media.

A network of people will have to be developed who willparticipate in an exchange of innovative ideas, with proper

protection of intellectual property. Each year, this network

could adopt a particular enabler for a detailed study, take

stock of where it is and draw up a blueprint of how to change

it, if necessary. In the process, one must also mention the

milestones which will then become the job of everyone to

monitor. The purpose of this network is not to drive

innovation. Instead, it will help generate an attitudinal

change in people's mind-sets like greater tolerance to

failure, going off the beaten track, looking for solutions

encountered in daily life, etc. It will also encourage thepublic, government and other organizations to create an

innovative eco-system in whatever they control. Most

importantly, it will foster experimentation. All this has to be

done in a way that facilitates innovation and stops well short

of saying what has to be done!

Actions in Specific areas

For the network to be effective, it must nurture debate and

discussion among a broad spectrum of people. However, itsrole will be limited to enabling, encouraging and

5. SPECIFIC RECOMMENDATIONS




experimenting with innovative ideas rather than “doing”

them or saying how they are to be achieved. To achieve this,

the network will take initiatives that bring about

improvements to the enablers. In particular, the network can

work towards some goals laid out below. These are not a set

of policies that need to be enacted, but issues that the

network needs to seriously debate and develop as parts of

an innovative ecosystem.

• Schooling up to class 10 should be made

compulsory for all children.• This will require an improvement in both quantity

(more schools) and quality (better teachers and a

better curriculum).

• Private schools should be allowed with education

vouchers if necessary (especially where a public

school option is not available in some pre-defined

vicinity, e.g., within 5 kilometres).

• Teachers in public schools must be made more

accountable to the local community of parents.

• Institute competition among public schools by

ranking these and making the ranking public.

• Foster competition between public schools and

private schools through regular competitions that

have prizes and wide recognition

• School curricula should concentrate more on local

issues, be geared towards solving local problems

with the use of local resources, along with more

basic training in mathematics and languages.

• Learning should not be by rote; tests and

examinations should be geared towards checking

on functional knowledge and understanding.• School education should include a strong content of

vocational training so that students can decide on

moving to vocational institutes after class 10 or, go

on to class 12 with a view to moving up to a college

education.

• More vocational institutes are required with a strong

partnership between government and the private

sector. This will keep the curricula in vocational

School Education:

Vocational Training and Skilling:




institutes geared towards the skills required by

businesses.

• To keep up with changing demand for skills, modular

training is required to quickly train new workers and

upgrade workers to learn and perform in a

competitive and global marketplace.

• The major objective of college education should be

two-fold: specialized training for higher productivity

and a managerial, or supervisory, role in the job

market or, for moving into a university education tofurther a career in research and/or academics.

• Generous educational loans should be provided to

the very best students and those who require

funding.

• Augment capacity including allowing private

investment in higher education.

• New universities should be integrated ones offering

both undergraduate and post-graduate degrees

leading up to PhDs.

• Foster competition among universities, both public

and private, for example, by rankings based on

performance indicators and by competitions that

have prizes and wide recognition.

• To attract the best researchers into academics,

teacher salaries need to be increased. One way of

doing this will be to top up government salaries with

private sector provided bonuses based on research

outputs.

• The concept of posts in universities should be

discouraged; a performing young researcher should

not be held back from promotions because positionsabove him, or her, are choked by those who have

been promoted before.

• Universities should be the prime research

institutions (given that teaching and research create

dynamic complementarities). This means that

government grants and funds going to specialized

institutes with little or no teaching commitments

should, instead, be used to strengthen university

infrastructure. The existing specialized institutes

need to have linkages with students so that they can

continuously re-invent themselves.

College Education:




New Curricula:

• India is slow to react in developing new disciplines

and courses within its university setup. This is

largely because they are hamstrung by a regulatory

agency (the University Grants Commission, or the

UGC) that believes in prescribing a standard

system for all. This slows down the process of

developing new courses according to the need of

the hour. While UGC should be looking into

observable measures like class size and

infrastructure, it should desist from laying down

what can be taught and when. Universities shouldbe allowed to innovate on syllabi and courses.

• India has taken enormous strides in developing a

vibrant services sector. Unfortunately, there is no

course in India that looks at service science as a

discipline. The service sector requires a training

process that is quite different from the existing

course structures that concentrate on the industrial

and agricultural economy. For instance, investment

in fixed assets is relatively unimportant in a service

company. Its major asset is the human capital,

made up of footloose and highly skilled individuals.The productivity of such individuals depend on how

well they have learnt various aspects of the modern

technology, how they network with other people

and, how capable they are of borrowing insights

from a number of related disciplines. This is

independent of, and in addition to, the more

classical disciplines they learn in universities.

However, there are no training processes in India

that can churn out more and more of such people.

• The universities should be treated as “Factory of

Ideas” and should play the true role of acting as aninnovation hot bed for creation of wealth.

Innovation is about imagining and creating new

things. While the role of science and technology is

readily understood, management has only recently

been receiving some mention. However, the role of

design is yet to be understood. Design is about

application of creativity throughout the process of

innovation to convert ideas into products and

services. For creating an innovation eco-system,

science, technology, management and design must

come together. The best way to achieve this is




through the intermingling of these disciplines and

that happens when strong and functioning networks

are developed among the universities, institutes

and businesses.

• The network should strive to include participants

from the private sector, academia and other citizens

to foster joint work with proper recognition of

intellectual property through mechanisms

suggested in this report. For India to be an

innovative society, it is imperative that collaborativeactivities become institutionalized.

• Competitions among private sector organizations

should be instituted to choose the most innovative

organizations.

• Companies should be encouraged to set up

collaborative networks, both within and outside of

them.

• Government supports various research proposalsunder two broad heads. The first set consists of

research grants given to individuals, or institutes,

based on proposals submitted by them. The other

set consists of specific topical issues given to one

institute or organization to help formulate policy. The

second type of grant is not conducive to innovative

ideas. The same issue should be studied by at least

two (or even more) independent groups. This will

force the groups to compete with each other to

develop the best solution, bring the debate out in the

open (rather than being within the realm of

government designated experts) and bring about a

sense of participation among all.

• Generate a mechanism of identifying ministries that

implement innovative solutions.

• Work with various ministries to identify problem

areas and create a national movement to

encourage everyone to find solutions. The network

must take the solutions back to the ministries.

Our strength lies in our numbers. Innovation is a productof the mind and people must not be treated as inputs into

Private sector:

Government:


Both the private sector and the government play a crucial rolein supporting the innovationecosystem. For this, the private

sector has to be encouraged and rewarded.

Innovation is the need of thehour. We need to encouragecreativity and bring it to themarket. Unless we realise theurgency of the situation, theloss of gaining a place in theworld market might be

irreversible. We need to build on the vast talent pool that wealready have and gear it towards taking up challengesthat the country faces and comeup with innovative solutions toour problems. Let's join handsin making India an innovationhub of the world, a focal point around which other networkswould congregate.



a production process. Instead, they must be seen as

problem-solvers and must be encouraged to do so.

Unless this is done, our biggest strength can become

our worst nightmare, as we try to find productive jobs in

straight-jacketed enterprises and activities. Simply put,

if we do not innovate, we perish.




TABLES




Notes:

Sources:

For India, number of students passing Senior SecondaryExamination is not available. The reported figures are the totalnumber of boys and girls who got enrolled in Class XII.

For India, there are no statistics on the number of S&T graduates.The data reported in the above table have been compiled usingenrolments in B.Sc., M.Sc., and AICTE approved intakes inPolytechnics and Degree Engineering programmes.

Age-group wise population for India as on March 1, 2002, March

1, 2003 and March 1, 2004 have been obtained using datareported in Census of India, 2001 and projected population for 2006 on the assumption that population grew at the same rateevery year.

For China, population in the age-group 20-24 has been obtainedusing data for 2000 & 2005 on the assumption that populationgrew at the same rate every year.

For USA, high school graduates refers to only high schoolgraduates, that is, does not include education attainment levelshigher than high school (e.g., bachelor's); this is selected to makeit comparable to the high school graduates (enrolments) data for

India and China.

Selected Educational Statistics 2000-01, 2001-02, 2002-03 &2003-04

(An annual publication of the Dept. of Secondary & Higher Education, Ministry of Human Resource Development, Govt.of India)

Rajya Sabha Unstarred Question No. 42, dated 25.7.2005

Rajya Sabha Unstarred Question No. 3846, dated22.05.2006

India:

Innovation Situation in India – Quantifying Enablers using Indicators

EDUCATION

TABLE I




Census of India, 2001

Projected population by age and sex for 2006 (on the basis of Census of India, 2001) from Report of the Technical Group onPopulation Projections (constituted by the NationalCommission on Population), May 2006.

China Statistical Yearbook 2005 Chapter 21: Education,Science & Technology

21-7: Number of Graduates by Level and Type of School

21-36: Basic Statistics on Scientific & TechnologicalActivities

from National Bureau of Statistics of China(http://www.stats.gov.cn/tjsj/ndsj/2005/indexeh.htm)

Population by five-year age group and sex 2000 & 2005,World Population Prospects: The 2004 Revision PopulationDatabase (http://esa.un.org/unpp/)

Educational attainment data from Current Population Survey2001, 2002, 2003 & 2004, U. S. Census Bureau(http://www.census.gov/population/www/socdemo/educ-attn.html)

Educational attainment data from 2004 American Community

Survey, American FactFinder, U. S. Census Bureau(http://factfinder.census.gov)

Survey of Graduate Students and Post Doctorates in Scienceand Engineering, Division of Science Resources Statistics,

U. S. National Science Foundation(http://www.nsf.gov/statistics/nsf06325/tables.htm#group1b)

Estimated age-group wise population from U. S. CensusBureau (http://www.census.gov/popest/archives/2000s/)

Age & Sex data from 2004 American Community Survey, American FactFinder, U. S. Census Bureau(http://factfinder.census.gov)

China:

U.S.A.:




Notes:

Sources:

*of which 31.7% were performing R&D activities, 30.4%were performing auxiliary activities and rest 37.9% wereproviding administrative and non-technical support.

By July 2006, R&D Scientists/Engineers in India had risento 157 per million.

This figure is 3 percent of that for U.S.A

(Dr. R. A. Mashelkar, Director General, Council of Scientificand Industrial Research)

University Grants Commission

R&D Statistics, Department of Science & Technology,Government of India (http://dst.gov.in/majorhighlights.pdf)

China Statistical Yearbook 2005 Chapter 21: Education,Science & Technology

21-36: Basic Statistics on Scientific & Technological Activities, National Bureau of Statistics of China(http://www.stats.gov.cn/tjsj/ndsj/2005/indexeh.htm)

Survey of Graduate Students and Post-doctorates inScience and Engineering, Division of Science ResourcesStatistics, National Science Foundation(http://www.nsf.gov/statistics/nsf06325/tables.htm)

2004 Survey of Science and Technology Statistics,UNESCO Institute for Statistics(http://www.uis.unesco.org)

Estimated age-group wise population from U. S. CensusBureau (http://www.census.gov/popest/archives/2000s/)


EXPERTISE

TABLE II




Notes:

Sources:

According to World Development Indicators, 2005 total number of patent applications filed in India in 2002 was 91,924 of whichresidents filed 220 applications and non-residents filed 91,704applications.

According to National Bureau of Statistics of China, total number of patent applications filed in China in 2002 was 2,52,631.

Figures for India under “Number of Patents granted” are the

number of patent applications Notified for opposition in theGazette of India.

°of which 1078 patents were granted to Indians

The reported figure for new designs in India in 2003 gives thenumber during January-April, 2003.

*World Development Indicators, 2005

†News article: “India lagging in science and technology ” dated

August 29, 2006 authored by T. V. Padma (official at SciDev.Net)

(http://www.scidev.net/content/news/eng/india-lagging-in-science-and-technology-says-official.cfm)

**Science Citation Index

@Indian Patent Searchable Database EKASWA-A & EKASWA-B

provided by Patent Facilitating Centre, Department of Science &Technology, Govt. of India(http://www.indianpatents.org.in/db/db.htm)

R&D Statistics, Department of Science & Technology,Governmentof India(http://dst.gov.in/majorhighlights.pdf)

#China StatisticalYearbook 2005 Chapter 21: Education, Science& Technology, 21-36: Basic Statistics on Scientific &Technological Activities from National Bureau of Statistics of


INNOVATION RELATED OUTPUT

TABLE III




China(http://www.stats.gov.cn/tjsj/ndsj/2005/indexeh.htm)

^Dept. of Industrial Policy & Promotion, Ministry of Commerce &Industry Notification of Registration of Designs dated August 16,2003(http://ipindia.nic.in/ipr/design/notification/16.08.2003.pdf)




ANNEXURES




1. Pre-paid SIM cards in India

2. Sona Koyo systems steering systems

3. McDonald's food development centre

4. National Open School

5. CII Skills Initiative

6. IDF Health Smart Card

7. Reverse pharmacology process of drug discovery

8. Aravind Eye care system

9. Governance: Small area estimates of poverty and

poverty maps

10. BPO: business process innovation - Pick-up and drop

facility

11. IBM “On-demand” consulting model

12. E-choupals

13. Computer based functional literacy

14. Governance: RTI

15. E-governance: online filing of Haryana VAT returns

16. Bharti Outsourcing (business process) model

17. Magarpatta City: The farmers' cybercity

18. Cavincare “Chic?” shampoo small sachets

19. IBM e-commerce website architecture

I. EXAMPLES OF INNOVATION




This note outlines the steps in quantifying the indicators

identified for each enabler of innovation.

Given that Human Capital is the most vital resource for

promoting innovation, we started off with compiling data on

our manpower stock and the output that it has generated

over the last few years (2000-01 to 2003-04). First, it is very

important to take stock of how many High School Graduates

and how many S&T Graduates India has been producing

because that is the very first step towards building up a

(human) resource base in Science & Technology that will

engage in R&D activities to produce output that is

commercially applicable and socially useful. Then, we have

looked into our expertise, to be more specific, the number of

Doctorates, personnel in R&D establishments and their

output in terms of the number of scientific & technical journal

articles published, the number of citations, the number of

patent applications filed, the number of patents granted and

the number of new designs.

It is important to benchmark the results for India against

those for U.S.A. and China, the former a world leader in

innovation and the latter our neighbour and our immediate

competitor. Accordingly, for all of the above indicators,statistics for U.S.A. and China have also been compiled.

The major problem that we have encountered during this

exercise is the absence of readily accessible data for India

from a single reliable database. In fact, there is no defined

source for our data requirements. However, there is some

data at the disaggregated level available from myriad

sources. Moreover, since we have also attempted a cross-

country comparison of the indicators, it was necessary that

the statistics be comparable. Nevertheless, within the

limitations of data availability, we have tried to develop areasonably consistent dataset.

For India, data on the number of students passing Senior

Secondary school examination is not available. While

annual enrolments in Class XII are available from the

Ministry of Human Resource Development, there is no data

on drop-outs. Thus, we were not able to estimate the

number of High School Graduates. In view of this, we had

no option but to report enrolments instead of High School

Graduates. The reported figures are therefore not strictly

comparable to the figures for U.S.A. and China.

II. DETAILS ON THE DATA COLLECTION ANDCOMPILATION METHODOLOGY




Again, there is no data on the number of persons graduating

in Science & Technology. Therefore, we had to compile

whatever data is available from various sources so as to

arrive at a reasonably good approximation. Ministry of

Human Resource Development provides data on annual

enrolments in B.Sc., M.Sc. and AICTE approved

Polytechnics. Sanctioned annual intakes in AICTE

approved Degree Engineering Institutions are available

from Lok Sabha and Rajya Sabha Starred & Unstarred

questions. The reported figure for each year is the total

enrolment in B.Sc., M.Sc., Polytechnics and the total

approved intake in Degree Engineering Institutions. Thus,

we have accounted for University recognized Degrees in

Science and AICTE approved Degree and Diploma

programmes in Engineering & Technology. However, once

again the reported figure is not strictly comparable to the

figures for U.S.A. and China.

We have also reported the numbers as percentages of the

relevant population age-group. Thus, it was necessary to

have annual data on age-group wise population. However,

for India, this data is available only for two years 2001 and

2006. Census of India provides the data for 2001 and the

data for 2006 is the projected data based on Census 2001.The age data for the intervening years was obtained

assuming a linear annual growth rate of population.

Data on the number of Doctorates in Science & Technology

have been obtained from the University Grants

Commission. R&D output statistics have been obtained

from World Development Indicators (2005), Science

Citation Index, Patent Facilitating Centre, Department of

Science & Technology, R&D Statistics, Department of

Science & Technology and Dept. of Industrial Policy &

Promotion, Ministry of Commerce & Industry.

Data for China and U.S.A. were available from respective

country and international sources. Data for China has been

sourced from the National Bureau of Statistics of China and

the data for U.S.A. has been taken from the U.S. National

Science Foundation and the U. S. Census Bureau. Age-

group wise population for China was not available for all the

four years. Population in the age group 20-24 in the two

years 2000 and 2005 was obtained from the 2004 Revision

Population Database provided by the UN. We have

estimated the population in this age group in the interveningyears by assuming a linear annual growth rate. However,




data could not be obtained for the 18-24 age-group because

the available data is grouped by 5-year age cohorts.

A reasonably consistent dataset is thus being developed

that allows us to measure progress in innovation over time

and across countries.




CII Advisory Committee onNational Innovation Mission

Mr. Shanker Annaswamy (Co-Chair)Managing Director IBM India (P) Ltd.

Lt. Gen. (Retd.) S. S. Mehta (Co-Chair)Director GeneralConfederation of Indian Industry

Dr. Ashok JhunjunwalaProfessor - Department of Electrical EngineeringIndian Institute of Technology, Madras

Prof. Rishikesha T. KrishnanChairperson - Research & PublicationsIndian Institute of Management Bangalore

Dr. Jai MenonChief Information Officer Bharti Airtel Limited

Dr. Ganesh NatarajanDeputy Chairman & Managing Director Zensar Technologies Ltd.

Mr. Krishnakumar NatarajanPresident & CEO - IT ServicesMindTree Consulting Pvt. Ltd. and Indian Institute of Management Bangalore

Prof. Anand PatwardhanExecutive Director, TIFACDepartment of Science & Technology

Dr. S. RamakrishnanDirector General

Centre for Development of Advanced Computing

Mr. Anuj Sinha Adviser & Head (NCSTC)Department of Science & Technology,

Mrs. Aruna SundararajanChief Executive Officer - CSC ProjectDepartment of Information Technology, IL&FS PMU

III. CONSULTATIONS




1. A S RaoDSIR, Government of India

2. Ajay Madhok AMSOFT Systems India Inc.

3. Anil WaliFoundation for Innovation & Technology Transfer

4. Anjan DasConfederation of Indian Industry

5. Anupam SaronwalaIBM Global Technology Services

6. Badri RaghavanFairIssac India

7. Bharati JacobSeedFund

8. Daniel M. DiasIBM India Research Lab

9. Darlie O KoshyNational Institute of Design

10. Dravida SeetharamIBM India Limited

11. H R BhojwaniMinistry of Science & Technology and EarthScience, Government of India

12. Harish KrishnanIBM India Ltd.

13. Harsh Soni

Fidelity India

14. M. P. RanjanNational Institute of Design, Ahmedabad

15. M. V. Rajiv GowdaIndian Institute of. Management, Bangalore

16. Maj. Gen (Retd) R. SwaminthanOffice of the President of India

17. Manish Sabharwal

Team Lease Services Pvt. Ltd.

LIST OF RESPONDENTS




18. Meena GaneshTESCO Hindustan Service Center

19. N SrinivasanConfederation of Indian Industry

20. N. K. SinghTeleVital (I) Pvt. Ltd.

21. Naushad ForbesForbes Marshall Ltd.

22. Poonam Bir KasturiSrishti School of Art, Design & Technology,

Bangalore

23. Pradeep DubeyYale University

24. Puneet GuptaInfosys Technologies Ltd.

25. R. SahaTIFAC, Department of Science & Technology

26. Rajendra Prasad

Council of Scientific & Industrial Research

27. Romi MalhotraDELL India

28. Sanjay SinghTIFAC, Department of Science & Technology

29. Soubir BoseOracle India

30. Soumitra Dutta

Roland Berger Professor of Business andTechnology INSEAD

31. Subir RoyBusiness Standard, Bangalore

32. SUNYStonybrook, USA

33. V. PonrajOffice of the President of India

34. V. S. RamamurthyBoard of Governors, IIT Delhi




35. Vasu RoyNetapp India

36. Venkat PanchapakesanYahoo India

37. Vinay L. DeshpandeEncore Software Ltd.

38. Vineet Kumar GoyalConfederation of Indian Industry




The Confederation of Indian Industry (CII) works to create and sustain an

environment conducive to the growth of industry in India, partnering industry and

government alike through advisory and consultative processes.

CII is a non-government, not-for-profit, industry led and industry managed

organisation, playing a proactive role in India's development process. Founded

over 111 years ago, it is India's premier business association, with a direct

membership of over 6300 organisations from the private as well as public sectors,

including SMEs and MNCs, and an indirect membership of over 90,000companies from around 336 national and regional sectoral associations.

A facilitator, CII catalyses change by working closely with government on policy

issues, enhancing efficiency, competitiveness and expanding business

opportunities for industry through a range of specialised services and global

linkages. It also provides a platform for sectoral consensus building and

networking. Major emphasis is laid on projecting a positive image of business,

assisting industry to identify and execute corporate citizenship programmes.

CII's theme of “Competitiveness for Sustainable and Inclusive Growth” reflects the

Confederation's commitment to balanced development that encompasses all

sectors of the economy and all sections of society, at all levels Global, National,

Regional, State and Zonal.

With 57 offices in India, 8 overseas in Australia, Austria, China, France, Japan,

Singapore, UK, USA and institutional partnerships with 240 counterpart

organisations in 101 countries, CII serves as a reference point for Indian industry

and the international business community.

Confederation of Indian Industry

report on innovate

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