Indian Innovation Capabilities in the Context of 'Make in India': A Global comparative scenario Workshop on “STI for ‘Make in India” at India International Centre, New Delhi, on 10 th April, 2015 N MRINALINI GUNJAN TYAGI ( (CSIR-NISTADS, New Delhi)

“Make in India” The slogan “make in India” brings to focus the importance of manufacturing sector as backbone of an economy in a globalised environment. This can be viewed as an emphasis to distinguish it from “made in India”, and as a commitment towards creation of a manufacturing friendly ecosystem. This opens up several issues like- Indias manufacturing capability in the global context, Its strength in R&D and innovation, export potential, its infrastructure etc The need is to create a manufacturing friendly ecosystem for the entrepreneurs, by ensuring the removal of bottlenecks, to invite investments that will create employment, increase productivity and contribute to the general economic health of the country. Can India move from factor driven competitive strength to knowledge driven competitive strength China is catching up with giants of the global economy because of its manufacturing sector that has given necessary impetus to the growth of Chinese economy. China’s non hi tech small firms dominated industrial products have made their presence felt in the global markets and this sector has helped capital accumulation for Chinese ventures in the hi-tech sectors. The question that comes up is where India stands as of now in terms of its capabilities and strength in the global context, especially amongst the BRICS countries.

Indian economy among BRICS Among the BRICS countries in terms of GDP (nominal $ billion) India ranks 10 in 2014, improving from rank 13 in 2000, that is better only compared to South Africa. GDP per capita that indicates the weak fundamentals of the Indian economy. Its poor state amongst the BRICS Sources: (i)World GDP Ranking 2014 ( (ii) IMF World Economic Outlook October 2014 ( (iii) World Bank Data (

Technology and skill intensity of export Another weak spot of Indian economy is revealed in its performance in technology and skill content in export. India has just managed to hold on its low technology and skill intensity at 7% of manufacturing export from 1996 to 2012, during the same period China’s has gone up from 12% to 26%. Source: World Bank data

Global comparison of High technology export in 2012 India ($12.43 billion) is far behind China ($505 billion) This clearly shows that India is no where near the top high technology export countries and it reflects on the manufacturing capability, where the export market is not targeted by high technology products. Source: World Bank data

India’s Share in Comparison to BRICS and US in World manufacturing India has improved its rank from 18 to 11 with a share of 0.96% in 1970 to 2% in Note: * Russia’s 1990 data is available. ** China’s 2004 data is available Source: World Macroeconomic Research (

India’s manufacturing competitiveness Drivers ratings in comparison with top GMCI countries India holds an advantage with respect to the low cost of labor and materials but India is far behind in terms of Healthcare and legal &regulatory system compared to the top 3 GMCI countries. Source: Deloitte LLP and the US Council on competitiveness, “Global Manufacturing competitiveness Index”, (

India in Research & Development among BRICS India took 24 years for a climb of 0.2% share of R&D in GDP, and it is consistently lowest among BRICS. India is also at the bottom in terms of the number of R&D researchers per million population. Source: (i) OECD, “Fact book 2010: Economic, Environmental and Social Statistics”, OECD Publishing, Paris (ii) Battelle, R&D “2014 Global R&D Funding Forecast”, December 2013, and World Bank data.

GERD in India (as percentage of GDP) by stakeholders (1997 to 2011) In India although there is increase in R&D spending by enterprises, it is still too small compared to spending by Govt. More alarming is the fact that spending in the higher education sector remained largely unchanged during 1997 to 2011 Source: UNESCO Institute of Statistics (UIS) (

R&D stakeholders in BRICS (GERD as percentage of GDP) CountryYearBusiness Enterprise GovernmentHigher Education Private Non- Profit Brazil 2012**** 2005**** 1996**** Russia * * * India * * * China * * * South Africa * Source: UNESCO Institute for Statistics (UIS) ( Note- * means not available Globally and as it is in BRICS countries trend is increasing spending on R&D by the enterprises.

India’s R&D output among BRICS During the period 1996 to 2011 India has improved its own performance in terms of publications, but the performance looks pale when compared to the progress China has made. Source: World Bank data

Patent granted to India among BRICS The comparative performance of India and other BRICS countries in terms of patent granted shows an unbridgeable gap. Source: World Intellectual Property Organization (WIPO) (website accessed in January 2015).

BRICS Global Competitiveness Index The Global Competitiveness Index presents a comparative position of a country's potential for growth. In the competitiveness index India’s position has gone down from rank 56 in to 71 in , whereas China has improved its rank from 44 to 28 during the same reference periods. Source: World Economic Forum (WEF), “The Global Competitiveness Report , , ”, Geneva, Switzerland 2014.

BRICS Global Innovation Index The Global Innovation Index a composite indicator that ranks countries/economies in terms of their enabling environment to innovation and their innovation outputs. In innovation index China has retained its rank 29 in 2007 till 2014, and India has moved from 23 to 76. Source: (i)Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO), “The Global Innovation Index 2014: The Human Factor in Innovation”, Fontainebleau, Ithaca, and Geneva, (ii)Confederation of Indian Industry (CII), INSEAD, “Global Innovation Index (GII) ”, (iii) The World Business/INSEAD Global Innovation Index (GII) 2007, “The world’s top innovators”, January-February 2007.

BRICS in Global Knowledge Economy Index The Knowledge Economy Index takes into account whether the environment is conducive for knowledge to be used effectively for economic development. In Knowledge economy index India has moved from 106 in 1995 to 110 in 2012, on the other hand China has improved its ranking from 100 to 84. Source: Knowledge Economy Index (KEI) 2012 Rankings, (Website accessed on December, 2014).

Task ahead In the present milieu, manufacturing capability is viewed in the context of being competitive in both, the domestic and the global market. India’s position in various parameters, vis-à-vis China and other BRICS countries is not very encouraging and to improve its global position, India has to strengthen its manufacturing activities by infusing technological innovations To be competitive, the role of R&D and innovation becomes very significant. So, ‘Make in India’ slogan, is not to be viewed in the narrow sense of attracting MNCs to set up their production units here for production but also to view it as an opportunity for expanding the manufacturing gamut of Indian firms by instilling innovative competitiveness amongst the firms. ‘Make for India’ can be a component of ‘Make in India’, as the emphasis here is to produce in India and not just assemble in India, by targeting both the India and Global market. This can be seen as an opportunity, and is not only appropriate for new direction to the economy but also for the timing when the economy needs revamping. It is in this context comes the need for infusing the dynamics of innovation in Indian manufacturing sector with special focus on the small-scale sector. This requires strengthening the technology support system and investment in R&D and promotion of innovation through governmental initiatives A beginning can be made by making the network of innovation support system more proactive. “Make in India” needs some special focus on small enterprises to raise them to a new level of manufacturing dynamics speared through innovation.