New Delhi: India is increasingly becoming a top global innovator for high-tech products and services, but it can do much more to reach its full innovation potential, especially by bringing the benefits of innovation to the poor, says a World Bank report.
Although the country is emerging as a top global innovator in sectors like biotechnology and IT, less than 3% of its workforce is in the modern private sector, while roughly 90% remains in the informal sector.
Disparities in productivity levels across firms within manufacturing sectors is wider in India than in China, Mexico, Russia and Korea, said Mark Dutz, World Bank Senior Economist and editor of the report - Unleashing India’s Innovation.
The output of the economy could increase over five-fold if all enterprises could achieve national best practices based on knowledge already in use in India.
India would especially benefit from fostering more inclusive innovation, the report says. This could be achieved by promoting more formal R&D efforts for the poor and more creative grassroots efforts by them. Improving informal enterprises’ ability to better use existing knowledge could also be helpful, it added.
“Existing pro-poor initiatives need to be scaled up,” said Dutz.
The report also stated that some 2% of Indians live abroad; together they earn almost 2%-3% of India’s GDP and recommended that new ways should be explored to leverage the entrepreneurs and technologists of the Indian diaspora.
Dutz also said “Inclusive innovation can play a critical role in lowering the costs of goods and services and in creating income-earning opportunities for poor people.”
“Grassroots innovation networks should be formally evaluated and supported, and government programmes should promote more knowledge absorption in the productive sector and help extend the power of innovation to the common man,” he added.
The report also stresses upon India’s need to focus on its higher eduction system to handle the manpower crunch the country would face in the future.
As per the report, India has one of the largest systems of higher learning in the world, with some institutions of world class quality. But, its few high-quality institutions are not enough to meet its growing demand for skilled personnel.
To maintain its share of global knowledge services, India would need 2.3 million knowledge professionals by 2010, or it may face a deficit of 0.5 million workers, the report says.
The higher education system therefore needs to respond adequately to the economy’s rapidly changing needs.
The report suggests an increase in the fiscal and managerial autonomy of universities and colleges, and the encouragement of greater private participation in higher education.
In-service training is another means of imparting skills, and Indian firms that provide this training are 23%-28% more productive than those that do not, the World Bank report said.
Today, only 16% of Indian manufacturing firms offer in-service training, compared with 92% in China. The report, therefore, suggests that matching public funds be provided to firms to invest in training of personnel.
World Bank Country Director (India) Isabel Guerrero said, “the world has acknowledged India’s R&D potential and more than 300 multinational corporations have set up R&D and technical centres in India.”
Better diffusion of existing knowledge across s India was important. Based on a 2006 World Bank Enterprise Survey of roughly 2,300 manufacturing enterprises in 16 Indian states, absorbing existing technology (whether generated domestically or bought from abroad) has a stronger, more significant association with enterprise productivity than spending on R&D,“ he added.
Innovation in India must be thought of as improving practices across the entire economy, the report stated.
Encouraging stronger competition among enterprises is particularly important, the report states.
Finally, its says while public programmes supporting innovation have achieved significant success, their outcomes have not been commensurate with the needs of the Indian economy or the resources invested in them.