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 10th April, 2015

N MRINALINIGUNJAN 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 Indicator

GDP nominal (in Billion US$) (rank)

GDP per capita (Current US $)

(rank)

Country 2014 2010 2000 2013 2005 1996

Brazil 2244.13 (7)

2143 (7)

645 (10)

11208 (63)

4739 (83)

5108 (64)

Russia 2057.3 (9)

1525 (11)

260 (19)

14612 (52)

5338 (76)

2644 (85)

India 2047.81 (10)

1709 (9)

477 (13)

1499 (146)

740 (156)

411 (158)

China 10355.35 (2)

5950 (2)

1193 (6)

6807 (84)

1731 (125)

703 (140)

South Africa

341.22 (34)

365 (30)

133 (30)

6618 (87)

5186 (80)

3593 (73)

•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 (http://knoema.com). (ii) IMF World Economic Outlook October 2014 (http://www.imf.org). (iii) World Bank Data (http://data.worldbank.org).

Technology and skill intensity of export

Indicator High-technology exports (% of manufactured exports)

Country 2012 2005 1996

Brazil 10 13 6 Russia 8 8 10

India 7 6 7 China 26 31 12

South Africa 5 7 6

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

Country High technology export (Current US Billion $)

US 148.8 China 505.6 Japan 123.4

Germany 183.4 Korea 121.3 France 108.4 India 12.43 UK 67.79

Russia 7.095 Canada 24.04 Brazil 8.82

•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

1970 2013 Rank Share Rank Share US 1 29.7 2 17.2 Brazil 14 1 9 2.1 Russia 8 3.1* 8 2.3 India 18 0.96 11 2 China 3 8.9** 1 23.2 South Africa 24 0.48 35 0.37

India has improved its rank from 18 to 11 with a share of 0.96% in 1970 to 2% in 2013.

Note: * Russia’s 1990 data is available. ** China’s 2004 data is available

Source: World Macroeconomic Research 1970-2013 (http://kushnirs.org)

India’s manufacturing competitiveness Drivers ratings in comparison with

top 3 2013 GMCI countries

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China 5.89 5.87 10 8.25 3.09 6.47 7.16 8.16 2.18 8.42

Germany 9.47 7.12 3.29 8.96 9.06 9.82 4.81 7.26 9.28 7.57

United states

8.94 6.83 3.97 8.64 8.46 9.15 6.03 7.60 7.07 6.34

India 5.82 4.01 9.41 4.82 2.75 1.78 5.31 5.90 1.00 5.09

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”, 2013. ( www.deloitte.com/globalcompetitiveness, www.compete.org)

India in Research & Development among BRICS

Indicator GERD (as % of GDP)

Researchers in R&D (per million people)

Country 2014 2005 1996 2012 2005 1996 Brazil 1.3 1 0.7 710 588 NA Russia 1.5 1.1 1 3,096 3228 3,788 India 0.9 0.8 0.7 160 137 153 China 2 1.3 0.6 1,020 849 439

South Africa 1 0.9 0.6 364 359 NA

•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 2010. (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)

Sectors 1997 2000 2003 2006 2009 2010 2011

Business Enterprise 0.16 0.13 0.16 0.25 0.28 0.28 0.29

Government 0.5 0.58 0.52 0.49 0.51 0.49 0.49 Higher education 0.02 0.03 0.03 0.03 0.03 0.03 0.03

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) (http://data.uis.unesco.org).

R&D stakeholders in BRICS (GERD as percentage of GDP)

Country Year Business Enterprise

Government Higher Education

Private Non- Profit

 Brazil

2012 * * * *

2005 * * * *

1996 * * * *

 Russia

2012 0.65 0.36 0.1 *

2005 0.73 0.28 0.06 *

1996 0.65 0.25 0.05 *

 India

2011 0.29 0.49 0.03 *

2005 0.24 0.51 0.03 *

1997 0.16 0.50 0.02 *

 China

2012 1.51 0.32 0.15 *

2005 0.91 0.29 0.13 *

1996 0.25 0.24 0.7 *

South Africa 2010 0.38 0.17 0.2 *

2005 0.52 0.19 0.17 0.01

1997 0.32 0.2 0.07 0.01

Source: UNESCO Institute for Statistics (UIS) (http://data.uis.unesco.org).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

Indicator Scientific and technical journal articles

Country 2011 2005 1996 Brazil 13,148 9897 3,813 Russia 14,151 14425 18,553 India 22,481 14635 9,753 China 89,894 41604 10,526

South Africa 3,125 2395 2216

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.

Resident Non-resident Abroad

Country 2013 2005 1999 2013 2005 1999 2013 2005 1999 Brazil 385 249 424 2587 2190 2795 858 286 338 Russia 21520 19556 15362 10260 3943 4146 1987 1263 383 India 594 1396 633 2783 2924 1527 3808 888 157 China 143535 20705 3097 64153 32600 4540 10970 870 213 South Africa

474 1010 140 4282 821 6179 971 483 386

Source: World Intellectual Property Organization (WIPO) (website accessed in January 2015).

BRICS Global Competitiveness Index

Indicator Rank (countries) Score (maximum possible7)

Country 2014-15 (144)

2009-10 (133)

2003-04 (102)

2014-15 2009-10 2003

Brazil 57 56 54 4.3 4.23 3.95 Russia 53 63 70 4.4 4.15 3.46 India 71 49 56 4.2 4.30 3.90 China 28 29 44 4.9 4.74 4.19

South Africa 56 45 42 4.4 4.34 4.37

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 2003-04 to 71 in 2014-15, whereas China has improved its rank from 44 to 28 during the same reference periods.

Source: World Economic Forum (WEF), “The Global Competitiveness Report 2014-15, 2009-10, 2003-04”, Geneva, Switzerland 2014.

BRICS Global Innovation Index

Indicator Rank (Countries) Score

Country 2014 (143)

2009-10 (137)

2007 (107)

2014 (upto100)

2009/10 (up to 7)

2007 (up to 7)

Brazil 61 68 40 36.29 2.97 2.84 Russia 49 64 54 39.14 3.03 2.6 India 76 56 23 33.7 3.1 3.57 China 29 43 29 46.57 3.32 3.21

South Africa 53 51 38 38.25 3.24 2.87

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, 2014. (ii)Confederation of Indian Industry (CII), INSEAD, “Global Innovation Index (GII) 2009-10”, 2010. (iii) The World Business/INSEAD Global Innovation Index (GII) 2007, “The world’s top innovators”, January-February 2007.

BRICS in Global Knowledge Economy Index

Indicator Rank ( out of 145 Countries) Score (1-10)

Country 2012 2000 1995 2012 2000

1995

Brazil 60 59 71 5.58 5.48 5.08 Russia 55 64 59 5.78 5.28 5.67 India 110 104 106 3.06 3.14 3.57 China 84 91 100 4.37 3.83 3.99

South Africa 67 52 51 5.21 5.77 6.05

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, www.worldbank.org/kam (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.

Thanks