The Digital India Campaign is helping to transform the entire nation into a digitally empowered society and knowledge economy.
- Bringing about innovation has never been as important as today, as the global economy shifts away from the industrial economy towards an innovation economy.
- India ranked 46th in the Global Innovation Index 2021 endorsing its presence in the global innovation economy.
- India was at 81st place in the 2015 report and has steadily improved its ranking in the last six years.
Innovation is a process whereby people or organizations with an entrepreneurial mindset develop new ideas or adapt existing ones to create new products and processes. Innovation is about building capacity to find solutions to everyday practical problems. Joseph Schumpeter (1883-1950), an American economist, was one of the first academicians to study the idea of innovation. He developed a theory of economic and social change which focused on the importance of innovation and the factors influencing it. He suggested an important distinction between invention and innovation.
According to him, invention is the first occurrence of the idea for a new product or process while innovation occurs when the idea is put into practice. Thus, refrigerator was an invention; but double-door refrigerator was an innovation. Similarly, the use of smart phones to conduct banking transactions (mobile banking) is an example of adapting the technology to non-traditional use. Bringing about innovation has never been as important as today, as the global economy shifts away from the industrial economy towards an innovation economy.
Global Innovation Index (GII), 2021
GII is published annually since 2007 by the World Intellectual Property Organization (WIPO). It ranks countries of the world in terms of their innovation capabilities and results, taking into account roughly 80 indicators, ranging from creation of mobile applications to education spending and scientific and technical publications. GII is a leading benchmarking tool for business executives, policy makers and others seeking insight into the state of innovation around the world.
The fourteenth edition of GII, documenting the performance of countries across the world, was released on September 20, 2021. It ranked 132 countries on various indicators. Switzerland was the world’s most innovative economy, followed by Sweden, USA, and UK. The top-performing countries in the GII were almost exclusively from the high–income group. India ranked 46th in the report, endorsing its presence in the global innovation economy. Within the income group of lower-middle income economies, India ranked second after Vietnam.
India was at 81st place in the 2015 report and has steadily improved its ranking in the last six years. It went up to 66th spot in 2016, 60th in 2017, 57th in 2018, 52nd in 2019, 48th in 2020 and 46th in 2021. Thus, India jumped 35 notches in six years. According to the 2021 report, India has been successful in developing sophisticated tradable services. Similarly, it continues its dominance in information and communication technology (ICT) exports, and has performed exceptionally well in domestic industry diversification (12th rank), and in producing science and engineering graduates (12th rank). India’s rising trajectory is attributed to its immense knowledge capital and a vibrant start-up ecosystem as well as the work done by public and private research organizations. India is already a leading player in the global markets in information technology (IT), pharmaceuticals and space technology and making gains in new-age technologies like artificial intelligence (AI) and robotics.
Bloomberg Innovation Index, 2021
Bloomberg is a New York-based media firm. Bloomberg’s annual innovation index is framed using dozens of criteria including manufacturing ability, concentration of high technology public organizations, and expenditure on research and development.
On February 3, 2021, Bloomberg published its ranking for 2021 in the midst of corona pandemic. The exercise was commenced with the involvement of 200 countries. Each was scored on a 0-100 scale. Countries which did not report data were eliminated, trimming the total list to 111. Bloomberg published data for top 60 countries. South Korea topped the list, followed by Singapore and Switzerland. India was ranked 50th in terms of innovations in the world, moving up 4 places as compared to last year, when it entered the list of top 60 countries for the first time. India is the only country in South Asia to be represented on the index. According to the report, India performed the best in the high-tech density category (28th rank) and patent category (32nd rank).
India Innovation Index, 2020
Within India, NITI Aayog released its first-ever India Innovation Index, 2019 on October 17, 2019 with the objective of providing a comprehensive overview of the innovation ecosystem of different administrative units of the country. The index was calculated as the average of scores of its two dimensions: enablers and performance. The report defined the following 5 enablers which act as inputs to the innovation environment: (a) human capital, (b) investment, (c) knowledge employment, (d) business environment and (e) safety and legal environment. The 2 performance pillars included: (a) knowledge output and (b) knowledge diffusion.
The index showed that the innovation ecosystem was stronger in southern and western India, Haryana and Delhi being exceptions. Karnataka emerged as the most innovative major state in India followed by Tamil Nadu, Maharashtra, Telangana, and Haryana. Sikkim took the top spot among North-Eastern and Hill states. Delhi was placed at the top spot among Union Territories.
India Innovation Index 2020 was released on January 20, 2021. Karnataka retained its position as the most innovative major state in the country, followed by Maharashtra and Tamil Nadu. Himachal Pradesh topped among North-Eastern/Hilly States, followed by Uttarakhand and Manipur. Delhi topped among the Union Territories, followed by Chandigarh.
India is uniquely poised to reap the advantages provided by a nation of an estimated 130 crore people, well-connected with over 80 crore mobile phones, and global leadership in information and communication technology (ICT) and software. Presently, India is one of the youngest nations in the world with more than 62 percent of its population in the working age group (15-59 years), and more than 54 percent of its total population below 25 years of age. These demographic attributes pose a formidable challenge and also a huge opportunity. To reap this demographic dividend, expected to last for the next 25 years, India needs to equip its workforce with employable skills and knowledge so that it can contribute substantively to growth efforts of the country. It calls for massive investment in human resources and skill formation as well as creation of an economic environment to absorb the relatively young working population into productive employment.
Realising that innovation is the engine for growth, employment, competitiveness and sharing of opportunities in the 21st century, the Government of India declared 2010-20 as the Decade of Innovation. It has also established a host of institutions and funds over the years such as National Innovation Council (NInC), State Innovation Councils (SInC), Atal Innovation Mission (AIM), National Innovation Foundation (NIF) and India Inclusive Innovation Fund (IIIF). Though laudable, these initiatives are not sufficient because the country’s investment in research and innovations is dismally low. According to the National Education Policy (NEP), 2020, “the research and innovation investment in India is, at the current time, only 0.69% of GDP as compared to 2.8% in the United States of America, 4.3% in Israel and 4.2% in South Korea.”
Risk Aversion and Talent Export
The prevailing culture in middle-class India emphasizes stability and job security over risk-taking. Students have been conditioned to pursue high status and well-paid positions with reputable national and multi-national corporations as these are the main indicators of success. The salary and stability of such jobs are perceived as critical for young professionals preparing for marriage and taking care of elderly parents. Hence, young scholars prefer not to turn to the risky and financially uncertain world of entrepreneurship. The prevailing culture in the country tends to stigmatize failure. Attitude towards entrepreneurship is likely to be a long-term exercise, and may require a generational change.
Talent export (earlier called brain drain) is another problem. Top talent from India has traditionally sought overseas opportunities, both for education and jobs. India needs to devise mechanisms to enhance knowledge inflow and attract talented Indians working abroad. Some return migration is visible but it is concentrated among the most successful and highly educated migrants. Bringing about reverse migration involves offering would-be returnees not only attractive opportunities and pay, but also a westernized lifestyle which requires smart cities and permissive laws.
Innovations are risky. New ideas need time and experimentation to develop, and if the idea fails, the individual has a negative return on his investment. Hence, in societies with few safety nets, innovation are also few. Government policy can give a push to individual innovators by providing fall-back options. The experimental character of entrepreneurship and the risks involved need to be understood so that an entrepreneur gets another chance to do better.
Strengthening the innovation system requires a platform for information sharing and dissemination to ensure improved access to knowledge. Government policy that favours innovation can have significant impact on growth and job creation in the economy. Furthermore, India has a latent science and engineering talent pool which needs to be capitalised to generate indigenous intellectual capital. Government’s investment in research, knowledge-creation, and technological progress does have a role in fuelling innovations, productivity, capital creation, and therefore growth.
Undoubtedly, India is a global leader in information and communication technology and in other cutting-edge domains, such as space. The Digital India Campaign is helping to transform the entire nation into a digitally empowered society and knowledge economy. It is not surprising that at the click of the button, Prime Minister Narendra Modi is able to periodically transfer specified amount of money directly into the accounts of 12 crore small and marginal farmers under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme. In any strategy of development, the key role of digitization and innovation has to be recognized.
Indian economy suffered a major set back in the wake of Covid-19 pandemic. It recorded negative growth rate of 7.3 percent during 2020-21. Luckily, a V-shaped recovery of the economy is on the cards. In its World Economic Outlook Report released on October 12, 2021, International Monetary Fund (IMF) has predicted a 9.5 percent growth rate for the Indian economy in 2021 and 8.5 percent in 2022. The report has praised India for its vaccination drive which helped economic recovery. It is noteworthy that the report has projected global growth at 5.9 percent in 2021 and 4.9 percent in 2022. China is projected to grow at 8.0 percent in 2021 and 5.6 percent in 2022. Evidently, India is slated to regain the tag of fastest-growing economy in the world. It is a good omen to realize the dream of becoming a US$ 5 trillion economy by 2024-25.