Transcript mrinalinix

Indian Innovation Capabilities in
the Context of 'Make in India': A
Global comparative scenario
N MRINALINI
GUNJAN TYAGI
(CSIR-NISTADS, New Delhi)
Workshop on “STI for ‘Make in India” at India International Centre, New Delhi, on 10th April, 2015
“Make in India”
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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)
2057.3
(9)
2047.81
(10)
10355.35
(2)
341.22
(34)
2143
(7)
1525
(11)
1709
(9)
5950
(2)
365
(30)
645
(10)
260
(19)
477
(13)
1193
(6)
133
(30)
11208
(63)
14612
(52)
1499
(146)
6807
(84)
6618
(87)
4739
(83)
5338
(76)
740
(156)
1731
(125)
5186
(80)
5108
(64)
2644
(85)
411
(158)
703
(140)
3593
(73)
Russia
India
China
South
Africa
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).
•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
Technology and skill intensity of export
Indicator
High-technology exports
(% of manufactured exports)
Country
2012
2005
1996
Brazil
Russia
10
8
13
8
6
10
India
China
South Africa
7
26
5
6
31
7
7
12
6
Source: World Bank data
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%.
Global comparison
of
High technology export in 2012
Country
US
China
Japan
Germany
Korea
France
India
UK
Russia
Canada
Brazil
High technology export
(Current US Billion $)
148.8
505.6
123.4
183.4
121.3
108.4
12.43
67.79
7.095
24.04
8.82
Source: World Bank data
•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.
India’s Share in Comparison to BRICS and US in World
manufacturing
US
Brazil
Russia
India
China
South Africa
1970
Rank
Share
1
29.7
14
1
8
3.1*
18
0.96
3
8.9**
24
0.48
2013
Rank
Share
2
17.2
9
2.1
8
2.3
11
2
1
23.2
35
0.37
Source: World Macroeconomic Research 1970-2013 (http://kushnirs.org)
Note:
* Russia’s 1990 data is available. ** China’s 2004 data is available
India has improved its rank from 18 to 11 with a share of 0.96% in 1970 to 2% in
2013.
Local market
attractiveness
Healthcare system
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
Government
investments in
manufacturing and
innovation
Energy cost and policies
8.25
Legal and regulatory
system
10
Supplier network
5.87
Cost of labor and
materials
5.89
Economic trade,
financial and tax system
China
Talent-driven
innovation
Physical infrastructure
India’s manufacturing competitiveness Drivers ratings in comparison with
top 3 2013 GMCI countries
Source: Deloitte LLP and the US Council on competitiveness, “Global Manufacturing competitiveness
Index”, 2013. ( www.deloitte.com/globalcompetitiveness, www.compete.org)
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.
India in Research & Development among BRICS
Indicator
Country
Brazil
Russia
India
China
South Africa
Source:
GERD
(as % of GDP)
2014
1.3
1.5
0.9
2
1
2005
1
1.1
0.8
1.3
0.9
1996
0.7
1
0.7
0.6
0.6
Researchers in R&D (per
million people)
2012
710
3,096
160
1,020
364
2005
588
3228
137
849
359
1996
NA
3,788
153
439
NA
(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.
•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.
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
Higher education
0.5
0.02
0.58
0.03
0.52
0.03
0.49
0.03
0.51
0.03
0.49
0.03
0.49
0.03
Source: UNESCO Institute of Statistics (UIS) (http://data.uis.unesco.org).
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
R&D stakeholders in BRICS (GERD as
percentage of GDP)
Country
Brazil
Russia
India
China
South Africa
Year
2012
2005
1996
2012
2005
1996
2011
2005
1997
2012
2005
1996
2010
2005
1997
Business
Enterprise
*
*
*
0.65
0.73
0.65
0.29
0.24
0.16
1.51
0.91
0.25
0.38
0.52
0.32
Government
*
*
*
0.36
0.28
0.25
0.49
0.51
0.50
0.32
0.29
0.24
0.17
0.19
0.2
Higher
Education
*
*
*
0.1
0.06
0.05
0.03
0.03
0.02
0.15
0.13
0.7
0.2
0.17
0.07
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.
Private NonProfit
*
*
*
*
*
*
*
*
*
*
*
*
*
0.01
0.01
India’s R&D output among BRICS
Indicator
Country
Brazil
Russia
India
China
South Africa
Scientific and technical journal articles
2011
13,148
14,151
22,481
89,894
3,125
2005
9897
14425
14635
41604
2395
1996
3,813
18,553
9,753
10,526
2216
Source: World Bank data
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.
Patent granted to India among BRICS
Resident
Country
Brazil
Russia
India
China
South
Africa
2013
2005 1999
385
249
424
21520 19556 15362
594
1396 633
143535 20705 3097
474
1010 140
Non-resident
2013
2587
10260
2783
64153
4282
2005
2190
3943
2924
32600
821
Abroad
1999
2795
4146
1527
4540
6179
2013
858
1987
3808
10970
971
2005
286
1263
888
870
483
1999
338
383
157
213
386
Source: World Intellectual Property Organization (WIPO) (website accessed in January 2015).
The comparative performance of India and other BRICS countries in terms
of patent granted shows an unbridgeable gap.
BRICS Global Competitiveness Index
Indicator
Country
Brazil
Russia
India
China
South Africa
Rank (countries)
2014-15 2009-10
2003-04
(144)
(133)
(102)
57
56
54
53
63
70
71
49
56
28
29
44
56
45
42
Score (maximum possible7)
2014-15
2009-10
2003
4.3
4.4
4.2
4.9
4.4
4.23
4.15
4.30
4.74
4.34
3.95
3.46
3.90
4.19
4.37
Source: World Economic Forum (WEF), “The Global Competitiveness Report 2014-15, 2009-10,
2003-04”, Geneva, Switzerland 2014.
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.
BRICS Global Innovation Index
Indicator
Country
Brazil
Russia
India
China
South Africa
Rank (Countries)
2014
(143)
61
49
76
29
53
2009-10
(137)
68
64
56
43
51
Score
2007
(107)
40
54
23
29
38
2014
(upto100)
36.29
39.14
33.7
46.57
38.25
2009/10
2007
(up to 7) (up to 7)
2.97
2.84
3.03
2.6
3.1
3.57
3.32
3.21
3.24
2.87
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.
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.
BRICS in Global Knowledge Economy Index
Indicator
Country
Brazil
Russia
India
China
South Africa
Rank ( out of 145 Countries)
2012
2000
1995
60
55
110
84
67
59
64
104
91
52
71
59
106
100
51
Score (1-10)
2012 2000 1995
5.58
5.78
3.06
4.37
5.21
5.48
5.28
3.14
3.83
5.77
5.08
5.67
3.57
3.99
6.05
Source: Knowledge Economy Index (KEI) 2012 Rankings, www.worldbank.org/kam
(Website accessed on December, 2014).
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.
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.