Calcutta Notebook


The Niti Ayog had established an Expert Committee to prepare the road map for giving impetus to innovation in the country. The Committee has suggested that a "Grand Prize" be established to provide encouragement to innovators. It has also suggested that public funding of startups may be increased. "Startup" is made by young first generation entrepreneurs. A college graduate may have an idea to do business but he may not have the funds for the same. There are specialized investors that provide financial support to such ventures. These are variously called incubator funds or venture capital. They provide financial support without requiring collateral security. The funder gives money if the project appears viable. These fundings are high-risk high-gain. One out of ten startups may succeed but the value added by that one startup is so huge that it makes up for the loss incurred in the nine failed startups. The Department of Science and Technology has provided such funds to the tune of Rs 100 crore since 1980 or about Rs three crore per year. The Committee has suggested that the Government increase this to Rs 200 crore per year. Difficulty is that the Government is facing severe fiscal pressures. Global economy is down and revenue collections are under stress. Therefore it is necessary to explore other strategies for jumpstarting innovation that does not depend upon increased funding alone.

The biggest bottleneck to innovation is that Indian universities are producing non-thinking graduates who can only repeat the teachings like a parrot. They have no analytical or employable skills. Many Committees have pointed to this malfunctioning of the education system. This system was set up by the British rulers of India to produce a non-thinking educated class that oppresses the native population and serve the foreign masters. Brown sahibs have appropriated the system as it is. The Committee set up by Niti Ayog has not gone to the root of this malaise. It has remained satisfied by repeated standard slogans. Report of the committee says that it supports "steady re-engineering of the education system in the country, to prepare the youth for the new innovation economy and provide the young enterprises with a large pool of highly-employable workforce... including overhaul of existing school and college curricula, change in existing teaching techniques, better monitoring of school and faculty standards, better access to e-education facilities, and better targeted skilling and training to ensure employability of youth." All this is meaningless bureaucratic jargon. The basic problem of University system is that teachers have no incentive to teach, let alone to innovate. They are secured for life in their jobs. The Committee has not given any suggestions to deal with this fundamental problem. Requirement is to convert all University teachers from permanent employment to contract appointments and to institute an external evaluation system to determine renewal of their contract. Then the teachers will have an incentive to teach. Innovation will follow.

The Committee has suggested that Patents should be enforced strictly. That will create incentive for private individuals and business houses to invest in Research and Development, it has said. However, there are two aspects to the matter. The Harvard University had undertaken a study on role of the Government in Innovation in the energy sector. The Report said that Patents protection both helps and harms innovation: "In some cases, broad patent protection contributed to rapid innovation; in others a relatively weak... framework during the early stages contributed to technology transfer and competition, and thus innovation". Weak patents protection can allow large numbers of small businessmen to copy advance technologies and upgrade themselves rapidly. Once upgraded, they may be in a situation where they can make new innovations and have them patented. It is necessary to make it easier for the weak businesses to access patented technologies. The Committee has ignored this aspect of patent protection and merely restated the need for patent protection that is consistently raised by the developed countries.

The Committee has underscored the need to promote small businesses to generate employment. No one disagrees. Problem is that the economic policies implemented by the Government are wholly arrayed against small businesses. For example, it is proposed to take away the tax exemptions available to small businesses under the Goods and Services Tax. The Government wants to attract large scale foreign direct investment. This means that more production will be undertaken with automatic machines. They will produce at low cost. Small businesses will be killed. One large textile mill may create 1000 jobs but take away the livelihood of 50,000 small weavers. There exists, therefore, a contradiction between two government policies. On the one hand the Government says it wants to support small businesses. On the other hand it is implementing policies that kill these same small businesses. The Committee has failed to draw attention of the Government to this contradiction.

The Committee has remained silent on some other actions that are necessary to spur innovation in the country. A study by the United Nations University on the role of Government in promoting innovation said that "public subsidies for private sector research and development is quite low" in India. It is necessary, therefore-, for the Government to increase direct investment in innovation such as by sponsoring innovative projects. The United States has a system whereby private individuals building upon research undertaken by Government Universities can have the innovations patented in their personal name. This has enabled individuals to take innovations from the university system and build on it. It was necessary for the Committee to suggest a roadmap in this direction.

A study on innovation in the United States found that procurement of hi-tech products by the Government has helped much in innovation. The Committee has failed to make any suggestions in this direction.

India has a large network of scientific laboratories established by the Council of Scientific and Industrial Research of the Government of India. These labs have large budgets but they have contributed little to innovation. The United Nations University pointed out that the efforts to restructure CSIR have been made since 1996 but with only marginal results. The Committee has chosen to remain silent on this issue. In the result the Prime Minister must focus on reforming the existing university system and economic policies to jumpstart innovation.

Vol. 48, No. 34, Feb 28 - Mar 5, 2016