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NOTES

Strategy for R&D


in Indian Industry
Urgent Needs and Assured Returns
E C Subbarao

India has the advantage of high


quality researchers and growing
markets at home and abroad.
However, it is, at present, a
very minor player in the global
research and development arena.
If the right steps are taken, such
as enhanced R&D spending by
industry with the government
providing better incentives and
a focus on fundamental research
in the sciences and engineering,
India can become an important
R&D power. This article analyses
the present scenario and suggests
policy steps to achieve this goal.

This article was presented by the author at the


10th National Conference on Technological
Innovations in India: Retrospect and Prospect
organised by the Engineering Council of India
on 29 November 2012 in New Delhi.
E C Subbarao (ecsubbarao@gmail.com) is at
the Tata Research Development and Design
Centre, Pune.
Economic & Political Weekly

EPW

june 28, 2014

nnovation and research and development (R&D) are buzzwords in India


and the world, and are considered
essential for national well-being and
prosperity, as well as for climbing the
global economic ladder. India has some
unique advantages that should enable it
to leapfrog and become the third economic
power in the world, after the United States
(US) and China. This article surveys the
many obstacles to attain this goal and
also suggests some practical solutions to
overcome these obstacles.
India today is only a minor player in
R&D compared to developed economies.
Here, the status and growth of R&D in the
industrial sector in India are emphasised.
The urgent need for a big boost in this area
as a lever for marked economic growth
and social uplift, and thereby, the establishment of Indian intellectual prowess
and business acumen are discussed.
There are three main types of R&D,
each with its own focus. The first is R&D
in academic institutions carried out
largely as part of postgraduate thesis
requirements and thereby manpower is
trained for R&D. It is often basic research
to create new knowledge and publish
papers. The relevance to industrial needs
and societal problems are not the major
factors in choosing topics for academic
research and therefore, it is rarely patented or exploited. It is largely funded by
the government, with little or no support
from industry. The second is R&D in
government laboratories, most of them
working in mission mode, solely supported
by the government. Nearly 90% of the
governments R&D budget is allotted to
these agencies, the major ones are
defence (31.6%), space (15.5%), atomic
energy (14.4%), agriculture (10.8%),
Council of Scientific and Industrial

vol xlIX nos 26 & 27

Research (CSIR) (10%), and the Department of Science and Technology (DST)
(8.3%), leaving 10% or less for educational
institutions and others.1 The third is
R&D as in-house activity in the industry,
both in the private and public sectors.
This was nearly non-existent at the
time of Independence. The progress in
this respect thereafter is surveyed in
detail here.
A Brief History
At the beginning of the 20th century, India
was looked upon by the British rulers as
a cheap source of raw materials (cotton,
iron ore, coal, etc) for the industry in
Britain, which in turn exported finished
goods to the captive markets in India.
Huge cotton production led to the establishment of British textile mills in India.
The one exception was the setting up of
a steel mill in Jamshedpur by Jamsetji
Tata in the early 20th century. An Englishman light-heartedly challenged Tata
saying that if Tata really produced steel
in India, he would eat every bit of it!
(Mashelkar 2011).
Later, there were technology imports,
which did not call for any innovation or
in-house R&D. Then policy moved to
substitution of imported products by reverse engineering, again with little or no
in-house R&D. Only once global competition started to hurt, did Indian companies begin to establish some minimal inhouse R&D facilities, directed more at
troubleshooting and quick fixes for minor
production problems than any real advances in technology for new products
or for improvement of efficiency in production or energy use. Thus at the time
of Independence, there were minimal
R&D activities in Indian industry, with
some notable exceptions such as Tata
Steel and Hindustan Lever.
Since Independence, a number of R&D
facilities have been established in the
public (e g, Bharat Heavy Electrical, Steel
Authority of India, Bharat Electronic,
Hindustan Aeronautical, etc) and private
(e g, pharmaceutical, Tata Motors, Tata
Steel, etc) sectors, whose goal was to
develop new and improved products
appropriate to the expanding Indian
87

NOTES

market, and also to improve productivity and energy efficiency of manufacturing industry.
Thus, there are now about 1,500 R&D
units in Indian industry registered with
the Department of Scientific and Industrial Research (DSIR). Indian industry
operated in a protected market till economic liberalisation started in 1991. This
and the drive for exports from India
started to change the mindset of Indian
industry about R&D, resulting in a sevenfold increase in R&D spending as a percentage of sales revenues from 0.071 in
1991 to 0.28 in 1995, 0.30 in 2000 to 0.51
in 2004 (Department of Company Affairs,
GoI). By 2009-10, it grew to 0.61 (private
sector 0.27 and public sector 0.82) (see
Note 1). But it still is low by international
standards.2 Only three Indian companies (Ranbaxy, Dr Reddys Laboratories
and Tata Motors) are among the worlds
top 1,250 companies in terms of R&D
investment (see Note 2). The reasons for
only limited expansion of industrial R&D
are many, including finances, R&D manpower, government incentives and the size
of the Indian manufacturing companies.
The two largest steel companies in India,
Tata Steel and Steel Authority of India,
are ranked 11 and 28 in terms of steel
production in 2012 globally. However,
the growth of Indian manufacturing industry, e g, steel and motor vehicles in
recent years is indeed very impressive,
as shown in Table 1.
Table 1: Crude Steel Production (million tonnes)
Motor Vehicle Production (millions)
Rank Country

1
2
3
4

World
China
Japan
US
India

2011

1980

1990

2010 2010

1,351 1,490
495 683
120 108
98
89
54
72

2007

39
0.2
11
8
0.1

49
1.5
13
10
0.3

58
2
10
13
0.8

78
18
10
8
3.5

Source: World Steel Association and Organisation of


international des Constructeurs dAutomobiles.

Unique Advantages for R&D


India possesses many unique advantages
for playing a stellar role in the R&D area
(Subbarao 2013). Erudition and discovery are important landmarks of Indias
history from ancient times. Some of this
knowledge like Ayurveda stood the test
of time, even if it is perhaps not well documented and may not be very systematic,
by modern standards. More than 50% of
88

Indias population is under 26 years of


age. This demographic dividend of over
600 million people in the working age
group is going to grow. This is in sharp
contrast to most of the advanced economies including China where the population is ageing, shrinking the proportion
of people in the working age even further with time. India has a good educational system in sciences and technology
and the products of the system have performed well in India as well as in countries with an advanced technological,
industrial base, like the US. English is
the established means of communication in the global knowledge economy.
India has the second largest number of
people proficient in English, next only to
the US. Finally, the costs of doing R&D in
India (including salaries) are much less
than in advanced countries, resulting in
a lower cost of research leading to a
paper or a granted patent.
These advantages, plus the growing
domestic market resulting from an expanding middle class has started attracting advanced countries to set up
R&D centres in India. The number of
multinational corporations (MNCs) setting up in-house R&D facilities has
grown from a paltry 50 in 2002 to about
150 in 2006 and over 870 now
(Mashelkar 2011; Ramarao 2012, 2013).
These include about 100 of the Fortune
500 corporations. IBM, Microsoft, Cisco,
Intel, Texas Instruments, Pfizer, LG,
Philips, Eli Lilly, Unilever, GE are some
examples and have over 1,60,000 employees (Mashelkar 2011).
During 2006, R&D investments by the
MNCs in their Indian units appear to
have surpassed that by Indian private
sector units (Dutz 2007). This is also resulting in a slow shift from brain drain
to brain recirculation. While all this is a
welcome vote of confidence in Indias
strengths enumerated above, it is also
causing some hiccups.
The MNCs attracting well-qualified
researchers with better salaries, work
environment, modern facilities, challenging research topics with an international
flavour, is leading to difficulties for Indian
academia and even R&D institutions to
attract or retain the much-needed talent.
Besides, the fruits of R&D by MNCs mainly
june 28, 2014

benefit their parent companies abroad,


with only a limited spillover to India.
Thus, R&D services have become another
export item from India.
Success Stories
Despite Indias low position on the global R&D canvas, there are many success
stories of R&D in Indian industry. A few
examples (INAE 2012) are:
Large-scale Industry
Indian pharmaceutical industry has
successfully launched a number of lowcost generic drugs not only for the Indian market but also globally.
In-house R&D made it possible for Tata
Motors to come up with successful cars
around Indica, Indigo, and Nano brands
for the Indian markets, becoming the third
largest car maker in India, including the
cheapest car, Nano. This is significant
because till recently Tata Motors was
known only for its commercial vehicles.
Mahindra and Mahindra invested only
$120 million to develop its fast-selling
Scorpio model about one-fifth of what
it would cost in Detroit (Dutz 2007).
Similarly, Tata Motors recovered within
one year its development costs on ACE, a
small truck that cost about $2,500.
Through in-house R&D and its implementation, Tata Steel became the worlds
lowest cost steel producer.
For People at the Bottom of the Pyramid
Computer Based Functional Literacy
(CBFL) developed and implemented by
Tata Consultancy Services in eight Indian
languages to enable an illiterate adult
read a newspaper with only 40 hours of
training and at a cost of about $2 per
person, all this without school buildings
and teachers. This has since been extended
to South Africa. It now includes all 3Rs:
Reading, wRiting, aRithmetic.
Low-cost potable water filters by several
companies, one of them is based on rice
husk ash to provide bacteria-free water,
with no need for electricity, thereby ensuring better health for poor people,
particularly children.
Embrace Incubator requires no electricity and is mobile.
Jaipur foot at a fraction of the cost of
an artificial leg.

vol xlIX nos 26 & 27

EPW

Economic & Political Weekly

NOTES

Low-cost refrigerator Chotuk00l has

recent science and technology policy


statements by the government emphasise
the goal of 2% of GDP devoted to R&D.
Bulk of the global R&D (78%) occurs in
five countries (the US, Japan, Germany,
France and the United Kingdom (UK)). In
contrast, China and India together contriIndias Position
buted a meagre 1.8% overall to R&D
Having reviewed where India is, the investment by the global 1,000 (BIS 2010).
pace of change and where we want to Only 14 Indian companies are among the
be, it is appropriate to analyse the issues top 1,500 companies in the world in terms
quantitatively. We select four countries of R&D investments, according to the latest
for the purpose of comparison: the US, annual Global R&D Scoreboard for 2012,
the icon of R&D and economy, and three prepared by the European Commission.
Asian countries, one which has been a Indian companies (with their rank in
historically advanced country (Japan), brackets) are: Infosys (329), Reliance
and two rapidly rising new stars (China Industries (507), Dr Reddys Laboratories
and South Korea). For this purpose, uni- (776), Tata Steel (867), Mahindra and
versally accepted matrices, extensively Mahindra (888), Lupin Laboratories (918),
used by economists, development plan- Ashok Leyland (1,136), Oil and Natural
ners and international agencies, are Gas Corporation (1,222), Bharat Heavy
utilised both for inputs as well as the Electricals (1,230), Cipla (1,275), Cadila
outputs. That would show the distance Healthcare (1,313), Glenmark (1,314), Sun
India has to cover, and the pace needed Pharmaceuticals (1,336) and Wockhardt
to get there in a reasonable time frame. (1,473) (PTI 2013). Pharmaceutical indusThe R&D spending (covering current and try has seven, auto has two and public
capital) in absolute as well as a percent- sector has two out of the 14. It is disage of gross domestic product (GDP) for appointing that there is no Indian company
in the top 300 in this list of 1,500 compathese four countries is given in Table 1.
Table 2 clearly shows that the situation nies worldwide based on R&D investments.
in India has not changed between 2010 It also shows that significant R&D efforts
and 2011, whereas it has increased in the are concentrated only in a few large
case of Japan and China. R&D spending companies. The percentage of turnover
by India in absolute numbers is about one of industrial units spent on R&D was
quarter of what Japan and China spent 0.61% (private sector, 0.27% and public
and less than one-tenth spent by the US. sector, 0.82%) in 2009-10.
According to the chairman of the Steel
In terms of percentage of GDP, India spends
half of China and one quarter of Japan. Authority of India, C S Verma, the Indian
China has overtaken Japan in this period. steel sector R&D spending is 0.15% to
Besides, India is a minor player on the 0.27% of its turnover, compared with
world scene in terms of R&D investments. about 1.1% to 1.4% of sales in the case of
For a country aspiring to become one of steel producers in Japan, South Korea and
the economic powers in the foreseeable China for the year 2009-10 (Bose 2012).
future, private sector industry spending The R&D expenditure (Rs crore) by leading
on R&D has to increase substantially to at industry groups in 2009-19 (see Note 1)
least 2% of GDP from the present 0.8% are: drugs and pharmaceuticals, Rs 4,300
for the past two years in a row. The crore; transportation, 2,300; information
technology, 2,200; fuels, 800;
Table 2: R&D Spending on PPP Basis and as a Percentage of GDP
chemicals, other than fertiand of Global R&D
Country
2010
2011
lisers, 800; biotechnology,
GERD PPP R&D as a
% Share of GERD PPP R&D as a % Share of
600; electricals and electron$ (Billion) % of GDP Global R&D $ (Billion) % of GDP Global R&D
ics, 600; metallurgical, 300;
India
32.5
0.8
2.6
38.0
0.8
2.8
telecom, 200; soaps, cosChina
144.3
1.5
12.0
174.9
1.6
13.1
metics and toiletries, 100.
Japan
148.3
3.4
11.8
152.1
3.5
11.4
Another area to look at is
US
415.1
2.8
32.8
427.7
2.8
32.0
the
source of R&D funding and
Source: Grueber and Studt (2011); BIS (2010).
no compressor and uses a cooling chip
and a fan used in computers.
Many more examples can be cited,
some based on the more with less for
more (MLM) principle (Mashelkar 2011).

Economic & Political Weekly

EPW

june 28, 2014

vol xlIX nos 26 & 27

Table 3: R&D Expenditures by Source and R&D


Personnel
Country

India

Year

1990-91
1995-96
2000-01
2005-06
2010-11
China
2009
Japan
2009
South Korea 2008
US
2009

Share of Expenditure R&D Personnel


Business Govern- Per Million
ment
People

24.3
27.5
23.2
32.6
34.9
71.7
75.3
72.9
59.6

75.7
72.5
76.8
67.4
65.1
23.4
17.7
25.4
31.3

164
913
5,300
3,732
4,618

Source: Agarwal, (2009), Mashelkar (2011) and


see Notes 1 and 3.

number of R&D personnel, in a few


countries (Table 3).
It can be seen that in the case of India,
the share of R&D expenditures by business or industry has increased significantly from one quarter to one-third in
the last two decades, and expenditure by
government has also declined correspondingly, whereas business and industry pay nearly three quarters, leaving a
relatively minor share for the government in the case of other leading countries. Since the Indian government, like
all governments, has financial obligations
for many activities such as education,
healthcare, infrastructure, etc, it is unrealistic to expect the government investment in R&D can increase too much.
Therefore, the only way the countrys
R&D expenses can approach at least 2% of
GDP is by private industry investing in R&D
considerably more (by a factor of three to
five) than it does at present. The other
glaring fact from Table 3 is the very
small number of R&D personnel in India
relative to population, compared with
other advanced economies. The top
countries in this respect are Finland
(7,500), Denmark (6,500) and Singapore (6,000) (see Note 1). It calls for a
close look at our priorities in science
and engineering education in terms of
quality and quantity.
Table 4: US Patents and Publications from R&D
and Population in 2009
Country

US Patents Issued US Patents


(Population
Per Million
in Millions)
People

India
China
Japan
South Korea
US

709(1,171)
2041(1,331)
35,524(128)
8,789(49)
81,912(307)

6
15
278
179
267

Per Cent of
Total World
Publications

2.5; 3.5(2010)
9.4
6.3
2.8
26.5

Source: www.nationmaster.com; see Notes 1 and 3.

89

NOTES

Besides the contribution of R&D to the


top and bottom lines of the company
balance sheets and thereby the countrys
GDP, other outputs of R&D are patents and
publications, which add to the intellectual image of the country (Table 4, p 89).
The points that stand out in Table 4 are:
The number of the US patents issued to
China is about three times that to India.
Similarly, for a million population, India
was granted six patents compared to
nearly 280 in the case of Japan. Patents
represent one of the indices of exploitable
outputs of in-house R&D. Of the top 50
applicants for patents in India between
1995 and 2005, 44 were MNCs, with only
six from Indian organisations (three
from public institutions, one from public
sector company and two from private
sector companies, both in the pharmaceutical industry) (Dutz 2007). This may
be attributed partly to inadequate awareness and legal help to Indian researchers
for intellectual property protection.
It is only after the 2005 amendments,
the legal framework was modernised to be
in full consonance with the World Trade
Organisation (WTO) Agreement on Trade
Related Aspects of Intellectual Property
Rights (TRIPS). Before that, R&D units in
the private sector filed 145 patents in
1995 growing to 315 in 1999, the bulk of
them being in the pharmaceutical field. In
this connection, the patent position in the
US, the most developed and active country in R&D and innovation, is instructive.
In 2011 US Patent and Trademark Office
(USPTO) granted 2,53,155 patents (almost
1,000 US patents on each working day of
the year). Further, a single company,
IBM, was granted 6,478 patents (equal to
almost 25 per working day) in 2011.
About 30% of these patents resulted from
IBM centres outside the US, an increase
from 22% the previous year (2010).
The licence fee from these patents to
IBM is about $1 billion per year, but it is
lower than for some other companies,
like Qualcomm at $6.3 billion per year.
Of the 10 top US patent winners in 2011,
there are three from the US (IBM, Microsoft
and GE), four from Japan (Canon, Sony,
Panasonic and Toshiba), two from South
Korea (Samsung, the second ranker, and
LG) and one from Taiwan (Han Hui).
Among the top 75 US patent winners,
90

30 companies are from the US and 26 from


Japan (Patent Buddy Top Scores). Another interesting fact about this listing is
that at least 20 US universities are in the
top 500 US patent winners with six of
them, each winning over 100 patents that
year (Massachusetts Institute of Technology, 242; Stanford, 200; University of
Texas, 179; University of Wisconsin, 160;
California Institute of Technology, 145;
University of Michigan, 118). This is impressive and demonstrates the innovative and entrepreneurial drive of these
academia. In conclusion of this discussion, it is sad to say that not even a single
Indian company is in the list of the 500
top US patent winners. It may be added
that India granted 18,230 patents in 2009,
which is only one-fifth of the 93,706
patents granted in China.3
Indian patents issued to persons of
Indian origin and of foreign origin for
select years are: 1995-96, 459 (Indian) and
1,299 (foreign); 2001-02, 557 and 1,324,
2004-05, 764 and 1,147 and 2010-11, 8,312
(27.1%) and 31,088 (78.9%) patents, respectively. It is noteworthy that a large
fraction of the Indian patents are granted
to foreign inventors, probably from MNCs
(Abramson 2007), the leading countries
being the US at 33.5%, Japan at 13.2%
and Germany at 11.8% (see Note 1).
Turning to the other output of R&D,
publications, Indias share is a measly
2.5% of the world total compared with
more than 10 times as many (26.5%)
from the US (Table 3). Nature Publishing
Index lists nine publications for India,
254 for Japan, 149 for China and 68 for
South Korea (Grueber and Studt 2011).
Thomson Reuters in a report to the DST
pointed out that considering the important role of India in the field of computer
science, only 2.4% of the global publications in this field were from India in 2010,
compared with 15%, 6.3% and 5% from
China, Korea and Taiwan, respectively.
This indeed is a dismal record for a country aspiring to join the global knowledge
elite. Besides, the information technology
(IT) sector contributes only 4.1% to Indias
GDP and 0.25% of employment (Deloitte
2007). This is a result of low investments
and of fewer people in the R&D activities
in India. It must however be noted that
India ranks ninth globally in terms of
june 28, 2014

scientific publication output (UNESCO


2010). The trend in number of scientific
publications for select countries is given
in Table 5 (see Note 1).
Table 5: The Number of Scientific Publications
(in thousands)
Country/Year

2000

2005

2010

US
China
India

139
30
18

140
70
30

140
135
40

Obstacles to R&D in India


The advantages that India offers as an
attractive destination for R&D to the
MNCs and the growth of in-house R&D
centres in Indian industry in recent times
was presented. But, it is clear that the
position of R&D in India in general and
Indian industry in particular is far from
where it should be, on the global scene.
It is therefore important to critically examine what are the obstacles limiting
the growth of R&D in Indian industry for
it to occupy its cherished position in the
select group of global economic powers.
The first and foremost is the late
awakening of the benefits of R&D in the
collective mindset of Indian industry,
as emphasised by V Krishnamurthy
(Deloitte 2007). It is only now dawning
that it is essential to catch up for the lost
time and to leapfrog by leveraging its
advantages, in the highly competitive
global economy.
The second is a reallocation of government funds with a greater share for basic
and applied research in the premier
educational institutions from the present
10%. This also enables the training of
more doctoral candidates in science and
engineering from the 8,302 in 2010-11
(see Note 1) to provide manpower for expanded R&D efforts.
The percentage of GDP devoted to R&D
in India is among the lowest in the world
and it must increase. It can only be by
the industry providing a larger share of
their revenues to in-house R&D and also
to collaborative R&D with academia and
government laboratories. This collaboration indeed is very limited in the case
of India due to differences in perceptions and priorities. For example, in
academia publications are a higher consideration due to the Publish or Perish
emphasis over usefulness to industry or
society, whereas economic contribution

vol xlIX nos 26 & 27

EPW

Economic & Political Weekly

NOTES

and cost-benefit analysis are uppermost in


industrys calculations. This explains why
the World Economic Forum (2008) ranks
India at 43 in terms of industry-academia
interactions compared with China (23),
Japan (21), South Korea (12), the UK (9)
and the US (1) (Mashelkar 2011).
Good quality R&D personnel are in
very short supply in India. It was already
pointed out that Japan has 50 times
compared to India in terms of R&D staff
per million population. This is in spite of
the fact that India has some excellent
educational institutions. The deficit thus
is in both quality and quantity. According to 2001 Census, India has about 154
million people in the age group of 19 to
24 years and eligible for tertiary education. However, of these only about 20
million (or about 13%) are enrolled in
the universities. It may also be noted that
most of them belong to the urban areas
(Yadav and Yadav 2010). The number of
PhDs in engineering graduating from the
premier institutions such as the Indian
Institutes of Technology (IITs), Indian
Institutes of Science (IISc), Institute of
Chemical Technology (ICTs) is little over
1,000 per year and too few to meet the
requirements of academia, R&D institutions (in industry, government laboratories and MNCs) besides the ones who go
abroad for postdoctoral research or work.
The quality of scientists who opt for R&D
is also poor, except those from a few institutions such as IISc and the new Indian
Institutes of Science Education and
Research (IISERs). The seriousness of the
problem of the quality and quantity of
engineers and scientists for carrying out
R&D in India was highlighted recently
with a sharp focus (Ramarao 2012, 2013;
Subbarao 1995; Agarwal 2009).
R&D Goals for Indian Industry
Once the corporate mindset is convinced
about the urgent need and justification for
R&D and innovation, what are the strategies to be followed to achieve the goals of
world class products (new and improved),
exemplary productivity, expanded markets, and motivated employees. While
each sector and company will arrive at
specifics in each of these areas in their
best judgment, there are some parameters common for all companies striving
Economic & Political Weekly

EPW

june 28, 2014

for global recognition. Some such common


objectives and pathways are listed here.
(1) Assured quality is essential for a
product or service. Indian industry has
taken it seriously by following Total
Quality Management (TQM), Six Sigma,
International Organisation for Standardisation (ISO) and similar tools. This has
enabled a number of companies to win
the most coveted Deming and Deming
Grand prizes in the last few years, e g,
Tata Steel, Rane (Madras), TVS-Lucas,
Reliance, SRF, Mahindra and Mahindra,
National Engineering Industries. Similarly, the software companies got certified for the quality parameters specified
by the Software Engineering Institute.
Meeting the stringent, measurable quality
parameters calls for a lot of focused
innovation and R&D.
(2) The productivity of Indian workforce
in the manufacturing industries is
reported to be one-third to one-fifth of
that of world leaders in efficient manufacturing (Gupta 2012). This calls for
urgent attention if we are not to be wiped
out by more aggressive MNCs. India can
no longer rest boasting of cheap workforce, since there are other ways of
cutting labour costs such as by replacing
tedious manual repetitive tasks by
machines. Productivity in manufacturing
industries cannot dependably be increased
by empirical, rule of thumb procedures,
but are now taken over by computer
simulation and optimisation of industrial
processes, which has been the practice
in advanced countries. In manufacturing industries, enhanced productivity
and assured quality have to go hand in
hand with other important variables:
energy savings, environmental pollution,
and waste minimisation and recycling.
Solutions to all these can be found only
through dedicated R&D and innovation.
(3) Quality of people is a key to the
success of any endeavour but more so for
creativity, R&D and innovation. Locating
the right people and motivating them to
excel and providing the freedom and rewards is a demanding responsibility for
the success of an enterprise to reach its
cherished place in the challenging global
knowledge scenario.
(4) Scaling up the contribution of the
manufacturing industry from the present

vol xlIX nos 26 & 27

17% to Indias GDP to reach 30% which is


the norm for the advanced economies
(Deloitte 2007), is a Herculean task and
calls for intense, all-round effort of the
highest quality in a sustained manner.
The magnitude of the problems is immense, particularly because advanced
nations continue their efforts at a high
level. Luckily, with a growing middle class
with expanding consumption habits,
home markets are expanding rapidly,
paving the way to face global competition.
The problems associated with bloating
production volumes calls for analytics
and strategy, which can be supplied by
appropriate R&D and innovation. Such
an impressive expansion has taken place
in the Indian pharmaceutical industry,
which resulted in over 85 Indian plants
approved by the US Food and Drug Administration, the largest number outside the
US (Deloitte 2007). Another example is
the Indian leather industry, which was
nearly wiped out because of antiquated
manufacturing methods and toxic chromium wastes. It is purposeful R&D and
innovation largely by the Central Leather
Research Institute in close collaboration
with industry that put this industry back
on its feet and running.
(5) R&D partnership for Indian industry
with academia in India and abroad is
essential for success in emerging global
knowledge economy. Effective means of
translating academic R&D output into
marketable products quickly is the valley
of death for most innovations. People
with special skills should be identified as
integrators of innovation to manufacturing products and capturing the market.
Such integrators should be able to communicate with researchers and innovators
on the one hand and designers, manufacturers and marketing people on the
other. Only the companies that can identify persons with such rare skills, groom
them, back them all the way, can bring
the two camps R&D community and
manufacturing industry together to
work towards a common goal. This delicate but crucial step can be helped by
venture capital, since industry by itself
will be unwilling to take the necessary
risks even in promising circumstances.
The government can also play a crucial
role by providing support on a shared
91

NOTES

basis to reach their goal in supporting


R&D in the first place and then help
reach the market. It has already been
mentioned that some of the leading US
universities have come a long way in exploiting academic R&D and innovation
by industry. This is the need of the hour
and Indian industry has to identify it as
such and work hard at it.
(6) In sum, a clear vision, good R&D and
innovation and dedicated systematic implementation are the keys to enable Indian
manufacturing industry to mature and
grow to join the world economic powers.
Urgent Needs
Having noted the indisputable potential,
the present pathetic position of India in
the world R&D scene and the major obstacles in reaching the cherished goals
of R&D in Indian industry, it is pertinent
to identify some effective solutions which
can be implemented on an urgent basis
to move from a stagnant position to an
aggressive one. The trajectory can consist of the following things. Availability
of an adequate number of well-qualified
R&D personnel from our premier institutions. The number of PhDs from these

academia has to quickly increase by an


order of magnitude without compromising on quality. Students entering for this
purpose should come from three streams:
regular entrants; present teachers in the
existing colleges under an expanded Quality Improvement Programme (QIP) with
each college deputing at least one candidate a year, with the government reimbursing the associated costs to the college to enable hiring of temporary teachers; industry deputing their staff for
higher studies in India, which has clear
benefits to industry and equally importantly to the academia since the industry
candidates bring in much-needed awareness of the needs of the Indian industry
to the academia. The recent innovative
programmes of the DST, such as INSPIRE,
J C Bose Professorships, should prove
helpful in increasing the number and
quality of R&D personnel.
The academia-industry interaction
which is totally inadequate at present
can be increased by the National Science
and Engineering Research Board setting
aside funds specifically earmarked for
projects jointly submitted by industry
and academia, which is already the

practice in advanced economies. Large,


medium and small industries can be
involved in this initiative. The arrangement for faculty to consult with industry
should be expanded to include summers
spent in industry working on industryidentified problems, which are clearly
beneficial to all the three parties concerned: faculty, industry and the institution. Such a scheme, called High Level
Summer Industrial Opportunities Programme for Faculty was successfully
started 50 years ago in IIT Kanpur
(Subbarao 2008).
The present incentives available for
in-house R&D, registered with the DSIR,
should be periodically reviewed and
expanded to cover special provisions.
These could include special awards to
industries when the discoveries of their
in-house R&D are patented and implemented with measurable benefits in new
products or improvements in productivity,
energy use and environmental gains. The
annual reports of the companies should
include patents obtained and implemented
and a measure of the benefits achieved.
Some forward-looking companies abroad
already supply information on the

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june 28, 2014 vol xlIX nos 26 & 27 EPW Economic & Political Weekly

NOTES

percentage of their present sales from


products they did not market last year
or the year before. Fiscal incentives
and tax breaks to stimulate R&D in
industry such as enhanced tax deduction emerged as a policy tool overthe
recent decades. These are available to
in-house R&D units in industry, recognised by the DSIR (INAE 2012).
Strategy and Action Plan
In a nutshell, the steps to be taken by the
three parties industry, academia and
government on an urgent, cooperative
basis are outlined here to propel Indian
industry to provide innovative, advanced
products worldwide and establish India
as a top player in the short-term.
(1) Industry is the key player which has
to drive this action plan.
(a) Create in-house R&D with the best
possible people and modern equipment.
(b) Venture capital should be available
to smaller and new enterprises to undertake R&D.
(c) Create intellectual property rights
cells in companies to aggressively pursue
patenting and exploit patents and those
not exploited internally, market them.
(d) Register with DSIR to derive tax
benefits and any other help from the
government.
(e) Identify and focus on some long-term
and some short-term goals in terms of
new products/processes, improvements
in quality, productivity, energy savings,
environmental safety, waste management to bring about cost reduction.
(f) Add technology integrators to the
staff.
(g) Establish close interaction with one
or more academia for input of key advanced concepts.
(h) Depute staff to Indian academia for
higher studies and experienced ones as
adjunct faculty.
(2) Academia has also to come down
from its high pedestal and aloofness
from industry.
(a) Produce quality graduates and postgraduates with proper orientation for
R&D and production.
(b) Faculty to consult with industry in
an expanded, meaningful mode on a
year round basis and on sabbaticals,
more than at present.
Economic & Political Weekly

EPW

june 28, 2014

(c) Improve intellectual property protection by creating a cell for this specific
purpose and to enable faculty to exploit
the patents by setting up enterprises, or
to market the patents to others.
(d) Undertake joint projects with industry to deliver results in the form of new
products/processes.
(e) Employ experienced industry people
as adjunct faculty or on sabbaticals.
(3) Government should lower their traditional blinkers about private sector
companies.
(a) Funding of joint projects with
academia and industry as partners with
a goal of taking innovations into industry as new products and improved/novel
processes, making fuller and imaginative use of the National Science and
Engineering Research Board, TIFAC and
Technology Development Board (TDB).
(b) Review and revise the incentives to
in-house R&D units and reward companies for successful exploitation of Indian
innovations from their own R&D as
well as from academia and government
laboratories, with an active role played
by TIFAC and TDB.
(c) Strengthen R&D and innovation by
focused funding in selected projects of
national importance or cutting edge
technology in selected institutions on intense enough scale to include the cost of
technology transfer and risk-taking, to
achieve quick economic results.
Likely Benefits
If the road map sketched here is implemented quickly with all seriousness, the
industry is sure to reap benefits in the
form of improved top- and bottom-lines
of the balance sheet by enhanced sales in
India and, equally importantly, globally.
The percentage of GDP invested in R&D,
which remained abysmally small at or
below 1% for 60 years will grow to 2% or
above as in the case of advanced economies at present. This will have a direct
impact on the growth of GDP. It will create more employment at all levels and
start shifting manpower from agriculture to industry and a host of related activities. Equally importantly, it will lift
the image of India in international economic circles and find a solid, well-earned
place among the top global economic

vol xlIX nos 26 & 27

powers. It will provide the necessary


elbow room for the government to
strengthen the educational and skill
development efforts.
Notes
1 R&D Statistics, Department of Science and
Technology (DST), Government of India (http:
//www.nstmis-dst.org/).
2 UK Department of Trade and Industry (http://
webarchive.nationalarchives.gov.uk/+/http:
//www.dti.gov.uk/index.htm).
3 Science and Engineering Indicators (www.nsf.
gov/statistics/indicators/2012).

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