India believes in copy paste over innovation

India has four notable S&T clusters, thanks to the more than 1000 Global Capability Centres (GCCs) assorted MNCs have set up in India, either as direct subsidiaries or as outsourced work centres run by Indians for their global clients.

There are hardly any Indian companies setting up their own capability centres in India. What makes Indian companies so shy of spending on R&D?

India’s aggregate R&D spending is one of the lowest in the world for a country with serious ambition for economic growth and strategic autonomy.

India spends less than 0.7% of GDP on R&D. in contrast, the figure is greater than 5% for tiny Irsael, almost 5% for South Korea, 2.43% for China, 3.3% for Japan, 3.14% for Germany and 3.46% for the US.

Of India’s R&D expenditure, almost 60% is carried out by the public sector, the private sector accounting for R&D spending totalling 0.26% of GDP.

The GII 2023 report observes that for 1,700 of the top 2,500 global companies that spend serious money on R&D, total outlay crossed $1 trillion in 2021, and rose from 3.9% of turnover in 2018 to 4.5% in 2022. Leaders in software hardware and pharma industries spend close to a fifth of their turnover on R&D. Rare is the Indian company that spends even 1% of turnover on R&D.

What makes Indian companies so chary of R&D?

There are no readymade answers the temptation of low-hanging fruit is probably the primary culprit.

Unoriginal sin: There are so many ways to modify or adapt an existing business model or tech to Indian conditions and make good money that spending money on creating something altogether new seems like a delusion of grandeur. A more honest variant of this is licensing extant tech from the IP holder.

Capital problem: Access to capital is a constraint. Even venture funds that invest in India wish to make a quick buck from business models and technologies that have been found to work profitably elsewhere in the world. Domestic capital to finance creation of groundbreaking innovation is scarce.

‘Do not question’: Social hierarchy also inhibits critical thinking. To question received wisdom is anathema. The teacher teaches, the student learns, without questioning.

Macaulay tax: Overlaid on top of this is English-medium education, which imbues in the recipient a sense of superiority vis-à-vis those who study in non-English Indian languages and, simultaneously, a sense of inferiority vis-à-vis the White man. Those who study in the medium of English run the risk of being cut off from their own cultural roots and end up bereft of cultural confidence. Without validation by a White man, they would not have confidence in a new idea or business model they innovate on their own.

Overturning social hierarchy and generating a new culture of empowerment would seem to hold the key to unleashing the innovative potential of India’s millions.

TK Arun