ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Is India Becoming More Innovative since 1991? Some Disquieting Features

India is variously described as a knowledge-based economy in the making, thanks essentially due to her high economic growth and the role played by knowledge-intensive sectors such as information technology in spurring and maintaining this growth performance. This paper looks at the empirical evidence on whether this is indeed the case since the reform process began in 1991. A variety of conventional indicators are analysed and their movements over the last two decades or so are charted to draw some firm conclusions. The results show that instances of innovation are restricted to a few areas such as the pharmaceutical industry. Further, increasingly most of the innovations in industry are contributed by foreign firms operating in the country.


Is India Becoming More Innovative since 1991? Some Disquieting Features

Sunil Mani

India is variously described as a knowledge-based economy in the making, thanks essentially due to her high economic growth and the role played by knowledge-intensive sectors such as information technology in spurring and maintaining this growth performance. This paper looks at the empirical evidence on whether this is indeed the case since the reform process began in 1991. A variety of conventional indicators are analysed and their movements over the last two decades or so are charted to draw some firm conclusions. The results show that instances of innovation are restricted to a few areas such as the pharmaceutical industry. Further, increasingly most of the innovations in industry are contributed by foreign firms o perating in the country.

This is a revised version of a paper presented as public lectures at the Institute of Public Enterprise, the National Geophysical Research Laboratory, both at Hyderabad, the Lal Bahadur Shastri National Academy of Administration, Mussoorie and as seminars at CSTM, University of Twente, The Netherlands and at the Centre for Development Studies, Thiruvananthapuram. I am grateful to the comments that I received on these occasions and in particular to R K Mishra, V P Dimri, Manoj Panda, Chiranjib Sen, Sushil Khanna and Joy Clancy. Thanks are also due to V S Sreekanth for very efficient research assistance. The usual disclaimer holds good.

Sunil Mani ( is with the Centre for Development Studies, Thiruvananthapuram.

otwithstanding the global financial crisis, growth performance of India has attracted considerable attention among analysts of all hues and shapes. One of the issues that is highlighted in discussions is the emergence and rise of a number of knowledge-intensive manufacturing and service industries and these industries together now account for a growing share of the country’s gross domestic product (GDP). India has now become a growing destination for innovative activities by multinational companies (MNCs) and this manifest itself in the form of a growing presence of foreign research and development (R&D) centres in the country. Foreign direct investment (FDI) from India has been steadily increasing and over 2007 and 2008 there were a number of high profile takeovers of western technology-based companies by Indian corporates. All these indicators have prompted analysts to think that India has become more innovative since 1991 and recent attempts at measuring the contribution of technology to economic growth essentially through measures such as total factor productivity (TFP) appear to indicate that Indian industries, both in manufacturing and services sectors, have become active from the innovation point of view. In the context, the purpose of the present study is to inquire into the direct evidence on whether innovative activities are on the rise in India. For this, we employ a variety of conventional indicators of innovation as data on new indicators are practically non-existent in the Indian context.

The paper is structured into three sections. Section 1, employing conventional indicators of innovative performance presents the trends in innovation in Indian industries. Recourse to conventional indicators is resorted to in the absence of new innovation indicators for India. Section 2 identifies two major disquieting features that can act as limiting factors to sustaining and improving innovative activity in the country. And finally Section 3 sums up the main findings of the paper.

1 India’s Innovative Performance

Over the last several years there has been much discussion in the popular press about the rise of innovations in India. In my view, this discussion has been precipitated by a number of indicators of innovations in India’s economy. These are: (a) Improvement in India’s rank in the Global Innovation Index; (b) many instances of innovation in the services sector, especially in the healthcare segment; (c) increase in knowledge-intensity of India’s overall output; (d) growing FDI from India including some high profile t echnology-based acquisitions abroad by Indian companies; and

(e) competitiveness in high technology areas.

Economic & Political Weekly

november 14, 2009 vol xliv no 46


0% 20%40%60%80%100%Higher Education 3.04 4.33 4.02 4.20 4.17 4.51 4.88 4.40 Industry 13.84 21.74 21.17 18.46 18.05 19.33 20.27 20.05 19.81 30.40 Government 86.16 78.26 75.79 77.21 77.94 76.48 75.56 75.44 75.30 65.20 1990-91 1995-96 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Higher Education Industry Government

According to the Economist Intelligence Unit (2009), India’s rank in its Global Innovation Index1 increased from 58 in 2002-06 to 56 in 2004-08 and is predicted to further increase to 54 by 2009-13. According to the World Bank, India has emerged as the fifth largest economy in terms of its level of GDP in purchasing power parity (PPP) terms. However, relatively speaking her economy is only one-half of that of China’s. India’s real GDP has grown at a rate of 5.7% during the period 1990-91 to 1999-2000, and it increased to 7.3% during 2000-01 to 2007-08 and over the last three years (2005-06 to 2007-08) it has been growing at the rate of about 9%. Currently, the service sector accounts for over twothirds of the economy and both service and manufacturing sectors have been performing very well. For a very long time the policymakers in the country never specifically used the term innovation in an explicit manner in Indian policy documents dealing with technological activities. For instance, the most recent policy document to promote innovations is titled the Science and Technology Policy 2003. But given the international trend and in realising the increasing number of innovations emanating from the country, a draft National Innovation Act is in the anvil and the usage of the expression “innovation” in this document is more than symbolic. In fact, there is a fair amount of belief in both policy and business circles that the country is becoming more innovative, at least certain specific industries in both manufacturing and service sectors have become important generators of innovations.2 Within the manufacturing sector itself a number of innovations have been reported from the automobile and medical devices industries.3 However, this proposition has not been subject to any rigorous empirical scrutiny.

Formal attempts at measuring innovation are supposed to have been on for very nearly 50 years or so. The first step involved in measuring innovation is to have a precise definition of the term “innovation” itself and then transliterating that definition into quantitative indicators. Indicators are essentially proxies, which come as close to the concept that is being measured. Although, there are a large number of definitions of the term “innovation”, most of these are at best descriptions of it. This is because innovation is complex, non-linear, multidimensional, and unpredictable. No single measure is likely to characterise innovation adequately

Economic & Political Weekly

november 14, 2009 vol xliv no 46

in its totality. Further, important aspects of innovation such as knowledge cannot be measured directly. Despite these difficulties the one definition that is very often invoked is that attributable to Schumpeter and found in his Theory of Economic Development. According to this definition, innovation is “the commercial or industrial application of something new – a new product, pro cess or method of production; a new market or sources of supply; a new form of commercial business or financial organisation”. Thus it can be seen that this definition is sufficiently broad enough to encompass both tangible and intangible innovations. However, a survey of the evolution of innovation indicators (Smith 2004) shows that most of these indicators, if not all, have a ttempted to measure tangible inputs and outputs of only product and process innovations. This is because, in those days (namely, during the 1950s, 1960s and 1970s), most of the economies were dominated by the industrial sector where there was a reasonable frequency of the occurrence of product and process innovations and service sector innovations were very rare. Although new indicators for measuring innovation through innovation surveys have appeared, their widespread diffusion has been limited due to the low response rates to these surveys and due to the poor quality of the data. Therefore, we have been constrained to measure innovative performance at the macro level (namely, at the level of a nation state) by employing the conventional measures of input to innovation in the form of intra-mural R&D investments and output indicators such as various types of patents and the technology balance of trade. E mploying these indicators, I measure India’s innovative performance during the period since the onset of economic reforms in 1991.

1.1 Trends in R&D Investments

I start by analysing the overall investments in R&D in the country as a whole (Table 1, p 44). Trends in R&D investments both at constant and current prices are tracked so also the overall Gross Expenditure on Research and Development (GERD) to GDP ratio as well. Both the nominal and real growth rates have declined since 1991 and the overall research intensity of the country has virtually remained constant pre- and post-liberalisation periods at about 0.78.4

Care has to be exercised while interpreting these figures that the overall investments in R&D have actually declined. This is because of certain peculiarities with respect to India’s R&D performance. Even now the government accounts for over 63% of the total R&D performed within the country although the share of government has tended to come down over time (Figure 1). This has been accompanied by an increase in R&D investments by business enterprises, which now account for about 30% of the total – a significant increase from just 14% in 1991 (for China the similar percentage is about 71% by business enterprises and research institutes (read government) account for only 19%). The increase in the share of R&D performed by business enterprises is generally considered to be a desirable trend as business enterprises tends to implement or productionise the results of their research rather more quickly than the government sector where much of the research does not fructify into products and process for the country as a whole.5

Table 1: Trends in India’s Overall Investments in R&D (1980-81 to 2007-08;
Current and constant values are in Rs Crore; constant values are in 1999-2000 prices)
GERD Nominal Growth GERD Constant Real Growth GERD to GDP
Current Rates (%) Rates (%) Ratio
1980-81 761 3,686 0.57
1981-82 941 24 4,112 12 0.61
1982-83 1,206 28 4,855 18 0.70
1983-84 1,381 15 5,127 6 0.68
1984-85 1,782 29 6,124 19 0.78
1985-86 2,069 16 6,628 8 0.81
1986-87 2,435 18 7,298 10 0.86
1987-88 2,853 17 7,809 7 0.89
1988-89 3,347 17 8,457 8 0.87
1989-90 3,726 11 8,673 3 0.84
1990-91 3,974 7 8,361 -4 0.77
Average 18 9 0.76
1991-92 4,513 14 8,348 0 0.76
1992-93 5,005 11 8,504 2 0.73
1993-94 6,073 21 9,382 10 0.77
1994-95 6,622 9 9,320 -1 0.72
1995-96 7,484 13 9,651 4 0.69
1996-97 8,914 19 10,665 11 0.71
1997-98 10,611 19 11,908 12 0.76
1998-99 12,473 18 12,954 9 0.77
1999-2000 14,398 15 14,398 11 0.81
2000-01 16,199 13 15,688 9 0.84
2001-02 17,038 5 16,022 2 0.81
2002-03 18,000 6 16,304 2 0.80
2003-04 19,727 10 17,276 6 0.78
2004-05 21,640 10 17,960 4 0.75
2005-06 28,777 33 22,954 28 0.88
2006-07 32,942 14 24,895 8 0.87
2007-08 37,778 15 27,413 10 0.88
Average 16 7 0.78

Source: Department of Science and Technology (2006 and 2008).

An interesting result thrown up by the above analysis is that the higher education sector, which includes the prestigious Indian Institute of Science, the Indian Institutes of Technology and a host of over 300 universities, constitutes only a very small share of the total R&D performed within the country. In other words, the higher education sector in India is not a source of technology for the industry. However, the sector is an important source of

human resource for the other actors in India’s national system of innovation.

It is thus seen that the only actor of the country’s innovation system that has increased its share in total R&D performance has been the industrial sector. Within the industrial sector much of the R&D is performed by private sector enterprises (Table 6, p 47).

C urrently, Indian private sector enterprises spend approximately

four times their public sector counterparts and nearly three times

when compared to GRIs. In other words in terms of R&D performance, the private sector enterprises in India are moving towards the core of India’s innovation system.

This increase in the share of private sector in the performance of R&D is sometimes questioned on the grounds that the private sector enterprises reporting expenditures in this area to the DST would have exaggerated their spending to gain tax incentives that are available in India to any business enterprise investing in R&D. These tax incentives are linked to the volume of R&D performed. Hence the desire to overstate it. However, this does not appear to be the case and in order to verify this proposition we have compared the R&D investments as reported by the DST with those available from the Centre for Monitoring Indian Economy’s (CMIE) Prowess dataset (Appendix Figure 1, p 51). The comparison shows that although the level of R&D as reported by DST is higher over most of the years under consideration, the differences in the levels have tended to decrease over time. Moreover, the direction of movement of both the series is more or less exactly the same. So the argument that the increase in R&D expenditure by private sector enterprises is a mere statistical artefact does not appear to be true.

Within the industrial sector about four industries account for a significant share of R&D investments (Table 3, p 45). The pharmaceutical and the automotive industries are the two most important spenders on R&D. In fact, it is sometimes said that India’s national system of innovation is led by the sectoral system of innovation of her pharmaceutical industry.

An interesting point to be noted is that the R&D expenditure of the pharmaceutical industry was expected to decrease after the Indian Patent Act in 2005 was amended in compliance with the Trade-related Aspects of Intellectual Property Rights (TRIPS). This reasoning was based on the belief that much of the Indian R&D in pharmaceuticals was of the “reverse engineering” type and this may not be possible since the amended patents act requires recognition of both product and process patents, thus effectively reducing the space that is available for executing R&D projects of this type. However, in actuality, the R&D investments of private sector pharmaceuticals in India have been registering an increase of almost 35% per annum (Figure 2).

It can, therefore, be safely concluded that although overall R&D investments may not have increased, there have been tremendous increases in R&D by the private industrial sector enterprises led by the pharmaceutical industry. So based on this one

Figure 2: Average R&D Expenditure Per Firm in India’s Pharmaceutical Industry: Pre- and Post-TRIPS Compliance



Average R&D expenditure (in Rs crore)



4 Average per company


1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: Own compilation based on the Prowess dataset.

indicator, the more correct statement to be made is that there is not enough evidence to show that the entire industrial sector in India is becoming more innovative since 1991, but there is some evidence to show that the India’s pharmaceutical industry


Public Sector Government Private Sector Ratio of Private Ratio of Private Enterprises Research Enterprises Sector to Public Sector to Government Institutes Sector Enterprise Research Institutes

1985-86 1,986.18 1,622.7 2,519.44 1.27 1.553

1986-87 2,356.99 1,723.36 2,916.33 1.24 1.692

1987-88 2,884.66 1,851.29 3,102.67 1.08 1.676

1991-92 4,843.88 2,745.50 6,369.44 1.31 2.320

1992-93 5,139.50 2,993.65 8,362.47 1.63 2.793

certainly is becoming more innovative. I propose to confront this proposition a bit more, but this time employing an input-based indicator such as the number of patents applied for and awarded.

1.2 Trends in Patenting

I consider the performance of Indian inventors with reference to four (three foreign and one Indian) different types of patenting. First and foremost is the US patenting performance, followed by India’s share in the Patent Cooperation Treaty (PCT) applications6 and in Triadic7 patents. This is followed by a discussion of the recent surge in Indian patenting within India itself.

1.2.1 US Patenting Behaviour of Indian Inventors

The US is considered to be the main market for disembodied technology and securing a patent for a new innovation in either a product may signal the technological strength of a firm or an institution that is actually patenting in that country. Further, the US Patent and Trademark Office (USPTO) is supposed to have one of the lowest home biases as more than 50% of the patents that are issued in the US goes to-

Table 3: Industry-wide Distribution of Industrial R&D (cumulative shares in%, wards non-US entities. For 1998-99 to 2002-03)

these two reasons the

Industry Share

number of US patents is a

Metallurgical industries 4.21

good indicator. Given the av-

Fuels 6.12

erage time lag of two years

Electricals and electronic equipment 8.94

between patent applications

Telecommunications 3.75

and patent awards, I consider

Transportation 15.16

both patent applications and

Chemicals (other than fertilisers) 8.35

Drugs and pharmaceuticals 19.30 those awarded in the US.
Defence industries 8.32 Three dimensions of US pat-
Information technology 4.69 enting are considered: first

Biotechnology 1.59 the volume of patent applica-Others 18.97

tions and awards, second the

Total 100.00

distribution of patents ac-

Source: Department of Science and Technology

(2006 and 2008). cording to the ownership of

Economic & Political Weekly

november 14, 2009 vol xliv no 46

the assignee and third the field of specialisation of patenting from India.

Volume of Patents: The number of patents applied for and awarded is presented in Figure 3. In order to see the significance of Indian patenting I compare it not only across time but across the Brazil, Russia, India, China, and South Africa (BRIC) group of countries as well.

The tables indicate that there has been a tremendous increase in the number of patents applied for and awarded since 1991. India accounts for approximately a third of the patents applied for and awarded by BRICS country innovators in the US.

In order to find out the specific year or years in which the structural break dates have occurred in patenting so that one can identify phases of growth (both in the applications and in awards), we perform some econometric tests8 (Table 4, p 46).

In the time series in patent applications and awards over the long period, 1965-2007, three break dates have been observed: for applications it is 1973, 1983 and 1992 and in the case of awards the three break dates are 1970, 1979 and 1997. It is seen that in

Figure 3: Number of Patents Applied For and Awarded to Indian Inventors in the USPTO (1963-2008)

3000 0.4

Number of patents applied for and awardedRatio of India to BRICS 2500 2000 1500 1000 500 0 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 Ratio of India to BRICS Applications Awards

1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 Source: Compiled from the USPTO.

both cases there are two break dates of 1992 and 1997 and these are during the phase of economic liberalisation in the country. The time lag in the break dates in applications and awards is found to be five years as against the actual time lag of two years between patent applications and awards.

The lagged relationship9 between patent applications and awards (Figure 4, p 46) indicates that over the years the success rate of Indian applications (defined as the ratio of patent awards in year ‘t+2’ to applications in year ‘t’) for patents has actually decreased. This finding is interesting as during this period the USPTO had become a bit more liberal in awarding patents (Jeffe and Lerner 2004).

An analysis of the distribution of ownership of these patents (Table 5 and Figure 5, p 46) shows that in 1991, domestic inventors (consisting of government research institutes (read as CSIR), private sector enterprises and individuals) accounted for about 71% of the innovations taking place within the country. This has since got reduced to just 39%. The share vacated by domestic inventors have been taken up by foreign companies implying the


Break Dates First Break Second Break Third Break

1 Patent applications 1973 1983 1992

2 Patent awards 1970 1979 1997

Growth Rates (%) Period 1: Period 2: Period 3: Period 4: 1965-73 1974-83 1984-92 1993-2007

Distribution of Indian Patents in Distribution of Domestic Patents

the US according to Ownership (%) according to Ownership (%) MNCs Domestic GRI Private Sector Enterprises IOP

1991 29 71 27 27 45

2007 61 39 55 30 15

GRI: Government Research Institute; IOP: Individually Owned Patents . Source: Compiled from USPTO.

fact that many affiliates of MNCs have started doing R&D – often enough through the outsourcing mode10 – and have started taking patents based on this research. This implies that increasingly most of the US patents that are assigned to India are actually owned by MNCs. So an increase in the number of Indian patents in the US need not necessarily correspond to an increase in India 1999. A run through the list (Appendix Table 2) of these enterprises shows that almost all of them are from the IT and IT-related industries.

Thus, combining the data (Appendix Tables 1 and 2) it is clear that Indian private sector enterprises are specialising in pharmaceutical innovations while the foreign enterprises are specialising in IT-related patents. As a result, specialisation of Indian patenting in the US (Table 6) has actually increased. For instance in 1991, almost 65% of the Indian patents were in a wide range of technologies although the single largest patenting was in the area of pharmaceuticals and chemicals. But by 2007 almost 72% of the patenting was in just two broad areas of pharmaceuticals and ITrelated technologies.

In order to find out if Indian patents are competitive or not, I have computed the Revealed Technological Advantage (RTA) indices of two of the leading technologies in which Indian companies and CSIR are prolific (Figure 6). These are Class 424 Drug, Bio-Affecting and Body Treating Compositions (DBABTC) and 532 (Organic Compounds (includes Classes 532-570)).

Figure 4: Lagged Relationship between Patent Applications and Awards


becoming more innovative or at best this proposition is difficult

to be substantiated in an unambiguous fashion.

The CSIR has an extremely good patenting record until 2003

(Figure 5) and thereafter it seems to be tapering off. The precise

reasons for this declining rate of patenting in CSIR require some

in-depth examination. Currently, CSIR is in the process of consoli

dating its patent inventory. It is supposed to be having a total of

3,016 patents in force (1,770 foreign, and 1,246 Indian patents)

and it is planning to transfer these to an independent profession

ally-managed holding company of the type like Intellectual Ven-

Number of patents applications for and grants 1400 1200 1000 800 600 400 200 0 Patent applications Patent grants lag two years

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005

tures Llc (Koshy and Kumar 2008) so that these patents can be

Source: USPTO.

more gainfully licensed and royalties earned. The next important category among domestic inventors is pri-

Figure 5: Trends in US Patenting by MNCs Operating from India, CSIR and Domestic vate sector enterprises (Figure 5). A run through this list of Private Sector Enterprises

d omestic enterprises (Appendix Table 1, p 50) shows us an inter


esting result, namely, that almost all the 23 firms11 excepting for

one a ctive in obtaining patents abroad are pharmaceutical firms and the only non-pharmaceutical firm is the largest IT services firm in the country.

This data further confirms that most of the innovations in India are actually done by pharmaceutical firms. Although IT services are an important industry with significant exports, the firms within the IT services industry in India do not appear to be active in patenting. A number of hypotheses have been put forward for this. First of all, Indian IT companies are much more services companies where they do not have that much scope for patenting as compared to the global IT companies which are more

Number of US patents granted 250 200 150 100 50 0 1969 1975 1981 1987 1993 1999 2005 2007 MNC CSIR Domestic private sector enterprises

product-oriented. Second, Indian IT companies depend on other forms of intellectual property right (IPR) mechanisms such as trade secrets and reducing the time spent to complete any typical project than filing patents as forms of IPRs.12

However, currently most of the Indian patents in the US are held by MNC affiliates operating from India. In fact, one can see a (Figure 5) sharp rise in the US patenting of these enterprises since

Both the indices are above unity implying competitiveness although for both the leading technology classes India’s competitiveness has been fluctuating for most of the years and since 2000 or so has been decreasing. Given the fluctuations in the data series, it is of course not so easy to conclude that competitiveness is actually decelerating.


Chemicals and Pharmaceuticals IT-Related Telecommunications Total

1980 50.00 0 0.00 50.00

1991 45.45 0 4.55 50.00

2003 57.89 16.37 1.46 75.73

2007 30.04 33.52 8.42 71.98

Source: Compiled from USPTO.

RTA 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 532 424

Apart from US patenting, it is also possible for Indian inventors to secure patents abroad. Two of the important avenues for patenting are PCT applications at the World Intellectual Property O rganisation (WIPO) and Triadic patents.

1. 2.2 PCT Applications

India joined the PCT in 1999. Thereafter, the number of applications from India has been increasing and most of these are by firms and institutions (legal entities). See Appendix Table 3 (p 51). According to a news item in the journal Current Science (Anonymous 2003), India’s CSIR is one of the most notable performers from among the developing world in terms of PCT applications.

In fact, CSIR is supposed to be sharing the first rank along with Samsung of Korea although within the CSIR this good performance in patenting is restricted to just five laboratories13 out of a possible 38. An analysis of the technology-wide distribution of these patents (Appendix Table 4, p 51) confirms the result that we have obtained earlier from the analysis of US patenting. Most of these patents are in organic chemistry and in pharmaceuticals – showing that India’s innovation capability is largely in these specific areas.

1.2.3 Triadic Patents

The methodology used for counting patents can influence the results. Simple counts of patents filed at a national patent office are affected by various kinds of limitations, such as weak international comparability (home advantage for patent applications) and highly heterogeneous patent values. The OECD has developed triadic patent families, which are designed to capture all important inventions only and to be internationally comparable. The performance of a country in securing Triadic patents is a good indicator of not just the quantity of innovations but also of its

Economic & Political Weekly

november 14, 2009 vol xliv no 46

quality for the simple reason that since patents have to be taken from three different patenting offices and given the high cost of not just securing these patents but maintaining these as well, firms and institutions are likely to self-select only their best inventions to be patented. So one may use the number of Triadic patents secured by a country as a good indicator of its innovative performance. Employing this indicator (Table 7) it is seen that India (along with China) has registered one of the highest growth rates in these kinds of patents and both the countries have a larger share of the BRICS as well.

Data on the ownership of these patents is not readily available. It may well be that (as noted in the case of US patents, these patents are actually owned by MNCs operating from India and in which case interpretation of an increase in the growth of Triadic patents secured by India may not mean India becoming more innovative.

1.2.4 Patenting in India

Hitherto, our discussion has been solely in terms of foreign patenting of Indian inventors. I now turn to the performance with respect to Indian patenting (Figure 7, p 48). Traditionally speaking, foreigners have taken more patents in India than Indians at the India Patent Office. This trend has continued during the post- liberalisation period although the ratio of Indian patents to foreign patents has increased from 0.37 to 0.46 between pre- and post-liberalisation implying a surge in Indian patenting. This is also reflected in the significantly higher

Table 7: Performance of India in Triadic Patents as Compared to Select Other Countries and Total World (1990-2006)

Brazil Russian Federation China India South Africa World
1990 10 21 12 12 13 32,417
1991 6 36 12 8 18 29,786
1992 13 45 17 7 33 29,922
1993 22 34 16 8 32 30,794
1994 12 51 17 6 21 32,414
1995 17 60 21 11 25 35,731
1996 18 58 23 14 29 39,098
1997 29 69 43 22 34 41,515
1998 29 94 47 34 35 42,878
1999 31 60 62 40 31 45,507
2000 33 69 84 45 35 47,162
2001 47 56 114 85 24 45,565
2002 44 48 178 106 28 46,120
2003 51 51 252 120 30 48,093
2004 51 55 290 122 33 50,727
2005 56 64 384 133 31 50,569
2006 65 63 484 136 30 51,579
Growth rate (%) 18.77 10.38 27.86 20.98 8.39 3.04

Source: OECD (2009).

growth rate of almost 24% per annum during the post- liberalisation period compared to just 5% per annum during the pre-liberalisation period. An interesting point brought out by the above table is that the TRIPS compliance of the Indian patent regime appears to have signalled a surge not just in foreign patents awarded in India but also Indian ones. Analysis of technology-wide patenting (Table 8, p 48) shows that chemicals,

Chemical Drug Food Electrical Mechancial Computer/ Bio-General Total Chemicals+ Electronics technology Drug+ Bio


1999-2000 516 307 250 147 569 92 1,881 823

2000-01 353 276 72 142 254 221 1,318 629

2001-02 483 320 36 139 311 302 1,591 803

2002-03 399 312 67 118 228 255 1,379 711

2003-04 609 419 110 396 539 401 2,474 1,028

2004-05 573 192 67 245 414 71 71 278 1,911 836

2005-06 1,140 457 110 451 1,448 136 51 497 4,320 1,648

2006-07 1,989 798 244 787 2,526 237 89 869 7,539 2,876

2007-08 4,071 1,469 88 1,078 3,230 2,052 314 2,959 15,261 5,854

Source: Controller General of Patents, Designs and Trade Marks (various issues).

Figure 7: Number of Patents Granted to Domestic and Foreign Inventors by the Indian PTO


pharmaceuticals and biotechnology are the preferred areas while mechanical engineering and computer technologies too have registered important increases in patenting during the post-liberalisation period.

In conclusion, our detailed analysis of both foreign and Indian patenting presents us with the following:

(i) There has been a significant surge in patenting by Indian inventors abroad and in India; (ii) the share of domestic inventors is still much lower than those of foreign inventors using

India as a R&D location; (iii) most of the domestic patents are in

chemicals and pharmaceuticals; while the foreign patents are in

IT and computer software-related areas; and (iv) among the do-1000 mestic inventors, CSIR is an important entity although private sector pharmaceutical enterprises too are very important. 0

1.3 Technology Balance of Payments -1000

India’s TBoP over the years since 1999-2000 (Figure 8). It is seen that India has been a net importer of technology until 2004-05. Over the last three years, the country has become a net exporter of technology thanks to increasing R&D and other technologybased outsourcing activities. Data constraints do not allow us to measure the TBoP industry-wide. But given the fact that much of R&D sourcing is confined to pharmaceutical and IT-related (including telecommunications) industries, this result, once again, substantiates the conclusions that we reached with the aid of the previous two indicators.

In conclusion, my analysis on India’s innovative performance over the period since 1991, the following points emerge:

  • Overall research intensity of the country as judged by rates of growth of GERD and GERD to GDP ratio has actually gone down since 1991.
  • But the share of the industrial sector within the overall GERD has actually increased by a factor of two since 1991 and the indus
  • 0.7

    Source: Controller General of Patents, Designs and Trade Marks (various issues). 1980-81 1985-86 1990-91 1995-96 2000-01 2005-06 2007-08 Indian Foreign Ratio of Indian to Foreign

    Ratio of Indian patents to foreign ones

    trial sector now performs close to a third of overall GERD.

    – Within the industrial sector over two-thirds of the industry is

    performed by private enterprises and most of these are concen

    trated in the pharmaceutical industry.

    – Analysis of various types of patent data and notably the USPTO

    data shows that much of it is actually done by MNCs operating

    from India, although the domestic private sector and enterprises

    and government research institutes (read CSIR) have also

    Number of patents granted








    0 increased their share of innovative activity during the period


    since 1991.

    – Once again, the patent data too shows that there is a specialisation in pharmaceutical technologies although MNCs operating from India tend to specialise in IT-related activities.

    Figure 8: India’s Technology Balance of Payments (1999-2000 to 2007-2008) 5000



    Total payments Total receipts TBoP

    in $ million


    The Technology Balance of Payments is the third indicator of innovative performance that is usually employed in the literature although due to data constraints and to difficulties involved in interpreting the results it is not a popular indicator of innovativeness like R&D expenditure and patents.14 TBoP measures international transfers of technology licences, patents, know-how and research, and technical assistance. Although the TBoP reflects a country’s ability to sell its technology abroad and its use of foreign technologies, a deficit position does not necessarily indicate low competitiveness. Only a handful of countries in the world are net exporters of technology (the prominent among them are the US, Japan and Switzerland). I have constructed

    1990-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

    Source: RBI (various issues).

    – This prompts us to conclude that India’s national system of innovation is largely dominated by the sectoral system of innovation of her pharmaceutical and IT industries. The former is largely in the hands of domestic enterprises while the latter is in the hands of MNCs.

    2 Disquieting Features

    Our analysis thus far draw our attention to the fact that improvement in innovative activities are restricted to a few sectors. In the

    2.1 Financing of Innovation

    India has two types of financial schemes for financing innovations: first, research grants and loans at concessional rates of interest and second, tax incentives for committing resources to R&D. A recent analysis by Mani (2008) showed that much if not all of the small number of research grants and loans available for financing innovations (such as those by the Technology Development Board, etc) are directed largely at the public sector although, as we have just demonstrated that, much of the innovations actually emanate from private sector enterprises. In short, there is a mismatch in the financing of innovations in the sense that research grants and concessional loans are not directed towards those sectors which are active in innovations. Second, the country has a tax incentive scheme for encouraging more investments in R&D. These incentives have been correctly fine-tuned to encourage innovations in 10 high and medium technology-based industries which are at the same time active in innovative a ctivity. Mani (2008) endeavoured to estimate the coefficient of elasticity of R&D with respect to tax foregone as result of this incentive scheme. The elasticity of R&D expenditure with respect to tax foregone as a result of the operation of the R&D tax incentive is less than unity for all the relevant industries, although it is s ignificant only in the case of the chemicals industry. In two of the industries, namely in automotive and electronic industries the elasticity is even negative, although not significant. From this the reasonable interpretation that is possible is that tax incentive does not have any influence on R&D, excepting possibly in the chemicals industry where it has some influence although even in this case the change in R&D as a result of tax incentive is less than the amount of tax foregone. This lack of a significant relationship between R&D and tax foregone can be explained by the fact that the tax subsidy covers only a very small percentage share (on an average 6%) of R&D undertaken by the enterprises in the four broad industry groups. So our conclusion is that for tax incentive to be effective in raising R&D expenditures it must form a significant portion of R&D investments by an enterprise. It is not thus a determinant of R&D investments by enterprises for the present.

    2.2 Availability and Quality of Science and Engineering Personnel

    The recent growth performance of knowledge-intensive industries in India is prompting many commentators to feel that India is transforming itself into a knowledge-based economy. The copious supply of technically trained human resource is considered to be one of the most important reasons for this growth performance. However, of late, the industry has been complaining of s erious shortages in technically trained manpower. For instance, a recent study (2007) conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) has revealed that the rapid growth in the globally integrated Indian economy has led to a huge demand for skilled human resources. However, lack of quality in the higher education sector has become a hindrance

    Economic & Political Weekly

    november 14, 2009 vol xliv no 46

    in filling the gap. The survey, based on a study conducted in 25 sectors, also showed that currently there is a shortage of about 25% skilled manpower in the engineering sector. Budgetary allocation for technical education has increased, although with some fluctuations. Its share as a proportion of expenditure on higher education has increased. In order to increase the quality of new supply of science and engineering personnel, the central government has established or is in the process of establishing five new Indian Institutes of Science Education and Research, eight new Indian Institutes of Technology, and 20 new Indian Institutes of Information Technology. Further, 30 new central universities of various sorts are going to be established.

    3 Summing Up

    There is evidence to show that innovative activities in the industrial sector have shown some significant increases during the post-reform process. Hi-tech industries now contribute over 5% of India’s GDP. The innovative activity is, of course, restricted to a few hi-tech industries. There is even some macro evidence to show that the productivity of R&D investments in India is higher than in China, although this proposition requires careful empirical scrutiny before firm conclusions can be reached. This rise in innovative activity is largely contributed by the domestic private sector if one takes into account all the indicators. Within the domestic private sector innovative performance is largely confined to the pharmaceutical industry. In short, India’s national system of innovation is to a large extent dominated by the sectoral system of innovation of its pharmaceutical industry and as such this trait is not widespread. Increasingly MNCs operating from India are also contributing to enhancing the country’s innovative performance. This is very likely the consequence of ever increasing FDI in R&D. Most of the MNCs patents are in the IT industry. In short, it may not be incorrect to draw the conclusion that India’s pharmaceutical and IT industries are becoming innovative, a lthough domestic enterprises are more active innovators only in the former while it is the MNCs that are active in the latter. Integration of India’s economy with rest of the world has opened up a number of opportunities which seem to have been capitalised by

    EPW Archives (1966-1998)

    EPW is pleased to offer to its readers digitised pages of the journal from

    the years 1966-98. The archives are hosted at the EPW web site. Please see “Archives 1966-1998” on the home page. The address is: These archives are available to all subscribers of EPW. They are hosted on a separate page and in a format different from the

    post-1999 archives.

    The pages for all the volumes for 1966-98 are now available.

    Readers are encouraged to read the detailed description of and introduction to the 1966-98 archives on the opening page of this section on the web site.

    Access to these archives is restricted to print/web subscribers of EPW. Please do subscribe to the journal to access these archives.

    the private sector industry. However, continued rise in innovative have to be made to increase both the quantity and quality of sciactivity is limited by the availability of finance and of good qual-entific manpower. Fortunately, the government is aware of this ity scientists and engineers. Although the available supply ap-problem and has started initiating a number of steps towards easpears to be very productive, it is important that to sustain this on ing the supply of technically trained personnel. The government a long-term basis and also to spread the innovation culture to still has to rethink its financial support schemes by reducing as other areas of the industrial establishment concerted efforts will much as possible the distortions that are currently in this area.

    Notes 12 According to press reports some of the leading IT Mani, Sunil (2008): “Financing of Industrial Innovaservices companies such as TCS, WIPRO and tions in India, How Effective Are Tax Incentives

    1 The index, which measures innovation perform-

    Infosys have filed for a number of patents, perhaps for R&D”, CD: Working Paper Series 405 ance in 82 countries, is based on the number of

    at the Indian Patent Office. See Mahalingam (Thiruvananthapuram: Centre for Development patents awarded to people from different coun

    (2003) and Gowda (2009). Studies).

    tries by patent offices in the United States (US),

    European Union (EU) and Japan. It also takes in 13 These five are IICT, CFTRI, CIMAP, RRL (JM) and Mahalingam, T V (2003), “Intellectual Property: Indian NCL. IT Wakes Up To Patents”, Dataquest, http://dqin

    factors that help and hinder the ability to

    vate, such as the amount of research and develop-14 Technology receipts and payments constitute the 103080411.asp (accessed on 20 July 2009).

    ment undertaken and the technical skills of the main form of disembodied technology diffusion. Ministry of Science and Technology (2007): China

    country’s workforce. See for details, Economist Trade in technology comprises four main catego-

    Science & Technology Statistics Data Book, http://

    Intelligence Unit (2009). ries:

    2 According to international press, the health deliv- – Transfer of techniques (through patents and P020080109573 867344872.pdf (accessed 15 July

    ery sector in India is one such sector that is replete licences, disclosure of know-how).


    with many innovations. See for the details, Econo-– Transfer (sale, licensing, franchising) of designs, Nayyar, Deepak (2008): “The Internationalisation of

    mist (2009). trademarks and patterns.

    Firms from India: Investment, Mergers and Ac

    3 The recent release of Tata’s Nano and the innova- – Services with a technical content, including tech

    quisitions”, Oxford Development Studies, March.

    tions in bio design (MAC 400 an ECG machine nical and engineering studies, as well as technical

    OECD (2009): OECD Factbook 2009: Economic, Envi

    that can be used in rural areas) from General assistance.

    ronmental and Social Statistics, http://titania.

    Electric’s (GE) John F Welch Technology Centre – Industrial R&D.

    in Bangalore are some of the innovations from the

    The main limitations of these data are the hetero-factbook2009/07/01/04/index.htm (accessed on formal corporate sector targeted essentially at the

    geneity of their content at country level and the 21 July 2009). rural sector that has made it into the news. For a

    difficulty of dissociating the technological from

    Reserve Bank of India (various issues): Reserve Bank systematic and journalistic account of the growth

    the non-technological aspect of trade in services,

    of India Bulletin.

    of innovations in India in recent times, see Bagla

    which falls under the heading of pure industrial

    Smith, Keith (2004): “Measuring Innovation” in Jan and Goel (2009).

    property. Trade in services may be under-

    Fagerberg, David C Mowery and Richard R Nel4 For China the GERD to GDP ratio has actually in-estimated when a significant proportion does not

    son (ed.), The Oxford Handbook of Innovation

    creased to reach 1.42% by 2006. See Ministry of give rise to any financial payments or when pay

    (New York: Oxford University Press), pp 148-78.Science and Technology (2007). ments are not made in the form of technology

    WIPO (2008): WIPO Statistics Database, July.

    5 Governmental R&D in India is expended by atom-payments. ic energy, defence, space, health and agricultural sectors. The spillover of government research to

    Appendix Table 1: Domestic Private Sector Enterprises

    References Active in Patenting at the USPTO

    civilian use is very much limited in the Indian

    Domestic Private Sector Enterprises Cumulative Total

    context although in more recent times, the con-

    Anonymous (2003): “Innovation Chain and CSIR”,


    scious efforts made by the government are slowly

    Current Science, Vol 85, No 5, pp 570-74.

    beginning to produce results. This is especially so

    Bagla, Gunjan and Atul Goel (2009): “Innovation from Ranbaxy Laboratories Ltd 78 in the area of space research.

    India: The Next Big Wave”, The Business Week,

    Dr Reddy’s Laboratories Ltd 33

    6 Any resident or national of a contracting state of

    11 February. the PCT may file an international application Dr Reddy’s Research Foundation 31

    Balakrishnan, P and M Parameswaran (2007): “Ununder the PCT. A single international patent apderstanding Economic Growth in India, A Pre-Dabur Research Foundation 28 plication has the same effect as national applica

    requisite”, Economic & Political Weekly, 14 July, Orchid Chemicals and

    tions filed in each designated contracting state

    pp 2915-22. Pharamaceuticals 22

    of the PCT. However, under the PCT system, in

    Controller General of Patents, Designs and Trade

    Panacea Biotec Ltd 16

    order to obtain patent protection in the desig-

    Marks (various issues): Annual Report.

    nated states, a patent shall be awarded by each Wockhardt Ltd 14

    Department of Science and Technology (2006 and

    d e signated state to the claimed invention con

    2008): R&D Statistics. Lupin Laboratories Ltd 13

    tained in the international application.

    Economist (2009): “Healthcare in India: Lessons from Sun Pharamaceutical7 A patent family is defined as a set of patents taken Frugal Innovator”, 16 April, http://www.econo- Industries Ltd 11 in various countries (i e, patent offices) to protect y.

    the same invention. Triadic patent families are a Aurobindo Pharma Ltd 10

    cfm?story_id=13496367 (accessed on 25 June

    set of patents taken at all three of these major pat

    2009). Torrent Pharamaceuticals Ltd 10 ent offices –the European Patent Office (EPO), the

    Economist Intelligence Unit (2009): “A New Ranking of Usv Ltd 9Japan Patent Office (JPO) and the United States

    the World’s Most Innovative Countries”, http://

    Patent and Trademark Office (USPTO). Biocon Ltd 8

    8 This is based on the methodology contained in Complete.pdf (accessed on 4 August 2009). Biocon India Ltd 7 Balakrishnan and Parameswaran (2007). I am

    Gowda, Aravind (2009): “Infosys to Increase Patent Sasken Communication grateful to M Parameswaran for the actual per-Filings”, Business Standard, 29 January, http:// Technologies Ltd 7formance of these tests.


    Dabur India Ltd 6

    9 Patents applied for in year ‘t’ is related to patents

    infosys-to-increase-patent-filings/311913/ awarded in year ‘t+2’. Gem Energy Industry Ltd 6

    (accessed on 20 July 2009). 10 Over the four-year period 2004-05 to 2007-08, Vittal Mallya Scientific

    Jeffe, Adam B and Josh Lerner (2004): Innovation and R&D outsourcing has been growing at a rate of Research Foundation 6

    Its Discontents: How Our Broken Patent System Is

    about 82% per annum.

    Endangering Innovation and Progress, and What

    Alembic Ltd 5

    11 The firm with the largest number of patents, Ran- to Do About It (Princeton: Princeton University

    Glenmark Pharamaceuticals Ltd 5

    baxy has been taken over by the Japanese MNC, Press).

    Daichi Sankyo in June 2008. Ranbaxy will now Koshy, Jacob P and K P Narayana Kumar (2008): Tata Consultancy Services Ltd 5 have to be classified as an affiliate of its Japanese “CSIR Looks to Profit from Patents Stock”, Mint,

    U & I Pharamaceuticals Ltd 5

    parent and therefore will have to be declassified

    Cumulative total 1969-2007 335

    as a domestic company, although this does not CSIR-looks-to-profit-from-pate.html (accessed on affect our present analysis. 18 July 2009). Source: Compiled from USPTO.

    50 november 14, 2009 vol xliv no 46

    DST vs CMIE

    Texas Instruments, Incorporated 180 40000

    International Business Machines Corporation 151


    General Electric Company 141

    Stmicroelectronics Pvt Ltd 70 30000

    Hoechst Aktiengesellschaft 46

    Cypress Semiconductor Corp 28

    Rs in million



    Broadcom Corporation 27 15000




    Adobe Systems,Inc 11

    Cadence Design Systems,Inc 9

    Indian Explosives Ltd 8

    Galaxy Surfactants Ltd 8

    National Semiconductor Corporation 8

    Monsanto Company, Inc 7

    Aktiebolaget Astra 7

    Hellosoft, Inc 6

    Hetero Drugs Ltd 6

    Lucent Technologies, Inc 6

    Microsoft Corporation 6

    Astrazeneca Ab 6

    Aventis Pharama Deutschland Gmbh 5

    Diebold Incorporated 5

    Genesis Microchip, Inc 5

    Hewlett-Packard Company 5

    Iowa India Investments Company Ltd 5

    Osram Sylvania, Inc 5

    Redpine Signals, Inc 5

    Sap Aktiengesellschaft 5

    Silicon Automation Systems Ltd 5

    Tektronix, Inc 5

    Cumulative total 1969-2007 1,101

    Source: Compiled from USPTO. Appendix Table 3: PCT Applications by Indian Inventors (2000-01-2006-07)

    Individuals Legal Entity Total

    2000-01 45 129 174

    2001-02 49 189 238

    2005-06 130 352 482

    2006-07 144 390 534

    2007-08 169 538 707

    Source: Controller general of patents, designs and trademarks (various issues).

    1990-91 1992-93 1994-95 1996-97 1998-99 2001-02 2002-03 Source: Own Compilation from DST (2006 and 2008) and CMIE, Prowess dataset.

    Appendix Table 4: Distribution of PCT Applications from India-Technology-wide

    Average Number 2001-05 Share (%)
    I-Electrical engineering
    Electrical machinery, apparatus, energy 131 1.08
    Audio-visual technology 61 0.50
    Telecommunication 183 1.51
    Digital communication 107 0.88
    Basic communication processes 142 1.17
    Computer technology 438 3.60
    IT methods for management 44 0.36
    Semiconductors 32 0.26
    Optics 45 0.37
    Measurement 201 1.65
    Analysis of biological materials 102 0.84
    Control 52 0.43
    Medical technology 1,795 14.77
    Organic fine chemistry 3,127 25.73
    Biotechnology 714 5.87
    Pharmaceuticals 2,872 23.63
    Macromolecular chemistry, polymers 182 1.50
    Food chemistry 393 3.23
    Basic materials chemistry 547 4.50
    Materials, metallurgy 323 2.66
    Surface technology, coating 78 0.64
    Micro-structural and nano-technology 3 0.02
    Chemical engineering 351 2.89
    Environmental technology 122 1.00
    IV-Mechanical engineering
    Handling 81 0.67
    Machine tools 50 0.41
    Engines, pumps, turbines 62 0.51
    Textile and paper machines 70 0.58
    Other special machines 178 1.46
    Thermal processes and apparatus 59 0.49
    Mechanical elements 54 0.44
    Transport 73 0.60
    V-Other fields
    Furniture, games 31 0.26
    Other consumer goods 53 0.44
    Civil engineering 23 0.19
    Total 12,155 100

    Source: WIPO (2008).

    Economic & Political Weekly


    november 14, 2009 vol xliv no 46

    Indian Council of Social Science Research Western Regional Centre

    The Indian Council of Social Science Research, Western Regional Centre (WRC) (covering Maharashtra, Gujarat, Goa, Diu and Daman) has recently embarked on a series of academic initiatives with an aim to further strengthen the status of social science research in the region. The WRC-ICSSR encourages institutions, academics, doctoral candidates and other stakeholders from the region who are involved in teaching and undertaking social science research to apply for the following programmes.

    Training programmes/Mentoring workshops/Research Methodology courses/Academic writing workshops/Development Conventions for capacity building of doctoral students, young faculty, and college teachers by undertaking/imparting training on issues related to social sciences research.

    Visiting Fellows/Lecture series/Collaborative engagements will support inviting eminent scholars, academics and policymakers up to two weeks for delivering and interacting with students and faculty. This program will also facilitate institutions to engage with the WRC in undertaking collaborative academic projects.

    Support for seminars/workshops/conferences and monographs aim at supporting proposals focusing on socially relevant contemporary themes.

    Study Grant for Doctoral students provides financial assistance to Ph.D. scholars in social sciences for consulting libraries/archives/data centres in different cities/towns in India for collecting materials related to their research.

    Support to Regional Journals aims at providing modest financial assistance to publish articles of contemporary interest for larger dissemination of scholarship through vernacular writings.

    All proposals should have a strong academic rigor and will be subject to a review. Maximum grant to each proposal, except the ones meant for doctoral students should not exceed Rupees Seventy five thousand (Rs 75,000/-). Activities under these proposals should be completed before 31st March 2010. Proposals selected for funding will be informed latest by 15th January 2010. Completed proposals should reach the Hon. Director, Western Regional Centre, J P Naik Bhavan, Mumbai University campus, Vidyanagari, Mumbai 400098 on or before 20th December, 2009.

    Dear Reader,

    To continue reading, become a subscriber.

    Explore our attractive subscription offers.

    Click here

    Back to Top