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Global Innovation: How will it help India?

March 1, 2011

We are in a globalized world where Indian youth loves to celebrate Christmas, craves for a McDonalds’ McChicken or Subway’s footlong, follows European soccer, and drinks Australian Fosters Beer. Any Indian could not imagined this world if our current Prime Minister Manmohan Singh would not have opened Indian economy in 1991. We saw a trend in increased Foreign Direct Investment (Inwards) in the post-1991 era. Recently, a question struck my mind, how did it affect innovation in India?

I would like to share some numbers and personal experience on this issue. India complied with the standards of an international agreement on Intellectual Property called TRIPS agreement in 2005, after 10 years of signing the agreement in 1995. In this event, we opened up our innovation economy in 2005. Number of patent application doubled and grants increased by nine-folds in India from 2004 to 2008. The classic example of global innovation that helped Indian telecomm sector to boom is mobile phone. India is second biggest nation for mobile phones and subscriptions. This can also be seen from a fact that 4 out of top 10 foreign patent applicants in India are Giant Telecomm MNCs.

A recent report by RAND to the UK Intellectual Property Office shows the trends of Intellectual Property in Developing Countries. I got a major take away from that report.

Foreign Direct Investment (FDI) and Strong Intellectual Property (IP) Regime have a correlation.

This means that a country’s FDI can improve innovations or in-turn strong IP regime/innovation can increase FDI. India, according to me, is a classic example of a country wherein strong IP regime increased FDI. Graph below indicates increase in FDI (inwards) since 2005, the year when India opened up the innovation economy.

Does this mean that we are helping foreign companies to incorporate business in India and block locals from innovation? My answer would be No. Maruti-Suzuki initiated automobile innovation in India now followed by Indigenous car makers like Tata and its launch of Nano. Mahindra & Mahindra and Tata are big players in the automobile industry sustainably living with major foreign players having their manufacturing base in India since past 2 years. Pharmaceuticals companies in India have shown a big boom with indigenous companies like Ranbaxy and Himalaya topping the chart. E-commerce industry is booming with a classic example of flipkart, an Indian version of Amazon or Barnes & Noble.

In conclusion, I feel that opening doors for global economy in 1991 and global innovation in 2005 will help India in becoming one of the foremost nations of the world as predicted in 2020. Also, opening doors for foreign companies to come in India, invest in R&D, and protect their technologies in India will help the local and global players to form a symbiotic relation. Local players will gain manufacturing know-how and global players will have an option to protect their technology and learn how to do business in India.

 

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