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India Advantage

The INDIA ADVANTAGE for R&D Investments

The 1990s laid the foundation on which an innovation led economy will emerge in India. Recent economic developments confirm that: when the Indian economy opened to the world economy in the early years of the decade, Indian entrepreneurs jumped at the opportunity to expand, and have since helped generate a solid growth trajectory supported by increasing productivity and global competitiveness. India’s labor productivity growth grew at 4.4% per year from 1995-2005, compared to 2% in the U.S. and 1% in the Euro area.

The list of multinationals who have set up R&D centres in India includes General Electric, Microsoft, IBM, Cisco, Intel, General Motors, Astra Zeneca, Motorola, Texas Instruments. R&D overlaps with software in some cases, but ranges far and wide. GE, for instance, does research in Bangalore on aircraft engines and turbine components. Several Indian scientists who had migrated to the US and Europe are returning back to the multinational’s R&D centres in India. There nearly 300 such MNC R&D labs in the country today.

Some of the best-known Indian R&D companies are in pharmaceuticals — Ranbaxy, Dr Reddy’s Labs, Sun Pharma et al. Biotechnology is a new hot spot, with Biocon and Shanta Biotech leading the way. Reliance Life Sciences is recogni-sed by the US National Institutes of Health for stem cell research. Less high-profile but more significant may be the mushrooming of new companies to do contract R&D for global ones. Divi’s Labs, Vimta Labs and Matrix Labs are some new stars in this firmament. R&D is no longer confined to the government PSUs or big companies, it is sprouting everywhere.

Patent applications in India have shot up from 4,000 in 1995 to almost 15,000 last year. Business Today estimates that Indian filings for US patents rose to 1,700 in 2003, up from 183 in 1997. Public sector labs file for many patents but are weak in commercialising these.This began in computer software. It then spread to design-intensive manufacturing. And it is now sparking an R&D revolution.

Indian R&D spending has been consistently increasing. According to Batelle, the world's largest independent research and development organisation, total R&D expenditure has increased from (in ppp terms) US$ 36.11 billion in 2005 to US$ 38.85 billion in 2006 and US$ 41.81 billion in 2007.

Indian as well as overseas investors believe in India's potential to blossom as a regional hub. According to a study by Batelle, in 10 years, the global research and development activity will be split into thirds between the US, EU, and Asia--dominated by China and India--in terms of efforts, funds and activity. Further, the Government is planning to introduce a comprehensive legislation, the Indian Innovation Act, to give a boost to research and innovation in the country.