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Unleashing India’s Innovation

Unleashing India’s Innovation: Toward Sustainable and Inclusive Growth

Unleashing India’s Innovation: Toward Sustainable and Inclusive Growth

Report Summary:
(Oct 4, 2007) India’s becoming a top global innovator for high-tech products and services. Yet, the country is underperforming relative to its innovation potential. To sustain competitiveness, economic growth, and rising living standards over the long term, India needs to aggressively harness its innovation potential.

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- Domestic R&D spending has never exceeded 1% of GDP.
- India's stock of scientists and engineers engaged in R&D is among the largest in the world.
- Only 16% of Indian manufacturing firms provide in-service training; firms that provide in-service training are up to 28% more productive.
- The sectors most open to competition have increased R&D spending the most.
- The informal sector accounts for roughly 90% of the workforce.
- Only 10-25% of general college graduates are suitable for employment.

Executive Summary and Overview
India is increasingly becoming a top global innovator for high-tech products and services. Still, the country is underperforming relative to its innovation potential —with direct implications for long-term industrial competitiveness and economic growth. This book focuses on inclusive innovation — knowledge creation and absorption efforts most relevant to the needs of the poor in India. This is in addition to the book’s emphasis on how faster growth can be facilitated by promoting “new to the world” knowledge creation and commercialization—the traditional understanding of the term innovation—as well as through often underappreciated but even higher-impact “new to the market” diffusion and absorption of existing knowledge.
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Chapter 1: The Indian Context and Enabling Environment
This chapter reviews the “dualism” of the Indian economy. India’s heterogeneity—with dispersion in enterprise productivity even wider within than across economic sectors—calls for support to create and commercialize new knowledge as well as to diffuse and absorb existing knowledge, with greater emphasis on inclusive innovation. Indicators of India’s innovation capacity highlight its innovation potential. Still, India is behind the global frontier in most sectors of the economy. Thus, innovation in India should not be thought of as simply pushing out the global technological frontier in a few areas, but as improving practices across the whole economy. More inclusive innovation efforts are especially important for poor people and informal enterprises.
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Chapter 2: Creating and Commercializing Knowledge
This chapter analyzes the tremendous potential of India’s efforts to expand knowledge and commercialization through formal Research and Development (R&D) and to move ideas from laboratories to markets. The world has acknowledged India’s R&D potential. More than 300 multinational corporations have set up R&D and technical centers in India. But despite their recent increases in R&D spending, national corporations and other domestic enterprises are not systematically exploiting this potential to India’s advantage. Indigenous R&D spending as a share of GDP remains low and dominated by the public sector. Furthermore, much of the knowledge that is created—especially by the public sector—is not commercialized.
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Chapter 3: Diffusing and Absorbing Knowledge
This chapter discusses how India stands to gain tremendously from increased diffusion and absorption of existing national and global knowledge. Reaping the large, enterprise-based productivity returns from better knowledge diffusion and absorption requires spurring flows of global knowledge; improving the diffusion and absorption of metrology, standards, testing, and quality services; and strengthening the absorptive capacity of small enterprises.
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Chapter 4: Promoting Inclusive Innovation
This chapter suggests that India needs to focus more on promoting inclusive innovation. A three-pronged strategy could make India’s innovation system better meet the needs of the economically weaker sections of Indian society: Harnessing, increasing, and redirecting formal creation efforts; promoting and diffusing innovations by grassroots entrepreneurs; and helping informal enterprises better absorb existing knowledge.
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Chapter 5: Strengthening Skills and Education for Innovation
This chapter addresses the need for stronger skills and education for innovation. India needs to transform its immense young labor pool into a skilled workforce able to take advantage of new and existing knowledge. To fully unleash India’s potential as an innovation economy, the government needs to improve the delivery of basic skills to both the formal and informal sectors; strengthen enterprise-based training and vocational education and training; and increase the transfer of market-relevant knowledge-creation skills in higher education, particularly by universities not in the top tier.
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Chapter 6: Upgrading Information Infrastructure
This chapter concludes that India needs to improve the ease and cost of accessing and sharing information and knowledge among enterprises, knowledge workers, and researchers. Upgrading the information infrastructure for innovation requires making information and communication technology more available to both rural and urban users, and strengthening India’s National Research and Education Network infrastructure for high-end research institutions.
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Chapter 7: Enhancing Innovation Finance
This chapter discusses how India can meet the final challenge — enhancing public finance for innovation, which is essential to enabling more state-of-the-art innovation, increasing the use of existing knowledge by enterprises, and promoting inclusive innovation. Areas of support include providing financing for early-stage technology development; deepening early-stage venture capital; and strengthening finance for technology absorption by micro, small, and medium enterprises.
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Listen to the Interview with the Editor/Author

Mark Andrew Dutz, Senior Economist, South Asia Region, World Bank

- How can innovation help India achieve faster and sustained growth? (0:38s) mp3 audio
- The report says competition is vital to unleash innovation in India. What are the report's key recommendations to encourage stronger competition? (0:45s) mp3 audio
- India would benefit especially from fostering more inclusive innovation, the report says. What does this mean and what can be done to scale up existing initiatives? (1m:02s) mp3 audio
- Compared to other emerging economies such as China and Brazil, how does India fare in terms of innovation? (1m:04s) mp3 audio
- What are some key measures to improve skills and provide training to workers, which the report calls a major bottleneck to innovation? (0:40s) mp3 audio

More Resources on India
World Bank Program
Website maintained by the World Bank Office in New Delhi, a launching pad to all information on World Bank activities in the country (strategy, projects, publications, etc.)
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India: Country Environmental Analysis
Strengthening Institutions for Sustainable Growth
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Development Data
A wide range of social and economic measures on India, including links to the World Bank's most important online development databases.
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Analysis and Research
Compilation of all the World Bank's publications on India, with 'search' options and links to analysis and research on other South Asian countries.
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World Bank Program in South Asia
Launching pad to all information on World Bank activities in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
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Request an interview
To interview the report's author e-mail South Asia media contact.
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