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Innovation: Trending Up but needs thrust, especially from the Private Sector 283

wealth creation in India. This assumes greater importance in the context of enhancing private
participation in innovation in India - in terms of contribution to gross expenditure on R&D,
R&D personnel and researchers, and share in patents filed in the country. The lessons drawn
therein on the crucial role of literacy, education, physical infrastructure and policies enabling
ease of doing business, as drivers of new firm creation and entrepreneurship, remain relevant in
this analysis.

CHAPTER AT A GLANCE

¾ India entered the top 50 innovating countries for the first time in 2020 since the inception
of the Global Innovation Index in 2007, by improving its rank from 81 in 2015 to 48
in 2020. India ranks first in Central and South Asia, and third amongst lower middle-
income group economies.

¾ For India to become an innovation leader, it needs greater thrust on innovation. India’s
aspiration must be to compete on innovation with the top ten economies. India’s gross
domestic expenditure on R&D (GERD) is lowest amongst other largest economies.
The government sector contributes a disproportionate large share in total GERD at
three times the average of other largest economies. However, the business sector’s
contribution to GERD is amongst the lowest. The business sector’s contribution to total
R&D personnel and researchers also lags behind that in other large economies. This
situation has prevailed despite the tax incentives for innovation having been more liberal
than other economies. India’s innovation ranking is much lower than expected for its
level of access to equity capital. This points towards the need for India’s business sector
to significantly ramp up investments in R&D.

¾ Indian residents’ share in total patents filed in the country stands at 36 per cent. This lags
behind the average of 62 per cent in other largest economies. Resident share in patent
applications must rise for India to become an innovative nation.

¾ India must focus on improving its performance on institutions and business sophistication
innovation inputs. These are expected to result in higher improvement in innovation
output.

REFERENCES

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Acharya, V. V., Baghai, R. P., and Subramanian, K. V. 2014. "Wrongful Discharge Laws and
Innovation". Review of Financial Studies, 27(1), 301-346.

Acharya, V. V., and Subramanian, K. V. 2009. "Bankruptcy Codes and Innovation". Review of
Financial Studies, 22(12), 4949-4988.
Adak, Mehmet. 2015. “Technological Progress, Innovation and Economic Growth; the Case of
Turkey”. Procedia - Social and Behavioral Sciences, 195, 776 – 782.