Science and Innovation
India needs to move from services-driven to IP-driven growth; low-tech to high-tech; low value to high value: essentials for next stage of economic growth and strategic autonomy. We need to be able to leverage democracy, demographics, and diversity for development. We need to promote innovation and IP-based manufacturing, leveraging India’s IT capabilities (low tech manufacturing unlikely to be globally competitive)
We need to support innovation through massive small and early grants program to encourage young innovators; we need big increase in R&D investment; we need fiscal/tax incentives for angel funding and “patient capital”
Promoting the ESDM ecosystem
Electronics sector can cumulatively employ 28 mn people if we focus on building local manufacturing ecosystem by 2020 (current around 5.5 mn). A great beginning has been made with the National Policy on Electronics in 2012. But it has to be strengthened, and bold new implementation measures need to be taken to address the global competitiveness issue. We need to aggressively promote local value addition and mandate it for all Govt aided procurements. We need to learn from China how to build scale. We need to leverage our domestic demand to aggressively drive value-addition within India. Our focus should be on high value added manufacturing which includes IP/Technology, components ecosystem and system manufacturing.
To achieve this, here are a few recommendations:
- Implementation of GST and abolishing of VAT;
- Granting deemed export benefits to all electronics goods manufactured in the country – where value-addition is greater than 30%;
- Declaring the sector as a priority sector and making concessional credit available to the sector;
- Greater incentivization to R&D leading to patents/products from India – where the IPR is held within India
- Address disabilities faced by local manufacturers against finished product import.
Increasing Internet Adoptionn
According to McKinsey India Internet Report, “India can achieve broad-based Internet impact by aiming for the digital inclusion of nearly 40% of its population, to reach a user base of 500 mn by 2015. This would enable India to derive much more of the intended benefits from government programs of inclusive growth in employment, education, health care, nutrition, and financial services.”
To increase IT adoption in the country, the recommendations include launching a nationwide digital literacy initiative, incentivizing innovation for the bottom of the pyramid class, and driving policies to increased ease of business and investment. Internet usage in India is of very low variety. ‘One Billion Connected Indians’ should be the goal. For that we need to maintain an open and free Internet, use a multi-stakeholder model as opposed to a multilateral model. We also need to reform the IT Act for India to realize the potential of creating many companies.
Leadership in Services Exports
The goal should be that India should own the services industry in the world. For this, we need leapfrog strategies; incremental strategies won’t lead to leadership. One of the key requirements is to launch massive skill development programs to create talent pools that are industry-ready. Talent is skewed heavily towards nine large cities. We need to develop talent in tier-2 and -3 cities. Availability of broadband is urgently needed across the country. Some of the recommendations are:
- Allocate 2% of national budget for research & create quality institutions to increase PhD holders to 200,000 by 2020
- Enhanced budget outlay for IPR creation with the help of Industry partnership
- Invest in hardware engineering & semiconductor capabilities which will create upward and downward innovation opportunities for IT Industry.
- To help IT industry move up the value chain for software importing nations, create an environment to promote IT/Software Product development in India through closer working relationships between Top Govt./public sector organizations – ISRO, BARC, HAL, ONGC etc. and by giving tax breaks to IT Companies initiating product development initiatives.
- Harness ICT for inclusive growth & help build domestic market
- Create National Information Infrastructure
- Blueprint for IT enabled solutions for public services efficacy
Domestic IT Market
At the basic level the PC penetration in India is very low; it is lower than even Sri Lanka. The reasons for this need to be addressed first: high cost of ownership, inverted duty structure, and lack of broadband.
Along with low PC penetration, we also have the lowest usage model of PC because of poor broadband availability. Despite these hurdles, there are many success cases, but there is no scale. For example, farmers are online, but that’s not a norm. The question is how do you scale the IT adoption across the country? Every state has its own IT policy, which is divisive. We need a national agenda for IT, for education, for entrepreneurship to drive tech adoption. We need to attract more foreign investment. India has to provide predictable tax and investment regimes.
India also has the opportunity to be a global manufacturing hub. MNCs need reforms in taxation rules, especially retrospective tax rules. There is a gap between people who make policies and people who administer them. Public procurement policies need to be totally reformed.
ICT for National Development
The power and success of the IT industry has to be used to achieve national transformation. We need to use ICT to achieve a big bang transformation of governance. We need to create a framework to streamline processes ranging from procurement to project management to implementation and delivery. We need to create an unfettered platform using transparent processes.
There is a dire need of opening up FDI in e-commerce. We need to enhance technology-enabled supply chain and sourcing which are the key drivers of e-commerce success. The cost of doing e-commerce in India is currently high due to charges attached to credit and debit card transactions. These need to be reformed. The e-commerce industry needs incentives like tax holidays that were given for software exports and exemption of service taxes.
National Education and Skill Development
The demand side for skill development is very well understood. What we need is wholesale reforms on the supply side. A knowledge economy like India runs on the back of its educated workforce. Today, our chances of emerging as a superpower squarely rest on our Education system and how well it responds to meeting domestic and global requirements for talent. The need of the hour is to rapidly implement the following three-pronged reform process to make higher education self-sustaining, and relevant.
- Policy Reforms
- Liberalization- It will bring about two key changes. First, it will unleash the creative energy of private enterprise by making entry, operations and exit extremely easy and transparent. Second, it will create a level-playing field. Education must also get a new-generation regulator like the TRAI or the IRDA in order to attract social entrepreneurs.
- Privatization- Substantial real estate is locked in inefficient institutions. As per government figures, nearly 70 percent universities are average or of poor quality. Government should instead focus on select institutions of higher learning and raise them to world standards. These universities will, in turn, set benchmarks for private players. Privatization will also ensure that the badly-managed institutions get a new lease of life. Private institutions can continue to be not-for-profit entities.
- Globalization- As these two stages advance, we will see the emergence of world-class institutions in India. Foreign universities coming into India will have to compete with home-grown institutions that offer world-class education at India-relevant fee levels.
- Curricular Reforms- In today’s world, where technological knowhow is evolving with each day, educational institutions need to be granted the freedom to engage with the industry and change the curricula as and when required. Educational institutions must teach what industry requires and must stay ahead of current needs.
- Financial Reforms- While maintaining the not-for-profit concept, Government should allow institutions to determine suitable fee levels to handle staff compensations, research work and rejuvenation. Universities should get liberal grants for carrying out research.