Lack of originality and innovation: This is how India’s perpetual habit of ‘Jugaad’ is anchoring the nation down.
Indians are well capable of arranging makeshifts options instead of innovating new ones. And that’s one of the major reasons why we are famous for our ‘Jugaad’.According to a Global Innovation Index report, Indians lack originality and rely on techniques which have been lying there for ages.
Not only this, India stands last in the list when it comes to full-time researchers. When it comes to investing in new ideas and researches, India only spent 0.82% on R&D from 2005 to 2014.
When it comes to education, we might have the brightest of minds, but our universities and schools lack infrastructure and innovation. While schools around the world are moving ahead with E-classrooms, Indian educational system still follows the traditional way of teaching the majority.
Sure, makeshift arrangements can help us for a shorter span of time, but when it comes to a safe and ‘developed’ future, India is in dire need of a change.
A large proportion of Indian companies just don’t have the policy or human resource capabilities to invest in innovation though the country fares favourably in terms of research and development (R&D) spending when compared with its peers, according to a top World Bank official.
“If you look at how much India invests in R&D as a share of GDP compared to other countries at its level of income per capita, it actually doesn’t do badly,” said William Maloney, chief economist for equitable, growth, finance and institutions in the World Bank.
Indian IT industrialist and co-founder of Infosys, Narayana Murthy, recently mentioned that there is no ‘earth shaking’ idea that India has given to the world in last 60 years. It’s a grave observation especially coming from a doyen of the IT industry and an eminent entrepreneur. But Narayana is not wrong. The data strongly corroborates his findings. India fares poorly in all innovation indexes.
India has one of the most hostile environments in the world for driving innovation.
Asia’s third-largest economy stood 54th in a recent ranking of 56 countries on the basis of how their domestic policies support global innovation. The report by the Information Technology and Innovation Foundation (ITIF), a technology policy think tank, includes countries that make up close to 90% of the world’s economy. This is the first time ITIF has compiled such a report.
“Thailand, China, India, Argentina, and Russia field policies that detract the most from the global innovation system. These countries make the most extensive use of trade barriers and other distortions while providing weaker environments for intellectual property protection,” the report said.
It examined 14 factors that favour domestic innovation and have a global impact, such as supportive tax systems and investment in research and development (R&D) and human capital. It also assessed 13 other factors—like forced localisation and weak intellectual property protection—that have negative effects on global innovation.
India is on top of the list of countries ranked on the basis of its generous R&D-related tax incentives. However, it lacks innovation because it lags in other areas such as collaborative R&D tax credits (offered on expenditures made to support research at universities, national labs, and research consortia), and encouragement to commercialise innovation, rather than just for the research.
- Human capital
A key reason why India lags in innovation is because the country spends the least compared to other countries on primary and secondary education. The Indian government spends just $1,248 (Rs84,978) per student on primary and secondary education, lower than even Vietnam, Indonesia, or Peru.
However, India is somewhere in the middle when it comes to countries with top-ranking universities. At 25, India is ahead of countries such as Argentina, Brazil, Poland, and Kenya, with 17 of the top 800 world-ranked universities, the report said, without naming the institutions.
Still, the number of researchers in the country stands at a paltry 15 per 100,000 people, placing India among the bottom five in this category. India is also among the bottom six countries on the rankings when it comes to total citations—an academic document that is referenced by subsequent academic research—per 1,000 citizens.
Why is it that India, even with its huge demographic dividend, is not able to break the glass ceiling? And more specifically, what socio-cultural barriers hinder innovation in our country?
Here below are five key socio-cultural comparatives that may give us real answers:
- Salary substitution business versus entrepreneurship
The socialist bias in our post-independence economic policy ensured a sense of skepticism towards private enterprises. Add to this the challenge of large subsistence farming populace, low formal education levels and limited number of government jobs. And so it evolved that commodity trading, repair shops, and retailing became the staple for anyone with an appetite for ‘business’ – lower investment, faster cash flow, no innovation risk and much less government dependence. These were in the true sense merely ‘salary-substitution businesses’ that aimed to create cash flow to maintain the promoter’s lifestyle. The first couple of million in profits from the business went into purchasing a house or car. Subsequent millions went into a second house and car, and so forth.
However, innovative enterprises require reinvestment of earnings into the business. India’s cumbersome government policies and bureaucratic challenges ensured anyone venturing into manufacturing needed a pocketful of ‘chai paani’ (bribes) instead of ideas and an enterprising spirit. Most people gave up. They were happy to have salary-like cash flows under the guise of business. Real entrepreneurship went missing. Today, we continue to be at the lower end of the business value chain, BPO and software services included.
- Bargain hunters versus premium payers
The genesis of ‘more for less’ attitude of Indian consumers lies more in low per capita income than in our much-celebrated ability to evaluate ‘real value’. Bargain hunting may be a good way to exemplify the boons of capitalism or illustrate demand-supply concepts but deeper down it’s a bane for innovation. Innovation demands long-term investments and to be sustainable it depends on the market’s ability to encourage and pay a premium. If the market isn’t ready to pay for that upgraded Intel chip or iPhone, the Moore’s Law can never be true.
The markets in India have a bias for ‘more for less’ and hence the incentive for a small business to invest in new technologies becomes constrained as well. Even at the top of entrepreneurship pyramid, i.e large corporations, the weak culture of innovation ensured there were no role models for MSMEs. These large companies faced a similar market – the bargain hunters – and as a result squeezed the smaller suppliers with lower margins instead of collaborative product developments. They encouraged lower cost over innovation, using the euphemism of improved efficiency. This is true even today in most manufacturing sectors, particularly Indian automobile supply chains.
- Safe players versus risk takers
The absence of social security, poor insurance penetration, and rudimentary agricultural practices that depend largely on monsoon, have ensured the battle for the family is still about basic necessities and not creation. Innovation demands creativity. Following a path of creativity is risky. This battle for basics leads to a preference for predictable paths and a collective culture that discourages deviation from the known. And for those who did try breaking the mould (and failed) didn’t receive a pat on the back of “well tried”. They instead got many versions of “I told you so!” Thus we have created a ‘safe playing’ society – routine education paths, routine jobs and routine businesses. Risk-taking has been a taboo! It still is, for both businesses and individuals. It starts from schools and continues thereafter.
- Money lenders versus financial enablers
The SME lending models across the formal financing sector give high weightage to vintage, profit and, most importantly, collateral security. There is little to nil importance given to strong ideation and ability to innovate. With this mindset, its difficult for banks to appreciate or evaluate balance sheet intangibles like goodwill and intellectual property (IP). The financiers have frowned upon diversification and encouraged ‘follow the routine’. It is difficult for any small enterprise to find adequate financial backing for a Greenfield project without collateral. The parallel finance system was limited to money lenders, where the interest you paid quickly grew bigger than the principal itself, even before you could say “show me the money”. With the advent of angel investors and VCs, access to capital has evolved in last few years, especially for new age tech and IT-enabled startups. For small manufacturing businesses, the situation is no different, even today.
- Hypocrisy versus democracy
In his recent commentary on section 377 of the Indian Penal Code, MP Shashi Tharoor quoted his father on India being both the largest democracy and largest hypocrisy. It’s caustic but has a bitter truth and apt reference for our case on poor innovation. At one point, we ensured the exit of videshi (foreign) companies under the pretext of encouraging swadeshi (indigenous) but continued fancying imported gadgets and imported cosmetics. We desperately needed capital and technology but criticised FDI.
Watercooler discussions often quoted Singapore as an example of cleanliness but we continued to throw garbage, roadside or road middle, as per convenience. Indian businessmen talked about honesty but were okay to grease the system, as long as their substandard products were accepted in government orders. Protectionism from better technology from outside seemed like a birthright. They were against the burden of corruption but ‘doctoring’ of financial statements to evade tax seemed no burden on conscience! Then there were willful defaulters who under the guise of ‘legitimate’ businesses took advantage of inefficient laws and judicial processes.
While the system was the way it was, the MSMEs have a share in the blame too. The only time they seem to have acted collectively was to protest a levy or imports, and rarely against the unreasonable demands of a corrupt officer. There is hardly any self-regulation that umpteen industrial associations undertake. The beauty of democracy is in responsible collectivism. Imagine if all the MSMEs in an industrial area decide not to cave in to the demands of the corrupt sales tax assessor or the blackmailing of the pollution control board officer! The beauty of hypocrisy is in half-truths and conveniences. It has been a convenient arrangement that encouraged the status quo and, by extension, eliminated the need to innovate.