Boardroom to lab

Private sector RD is poor. CEOs must start betting on primary research as a money-maker

Widely and justifiably acknowledged as the drivers of India8217;s economic growth, considered now a serious player in global mergers and acquisitions, and having produced CEOs whose brand values seem to have transcended the confines of balance sheets, is there any activity in which India8217;s corporates are way behind global best practices? Innovation. The data makes for painful reading as anyone glancing through a recent World Bank study, 8216;Unleashing Innovation8217;, will realise. True, reforms have had their effect.

Enterprise R038;D in 2004 was seven times more than in 1991. Competition, as the study notes, spurs innovation. But aggregate figures are still dreadful. India has never spent more than 1 per cent of its GDP on R038;D and nearly eight out of every ten rupees spent comes from the public sector. Just how much more corporates can spend is clear when one considers MNCs spent nearly one and half billion on R038;D in India between 1998 and 2003. Clearly, the potential for absorbing research funds exists.

But in a country this size, MNCs can never alter the basic picture. Domestic corporate R038;D will have to be ramped up. It is depressing to know, from the Bank study, that in the decade between 1995 and 2005, 44 of the top 50 patent applicants in India were foreign firms. Four of the remaining six applicants were public institutions and public sector corporations. Just two were private Indian enterprises, and both were pharma companies. It is abundantly clear India8217;s big corporations aren8217;t spending as much as they should and can on R038;D. Even basic steps are not taken: 92 per cent of manufacturing firms in China offer in-service training to employees, the figure for India is 16 per cent.

Yes, of course, there are structural problems, several of them have been cited by the study. Gross enrolment in higher education is low, which is the main reason for the skills bottleneck. Venture capital funding tends to be conservative, shying away from early-stage financing. There are far too many regulations. But there8217;s also India Inc8217;s unwillingness to bet on primary research as a profit-maker. This, the sarkar can8217;t change. Only our CEOs can.