Why are foreign companies, some with budgets higher than India’s R&D budget, moving their R&D to India? There are several reasons. First, the cost of R&D here is a fraction of that in the developed world.
Last year, the entire spend of India’s R&D was US $ 5 billion, less than the R&D budget of one company like Pfizer alone. A dollar in India delivers so much more.
Indian advantage is not just the cost but cost-cum-competence. I heard a presentation by the chief executive of a German software company in Bangalore. He showed the ideas generated per employee in the Indian unit were, on the average, three and a half times higher than in units elsewhere.
Second, there is world-class technical manpower. India has over 250 universities, 1,500 R&D units, several IITs and engineering colleges. India has the world’s largest chain of publicly-funded R&D institutions. This is an extraordinarily rich resource.
Third, the shortage of R&D personnel in some emerging hi-tech areas in industrialised countries. The companies have to bridge that demand-supply gap by external outsourcing.
The fourth reason is R&D in industries such as biotech, microelectronics, pharmaceuticals, infotech and new materials has become highly science- based. The costs of R&D are also increasing phenomenally. To put one new drug molecule in the market takes Rs 30,000 crore. Moving to highly-skilled but lower-cost countries like India is one solution.
For some time now, there has been deep concern about the declining interest in science in India. This is reflected in lower enrolment in science and also those who study science deciding to move away to lucrative careers in finance, marketing, management.
But with these new exciting opportunities opening up, the demand on science in India itself will increase enormously. The present production of 5,000 PhDs annually is too small a number for India, one sixth of humanity. This number had not grown since there was no demand on science in Indian industry, with some notable exceptions. This number can be raised several fold.
The customer now has the choice to buy the best. Therefore we have to create a winning product, which will withstand global competition. That can come from a winning idea. But such winning ideas will come only from creative people with the highest intellectual energy.
What is the distribution of intellectual energy across populations? There are scientific studies to address this question. Recently I read a brilliant paper by Gangan Prathap in Current Science. He argues the ecology of the intellectual process throws up outstanding scientists and inventors in a pyramidal and power-law fashions. Let me explain.
In 1926, the distribution of scientific productivity was analysed by A. Lotka of the Metropolitan Life Insurance Company. The result of Lotka’s investigation was an inverse square law of productivity, by which the number of people producing n papers is inversely proportional to n2. This means that for every 100 authors who produce one paper in a given period of time, there are approximately 100/22, or 25, who produce two papers.
There will be 100/(102) or one, who will produce 10 papers and so on. Interestingly, the same law applies to patents too.
In pre-liberalised India, we were happy to use the services of an average researcher, capable of producing that one paper or one patent per year. But when we are competing globally, we will require individuals capable of producing those 10 papers or those 10 patents.
It certainly appears technological creativity and productivity, just like scientific creativity and productivity, lies in the abilities of a relatively small number of individuals. We lost them to the western world so far. For instance, the cream of the cream from the IITs went abroad.
We comforted ourselves by saying that if we lost a small number it didn’t really matter. But we didn’t realise the implications of Lotka’s law — that they were the ones who made a huge difference to the economies abroad. We didn’t realise that when we lost one per cent of our top talent, we also lost 90 per cent of the intellectual energy.
We watched hopelessly, because we had nothing to offer to these creative people. No more. We have plenty to offer now.
As Indian industry becomes globally competitive, it will require people with skills, which have to be globally benchmarked and globally sourced. There will be enhanced competition among institutions, and both Indian and foreign industrial R&D centres, to seek the best brains.
This will mean CSIR-like institutions will have to create an intellectually stimulating, rewarding and ‘‘hassle free’’ environment to keep these researchers with them. Indian industry will have to offer competitive salaries and challenging jobs, matching foreign rivals.
Another implication of India’s emergence as a global R&D hub is linked to India’s positioning in the comity of nations. Just imagine around one-third of the new knowledge of major firms around the world being produced in India.
Take this fact along with the crucial dependence of the world’s big economies on this new knowledge. India’s emergence as a major global knowledge production centre has huge social, cultural, political, economic and strategic imperatives.
Let me conclude by reminding you about the Goldman Sachs prediction for 2050. It says India, China and the US will be the three top economies of the world. Going further, I can confidently predict that if India plays its cards right, by 2025 it can become the number one knowledge production centre of the world.
Let me assure you, it is a great time to be an Indian. Even more, it is a great time to be in India.
The author is DG, Council for Scientific and Industrial Research. This is an edited version of his convocation address at Pune University, on December 26, 2003