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Picture Courtesy: THE HINDU
India needs to promote innovation-driven industries and entrepreneurship to achieve long-term economic growth.
Innovation: New or improved products, processes, services, or business models; also R&D, patents, high-technology exports, human capital, institutional capacity etc.
Economic Growth: Increase in GDP (or per capita GDP), productivity, output, or income over time.
Economic growth theory (neoclassical, endogenous growth models) treats innovation as a key driver of productivity and long-run growth.
Increased Productivity: Innovation allows for more output with the same inputs, or same output with fewer inputs. → Improves total factor productivity; reduces cost per unit.
New Products & Markets: Firms innovate to produce new goods or services, open up new markets, satisfy unmet needs, or replace older goods (new demand).
Spillovers & Knowledge Externalities: Knowledge generated by R&D often spills over across firms/sectors. Examples: better education, diffusion of technology.
Human Capital & Institutions: Innovation depends on education/training, good institutions (rule of law, intellectual property rights, regulatory framework) to enable R&D, protect investment, and promote entrepreneurship.
Investment & Capital Accumulation: Innovation often requires capital investment (in R&D, machinery, tech infrastructure). As firms invest, overall capital per worker rises, boosting growth (especially in models of endogenous growth).
Competition & Creative Destruction: New innovators force older, less-efficient firms to adapt or exit. This dynamic pushes technological diffusion, efficiency.
Science, Technology, and Innovation Policy (STIP) 2013
Aims to enhance gender equality in science and technology (STI) and achieve global competitiveness through international collaboration.
Introduced Scientific Social Responsibility (SSR) to extend scientific benefits to society, encouraging MSMEs and communication with farmers and startups.
Atal Innovation Mission (AIM)
An umbrella initiative by the NITI Aayog to create and promote a culture of innovation and entrepreneurship.
Startup India
This initiative from the Department for Promotion of Industry and Internal Trade (DPIIT) aims to build a strong ecosystem for nurturing innovation and entrepreneurship.
Schemes for Artificial Intelligence (AI)
With AI projected to add trillions to India's economy, the government has launched targeted initiatives to build a robust AI ecosystem.
Schemes from the Ministry of Electronics and Information Technology (MeitY)
MeitY Startup Hub (MSH): A national coordination center that integrates all MeitY's incubation and innovation activities.
GENESIS (Gen-Next Support for Innovative Startups): A scheme with a ₹490 crore budget over five years to support early-stage and deep-tech startups, particularly in Tier-2 and Tier-3 cities.
SAMRIDH Scheme: An accelerator program to support and scale tech-based startups, providing matching funding up to ₹40 lakh.
Schemes from the Department of Science and Technology (DST)
NIDHI (National Initiative for Developing and Harnessing Innovations): An umbrella program that includes various components, such as NIDHI-PRAYAS for prototype development and NIDHI-Technology Business Incubators (TBIs).
INSPIRE Scheme: Promotes research careers among talented students from school to the university level through scholarships and mentorship.
Research, Development, and Innovation (RDI) Scheme: With a corpus of ₹1 lakh crore, this scheme incentivizes private sector participation in high-impact R&D, especially in deep-tech sectors.
Rapid Digital Adoption & Digital Public Infrastructure (DPI)
Tools like Aadhaar, Unified Payments Interface (UPI), and other IndiaStack components reduce friction in transactions, identity verification, and access to services. These lower entry-barriers for innovators and startups.
Increasing internet penetration (over 1 billion internet subscribers, Telecom Regulatory Authority of India report)—expands the market for digital innovation as well as user feedback loops.
Youth, Talent Pool, and Demographic Dividend
A large share of India’s population is young: over 65% below 35 years. Youth are more adaptable to new tech, more willing to take risks, and are the consumers and creators of innovation.
Education reforms (e.g. National Education Policy 2020), skill training schemes, and startup incubation in educational institutions attempt to align this talent with industry needs.
Supportive Policy & Funding Initiatives
The Union Budget 2025-26 allocates significant funds (₹20,000 crore) for private sector-driven R&D & innovation.
Government schemes such as Atal Innovation Mission (AIM), Startup India, deep tech startup policies, etc. provide grants, incubation, mentorship, infrastructure.
Ecosystem Building & Decentralisation
States launching their own AI missions to promote local innovation (e.g. in public services) show decentralised push. This spreads innovation beyond a few metro hubs.
Expansion of incubators, Atal Tinkering Labs (ATLs), Atal Incubation Centres (AICs) in more districts. This helps grassroots innovation.
Focus on Deep Tech, Frontier Sectors & Global Challenges
Quantum mission, green hydrogen, clean energy, defence tech are getting emphasis, not just apps/web-services.
Ministerial and institutional push toward R&D in areas needing high technical capabilities and longer-term investment. For example the “Deeptech Reactor”, “Human Capital Development Program” under AIM 2.0.
Low R&D Investment and Private Sector Apathy
India’s Gross Expenditure on R&D (GERD) remains around 0.6-0.7% of GDP, far below what innovation-leaders spend (US, South Korea, Israel etc.).
The private sector contributes only about 36-40% of R&D spend; much of the rest comes from the government. This leads to less market-oriented research and fewer incentives for commercial risk.
Weak Industry-Academia Collaboration & Poor Commercialisation
Many academic and public labs produce research, but only a small portion gets translated into products or scalable businesses. Technology transfer offices (TTOs) and incubation support are thinly spread.
The ecosystem leans toward digital / service-model startups rather than hardware, deep tech or foundational science.
Regulatory, Structural and Institutional Bottlenecks
Bureaucratic delays in funding, approvals, IP (patent) processes slow innovation.
Fragmentation of agencies handling R&D (DST, DBT, CSIR, etc.), overlapping mandates, siloed operations reduce efficiency.
Skill Gaps, Brain Drain, and Relevance of Education
Large numbers of graduates, but many lack industry-ready or deep technical skills. Only about 51% of graduates were deemed employable, according to the Economic Survey 2023-24.
Talented researchers move abroad or to sectors outside research because of poor facilities, irregular funding, low incentives.
Uneven Infrastructure & Regional Disparities
Many institutions, especially in non-metro / tier-2, tier-3 cities, lack modern labs, test beds, clean rooms, prototyping facilities.
States vary widely in innovation readiness; some states do very well, others are lagging, so innovation is clustered, not uniform.
Limited Deep-Tech and Strategic Sector Focus
Emerging and frontier technologies (AI, semiconductors, quantum, biotech) require long gestation, higher risk, but get less funding or policy priority compared to consumer tech or fintech.
Dependence on imports for critical components/technologies undermines self-reliance and exposes vulnerability.
Boost R&D Expenditure & Incentivise Private Sector Participation
Increase GERD substantially (aim for 2-3%+ of GDP, as noted in the Science, Technology, and Innovation Policy, 2013) with the private sector bearing a greater share through tax incentives, grants, co-funding.
Provide targeted support to early-stage / high risk research (Technology Readiness Levels 1-3), which often struggle.
Strengthen Industry-Academia Linkages and Commercialisation
Establish more TTOs in universities / research institutes, with clear metrics for performance (IP filings, spin-offs, licensing etc.).
Encourage joint research projects, shared labs, co-funding by industry, not just government.
Reform Regulatory Framework & Simplify Processes
Simplify patenting procedures; reduce delays in approvals; streamline compliance and licensing.
Harmonise overlapping mandates among research funding agencies; reduce procedural bottlenecks.
Upgrade Education & Skill Development
Revamp higher education to emphasize critical thinking, problem solving, interdisciplinary research.
Expand exposure to applied research at undergraduate / masters level.
Strengthen fellowships, post-doc pathways, career incentives for researchers.
Develop Infrastructure, Test Beds & Prototyping Facilities
Build state and regional centres of excellence with labs, pilot lines, clean rooms, hardware fabrication where needed.
Make such facilities accessible to startups and educational institutions outside metros.
Ensure Inclusivity and Balanced Regional Development
Support innovation in rural areas, non-urban zones, marginalized communities, women.
Decentralise incubation, funding, mentorship; ensure tier-2/3 cities are not ignored.
Improve IP Ecosystem & Market Linkages
Strengthen protection, easier licensing, incentives for commercialization of IP.
Create incentives for startups to bring products to market; improve access to capital, markets, supply chains.
Modern economies require continuous societal evolution and innovation for growth. India is leveraging its demographics and initiatives like NEP 2020 and Digital India to build an inclusive innovation ecosystem. However, challenges persist in market access, funding, and infrastructure. To achieve sustainable and equitable growth, India needs to institutionalize equity, develop skilled human capital, and adopt global best practices in innovation valuation, policy, and international cooperation.
Source: THE HINDU
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PRACTICE QUESTION Q. Innovation is the most powerful engine of economic growth, but it can also be a source of inequality. Critically analyze. 250 words |
The PMKVY is the Ministry of Skill Development and Entrepreneurship's flagship skill certification program. Its goal is to offer free, industry-relevant skill training to a large number of Indian youngsters, assisting them in securing livelihoods. The program also certifies people's previous learning and experience through the Recognition of Prior Learning (RPL) program.
AIM, a NITI Aayog project, promotes an innovation and entrepreneurship ecosystem throughout India. It offers financial assistance and mentorship to innovators, as well as programs such as Atal Tinkering Labs (ATLs) in schools and Atal Incubation Centers (AICs) to create innovation platforms.
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