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The
Importance Of R&D And Innovation
In The Post COVID19 World
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Balagopal Chandrasekhar
Founder and former Managing Director
Terumo Penpol Ltd. |
General observations based on my
experience as an entrepreneur and investor and mentor
for tech startups.
1. The R&D spend of companies and
government in India is too low. The private sector
still behaves as rent seekers, not builders of
businesses with a long term vision.
2. R&D has changed mainly due to
the impact of the Internet: information is easy to
access anywhere. This enables collaboration, sharing
of resources, and crowd sourcing solutions.
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3. Indian labs and research
institutes are a huge resource - industry is losing
out by not seeing this fact. They have people with
skills in all sorts of esoteric areas and fields, and
proven capabilities.
4. Industry must learn to know where to look. As Pasteur
said: chance favours the prepared mind. You must be
worrying about a problem to see a solution in the most
unexpected places.
5. Invest in your people regularly going to engg trade
fairs and research labs and seminars and workshops, not so
much for what is being discussed, as for what else you may
find there. This can range from answers to research
problems to processes you can use to reduce costs and
improve quality, to equipment that may help you make
something you could not otherwise do.
6. ‘Necessity is the mother of invention’. Innovation
starts with you: if you are not worrying about something,
if there is no necessity, there will be no innovation. I
have found the best ROI to come from investment in
research and development.
The course of industrial development in India has followed
a path of dependence on imported knowhow and equipment,
despite a substantial investment mostly by the Government
of India in Science and Technology by setting up large
National Labs in various fields of activity. This has been
a puzzle, and the answer must be sought in the industrial
policies of the period up to the mid-1980s, which were
based on erecting tariff walls to protect local business
and industry. This only resulted in creating an
inefficient and uncompetitive local industry. When the
economy started to open up, the private sector initially
was in panic, leading to the creation of the Bombay Club,
which tried to stop the opening up of the economy.
While matters have improved somewhat after that initial
panic reaction, matters appeared to be settling down to
the same lazy rent-seeking approach by the private sector.
This is proved by the decline of the share of
manufacturing industry in the GDP till it is today less
than 15%. (The corresponding figure for China is around
40%!). Various explanations were put forward for this,
some even claiming that, while China had become the
factory of the world, India would become the back office!
But, this neglect of the manufacturing sector has proved
costly, as India has fallen far behind China, and is now
not likely to catch up. China has graduated from being a
low cost manufacturer with cheap labour, to a high quality
manufacturer of products developed using their local
skills. Today, China is a global leader in engineering
products in the construction field, chemical industry,
electronics and communications sector, consumer products,
household articles of various kinds. In fact, it can be
said that almost 50% of the global manufacturing output
today comes from China! Indian businesses today depend on
importing most of their components and materials from
China, and Chinese supply chains have become essential for
many businesses and industries in India.
Why did India fall behind, and what did India do wrong? If
we study the course of economic reform in India, we find
it mostly
consisted in easing the restrictions on international
capital flows, enabling global finance capital to access
Indian savings and stockmarkets. The more important
liberalisation that was needed in domestic regulations
governing the manufacturing sector were not attended to,
with archaic regulations dating back more than 100 years
still on the statute books, holding back MSME sector from
modernising, expanding, and diversifying. Policies
privileged imports over domestic products, by setting high
quality standards, high tariffs on import of components
and materials, high interest rates, high power tariffs,
etc. If we had supported domestic technical capability
through supportive policies, we could have further
developed the know-why and technical capability for a
strong domestic power equipment manufacturing sector,
domestic machine tool sector, construction equipment
sector, and so on. Companies like BHEL, NTPC, BEML, HMT,
SAIL, IPCL, and others were already strong and capable,
and should have been helped by supportive policies to
become world class enterprises like the many Chinese
companies that have done so. Instead, our policies after
liberalisation only served to restrict these companies and
their capabilities, leading to their decline. |
