As Prime Minister Narendra Modi promotes his “Make in India” initiative, we have published a paper titled “Building a Design Economy in India” that discusses how the country can boost its growth through high valued-added economic activity. In a global economy where goods can be designed in one country, manufactured overseas, and sold in a third country, the most profit will accrue to the designers. Creative work requires a highly educated workforce, strong business investment, modern infrastructure, and a patent system that allows inventors to capitalize on their designs. India is improving on these measures, but still has some distance to cover to catch up to other industrialized nations.
Despite its large population, India awards far fewer patents than both the U.S. and China. Data from the World Intellectual Property Organization puts U.S. and Chinese patents awarded in 2013 at 243,986 and 154,485 respectively, while the Indian government records only 4,388 patents awarded. Indeed, Indian entities received more patents abroad than they did at home. Conforming requirements to international standards would make it easier for both foreign and domestic firms to patent their inventions. Stepping up enforcement of intellectual property rights would further incentivize patent creation in India.
Foreign Direct Investment (FDI) is another area where India lags behind other countries. While China attracted $1,531 per capita in FDI in 2014, India’s figure was $183 per capita. Rules restricting foreign ownership as well as detailed licensing and permitting requirements make it difficult for foreign companies to set up shop there. In addition, the World Bank estimates that India needs $1.7 trillion in infrastructure upgrades for transportation, telecommunications, electricity, water, and waste management. Lowering barriers to foreign investment and steering some of that investment towards infrastructure projects can greatly improve India’s design capacity.
Higher education is another area where India could invest more. As of 2014, India spent only one percent of its Gross Domestic Product (GDP) on post-secondary education, with only 18 percent of India’s young adult population enrolled in higher education. Furthermore, India allocates only .8 percent of GDP to research and development (R&D) funding, well below levels in the U.S. and China. Design work depends on having both a highly educated workforce and sufficient funding for R&D.
We offer a number of policy solutions to enhance the Indian economy’s design capabilities. They suggest greater cooperation between academia, industry, and government along the lines of the cross-sector collaboration that occurs in Silicon Valley. India has several growth industries that it can focus on, including medical devices, healthcare, and financial services. Indian smartphone owners also spend more time on more smartphone apps than users in other countries, creating a large market for e-commerce and other mobile services. Pursuing these many opportunities to build a design economy will position India for long-term success.