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Is India a Sleeping Giant of Innovation?

added: 02.13.2014, by Mike Spinney

An article in Live Mint describes India’s IT economy as being “on the cusp of transformation,” driven by an increased emphasis on innovation in the areas of social, mobility, analytics, and cloud computing—known as SMAC.

But being on the cusp doesn’t necessarily mean that India can take the next step and become a leader in IT innovation; at least not quickly or easily. The reason? India has a notoriously bad track record for intellectual property protection. For an economy to attract investments and retain the individuals in whose fertile minds ideas and creations are hatched that will generate products and jobs, it must demonstrate that it can protect their innovations. For a country and economy the size of India’s, effecting the necessary legal reforms, and then establishing a track record that gives investors around the world confidence, will take time.

While India’s economy has seen rapid expansion in recent years and is known as a global leader in the area of IT services, the country’s legal system is not regarded as friendly to innovators and ill-equipped to protect intellectual property. In fact, the U.S. Chamber of Commerce’s Global Intellectual Property Center gives India poor marks for intellectual property protection. Of the four largest emerging economies, Brazil, Russia, India and China, often referred to collectively as the BRIC countries, India ranks dead last behind even notorious bad actors China and Russia.

A recent article by Intellectual Property Watch described a study by the World Intellectual Property Organization on the effects of intellectual property protection within emerging, informal economies found that there are limits to the extent of innovation because research and development largely takes place within public institutions but that, without sufficient protections, there is little incentive for private companies to invest and bring innovations to market.

India’s poor IP protection track record has not kept it from becoming a focal point of the world’s IT economy, but there are concerns that growth is not sustainable with core activities in IT services and business process outsourcing (BPO).

Time will tell if India has the will to change its policies and take the steps necessary to show the world that it is serious about encouraging innovation by protecting the IP of its innovators. If it succeeds in doing so, we may find that, indeed, India is a sleeping giant of innovation and not merely a source of cheap, abundant labor.