Wednesday, December 5, 2012

Technovation Depravity De-mystified

Eureka!! While the Kepler Space telescope gave Nasa and its associate scientists and astronomers yet another chance to utter the most popular word in Greek with the discovery of the first ever solar system closest to ours in terms of its star and the distances of its planets from the same, spare a moment for Neil Armstrong and Sally Ride, the first man to walk on the moon who eventually went to his heavenly abode a month and a half back and the first ever female US astronaut respectively who lost her life to pancreatic cancer around 4 months ago. Ride did more to popularise science among young children and create more and better science teachers than arguably any other NASA alumnus till date. By the way, just a few days before her demise, a moment of pride came for us when Sahyadri, the 3rd and last of the indigenously developed 1st generation stealth frigates was commissioned in the Indian Navy (that’s another matter that the stealth frigate project started 15 years ago and Sahyadri alone took 9 years to build). However, I won’t beat about the bush and come to the issue. While for the developed world and our elder brother China (ever heard hindi chini bhai bhai), technology development news stories are like daily morning breakfast, our score barely reaches a dozen when it comes to indigenous technology development.         

Defence technology, without doubt, constitutes the greatest investment in all kinds of technology for any nation worldwide but herein we top the list. Not in technology development but in being the biggest technology beggar (read buyer) in the world. India is the world’s largest arms and weapons importer consisting of all the kinds of weapons and support technology and systems. In the 2012 budget, the government has targeted a total defence spend of $38 billion (up from $35 billion last year) an overwhelming majority of which consists of making up for increased salaries and personnel benefits coupled with arms and weapons procurement from outside. China corresponding defence spend was over $105 billion last year out of which, $6 billion was on defence R&D but this figure, as per numerous defence experts from India and the US, may by higher. To what extent has the People’s Liberation Army (the official name of Chinese military)  has reaped the benefits of higher R&D spend is laid bare by the fact that it recently unveiled the J-20 5th-generation fighter aircraft, an antiship ballistic missile, and the stealthy, catamaran-hulled Houbei-class fast missile boat. At the same time we are at just over $1.5 billion in defence R&D spend. For a more noble comparison, US’s total defence R&D spending last year was $76 billion, twice of India’s total defence spending targeted for financial year 2012-13!!

Moving from defence barracks to civilian turf, we are still languishing in muddy waters. India’s total R&D spend stands close to $40 billion as per a recent report by Roland Berger Strategy Consultants. Out of this, apart from the ignominiously low spending done on basic sciences, remaining is mostly divided between the pharmaceutical and automotive sectors in the country. While this is definitely a positive sign, it must not be forgotten that some of these companies are foreign giants who have set up their R&D facilities in India. Again, in the private sector, pharma stands out with nearly $2 billion in R&D spend.

But the flip side is that the above sectors mostly spend on developing consumer based product technology and technology in non-consumer based product sectors such as energy, infrastructure, agriculture and information and communication technologies is almost negligible. One example being that almost all heavy machinery and construction equipment used in the manufacturing plants in India and employed in the massive real estate boom in the country respectively is almost entirely German, Japanese or US made. Try and recall one Indian private company that manufactures power plant and energy related equipment using indigenously developed technology except Nuclear Power Corporation of India Ltd. (for nuclear, atomic and space R&D, read below). When it comes to soft skills, that’s all we have. Skills. When it comes to developing out own software products be it OS based or internet based, we happily hide behind the veil of our IT industry which is in real terms, an IT services industry and not a product development industry. There is no doubt that many IT, automotive and electrical/electronic firms, mostly foreign, have their running R&D centres in India but herein lies the catch. The output of that research, which means patents filed for that technical innovation, occurs in the homelands of the parent companies. One statistic can highlight this fact. A research study conducted by scholars in IIM Ahmedabad states that the total value of imported R&D from India to the US stood at around $430 million in 2006 while in 2010, it nearly quadrupled to $1.7 billion. In fact, as per Zinnov (2011b), the total market for R&D outsourcing in India stood at $11.8 billion in 2010, the IIM A paper states “although China may have more number of foreign R&D Centres, she exports far less R&D and testing services to the US”  as compared to India.

To put it in perspective, the core purpose of R&D is the socio economic development of a nation. Now, R&D centres of foreign firms, which by the way far outnumber similar setups by Indian companies, provide employment opportunities to Indian researchers and PhDs, the fruits are enjoyed by the developed nations abroad. From software to hardware, from automobiles to electronics, the patents filed outside after using cheap Indian talent are then converted into products and sold across the globe as brands at prices far outweighing the pockets of 80% of the Indian masses (barring pirated software which, being the biggest heartache to the developed world proprietary software industry, is available cheaply in India). Without being jingoistic, parallels can be drawn how the British colonialism destroyed the flourishing cloth dying and cotton weaving industry in many cities of India and at the same time, exported cheap minerals to UK which were then exported back to India and sold at exhorbitant prices to the select elite at that time while the farmers, mine workers and cotton weavers gradually perished in the hundreds of millions.  

But, coming back to the present, this hidden irony behind Indian technological and applied sciences R&D can largely be attributed to a rotten patenting process in the country which simply does not have enough workforce to process patent applications which is a extremely skilful exercise. As per a report presented in the Rajya Sabha in October 2008 by the Parliamentary Standing Committee on Commerce, a patent examiner in India handles 214 applications every year. The same number is only 90 in the European Patent Office, 97 in the United States Patent Trade Office and 88 in China. In 2010, China received 391,177 invention patent applications. Since China has a little above 5000 employees in its Patent office, a simple calculation would reveal 78.23 patent applications being processed per examiner. The Chinese office granted 135,110 invention patents in 2010, a little above 27 per examiner. While in India in 2009, our patent office received 36,812 applications and during the period 2008/09, made 16,061 grants. This comes out to 245 applications processed per examiner and just about 107 grants. Any lay man can ascertain the quality and accuracy of the patent processing office and its officials!! The enormity of the discrepancies that might lie in indentifying and rewarding the most important sources of socio-economic development of the country can be eye-popping. The icing on the cake is so colossal that it covers the entire salty cake. Just a small figure of an over 80,000 backlog of patent applications.  

Turning the page to institutional R&D promoted by non – profit organisations and government funded institutions, India lags far behind the dragon and South East Asian economies like South Korea. The biggest organisation in India for conducting original R&D, Centre for Scientific and Industrial research (CSIR), under which 39 national laboratories come, the Achilles heel is the peanuts awarded to these national laboratories when it comes to funding for what is their very objective of existence - R&D. The total allocated budget for CSIR in the financial year 2011-12 was Rs.3300 crore or around $650 million ($1.6 billion in PPP terms). For comparison, Alstom, the US company which manufactures power plant and electrical equipment and supplies to most Indian power utilities spends a little over $1 billion on R&D per year. Also, the R&D budget of National Science Foundation, US’s equivalent of CSIR, was $7.5 billion for the financial year 2011-12, 0.5% of US GDP. For India, CSIR’s budget is just 0.06% of India’s GDP.

However, there are bright spots slowly rising above the horizon. To augment R&D across all sectors of the economy, the weighted deduction on expenditure incurred on in-house R&D has been enhanced from 150 per cent to 200 per cent. Similarly, weighted deduction on payments made to national laboratories, research associations, colleges, universities and other institutions, for scientific research has been enhanced from 125 per cent to 175 per cent. As per the Union Budget 2010-2011, the income from such approved research association is exempt from tax. In 2010, the government  declared to set up a state backed VC fund for R&D in life critical sectors such as pharma with an initial corpus of $2.14 billion to expedite the drug discovery process and enhance the number of new drugs being discovered manifold.

But, such initiatives are pittance when it comes to massive investments in technology needed in core sectors such as energy, agriculture, heavy machinery and material science. This has percolated backwards to the first link of the entire R7D value chain, i.e the education sector at the school level to cuh an extent that the mountain of challenges is only growing higher. As per the results of a recent survey conducted across hundreds of schools in the Metros of India, the number of students wanting to take up commerce at a higher level of education has risen almost three-fold as one moves from classes six to eight to 11 and 12 in the last few years. While astronauts like Sally Ride go on to become educators to spur the next generation of scientists in the developed world, teachers in India are forced due to poor pays and in adequate recognition (owing to the vestiges of the colonial era) to teach in coaching institutes and private tution centres. More than 70% of science and engineering graduates from non IT stream end up being the part of the largest educated private labour force in the world – the Indian IT/ITES space. Hundreds of millions, though continue to live in an India where the fruits of R&D conducted 200 years back like electricity and water supply have never been tasted. 

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