Will the next Google come from India within the next

20 years? What must happen for innovation of such

magnitude to emerge from India?
By Mohul Roy

Abstract
It is quite possible that the next Google will come from India, provided India gets it right on certain fronts. India
has been applauded for innovations like the ultra-low-cost Tata Nano, low mobile-call rates, and the Indian
system of innovation known as Jugaad (frugal innovation) is practiced by millions across the country to overcome
daily problems. But for breakthrough innovation, India needs to take steps like creating a more enabling business
environment, better usage of the intellectual property rights regime, a robust ecosystem for funding, thrust on skills
development, and collaboration between governments, academic institutions, corporations, financiers, and citizens.

Innovation is the specific instrument of entrepreneurship, the act that endows resources with a new capacity
to create wealth.
Peter Drucker
Innovation is the mantra of our erait has been hailed as the key driving force behind sustained growth, productivity and
wealth creation. A new branch of economics known as Innovation Economics has cropped up that positions innovation
at the center of the model rather than being seen as an independent, exogenous force. Countries that have been leaders in
innovation have also been at the top in the global economic orderlook at the United States, Germany, and Japan. With
the global economy going through a volatile phase now and developed economies showing anemic growth, many feel its
time for the Asian century, with China and India the only major economies showing robust growth. But its also true that
to attain and sustain economic leadership, economies like Indias have to be leaders in innovation going forward.
India has for ages had its proprietary system of innovation, that which is locally known as Jugaad. This system of Jugaad has
found a mention in management discourse under the topic of frugal innovation. India being a country with low GDP per
capita and the Indian consumer being highly price sensitive, companies have mainly innovated on products like Embrace
(a portable infant warmer), Tata Nano (an entry-level automobile), Godrejs MittiCool (a biodegradable refrigerator made
of clay), and GE Healthcares MAC 800 (a portable ECG unit). Companies have gone on to profitably market these products
in not only other emerging markets, but also in developed economies, due to the increasing popularity of value-for-money
products. But a meager amount has been cutting-edge, as a study by the National Knowledge Commission shows.1
Thus, India, to attain innovations of the scale of Google, has to create a healthy innovation ecosystem. To create this
ecosystem, we urgently need to execute on the following steps:

Government support. This support has to come in various ways. Although in most cases it seems the private
sector is producing innovation, the government is also intricately involved through providing better infrastructure,
strengthening research capabilities of government departments, etc. In 2011, the Indian government spent only
around 0.9 percent ($36.1 billion) of GDP (PPP basis) on R&D as compared to the United States, which spent 2.7
percent ($405.3 billion) of GDP (PPP basis).2

Facilitating a friendly business environment. The World Banks Doing Business report ranks India at a miserable 134 out
of 189 countries.3 India is particularly lagging in parameters like starting a business (rank 179) and enforcing contracts (rank
186), things that a potential Google would have to circumvent. If the government doesnt take steps to reduce the bureaucracy,
reduce judicial backlog,and streamline transaction costs, then innovation might get all bogged down in procedural delays.

Strengthening the intellectual property rights (IPR) regime. In India, there is a two-level problem regarding
intellectual property rights:
Little or no awareness. Often, the small and medium enterprises (SMEs), which are regarded as the hotbed
of innovation in any economy, are not even aware about the IPR regime, and even if they are aware, they do not
understand the importance of getting patent protection for their invention. This was clearly brought out in a survey
of the National Knowledge Commission (NKC), where it was seen that only 3 percent of the SMEs have filed for
more than five patents in the past five years. Compare that to the fact that 17 percent of the SMEs surveyed said that
they introduced innovations unique to the world, and you see that there is a problem.
Awareness, but still no f ilings. In the case of large firms, although around 74 percent have access to patenting process, the
NKC study found that there is a wide disparity between awareness and actual translation into patents in terms of filings.
Thus, the following steps must be taken:
Increase awareness about the IPR regime through television advertisements, billboards, etc.
Inform SMEs about the IPR regime and its importance the moment they come for registration of their companies
and associated procedural tasks.
Have a national knowledge repository that will pool together all patented knowledge and allow inventors and
scientists to have access to it so that they can improve upon those ideas or pool together their proprietary ideas with
those ideas to create more powerful innovation.

Funding ecosystem. One of the reasons that Google could scale up was the regular funding that it got from various
investors and companies. The first funding was given by Andy Bechtolsheim (cofounder of Sun Microsystems) and
the next round was given by venture capital firms like Kleiner Parkins Caufield & Byers and Sequoia Capital. The
Indian funding scenario is comparatively bleak.
A recent planning commission report4 shows that annual investments in early-stage venture capital investing are only
around $240 million in India in FY12, compared with $6.3 billion in US and around $700 million in China. Also,
nearly 90 percent of that funding came from offshore investors. This is clearly not conducive for the next Google or
Facebook to emerge. The following steps must be taken:
The government must ensure ease of entry and exit for early-stage ventures along with tax incentives on capital gains
for such investors and simplify IPO requirements.
Government agencies like Small Industries Development Bank of India must be given greater financial firepower to
place bets on more start-ups, and the market for corporate bonds and high-yield debt must be strengthened to ensure
that smaller, high-risk companies also have access to debt.
Industry bodies and chambers of commerce must also look at hosting more company-investor meetings to drive
greater interaction between investors and entrepreneurs, leading to better chance of deals happening.

Strengthening the education system. The Indian education system suffers from both capacity and quality constraints. The
country still has 300 million illiterate peoplethe most in any country. And the people who are getting educated are also
doing poorly. Programme for International Student Assessment (PISA), monitored by the Organisation for Economic
Co-operation and Development, ranked Indian students 71st among 73 countries.5 And a report authored by local industry
body Assocham showed that only about 25 percent of Indian graduates are readily employable.6 Thus, there is a need for:
Holistic strengthening the education system right from the primary to tertiary education stagethere must not be
some islands of excellence like the IITs and IIMs and mediocrity all around.
The necessity of opening up more vocational centers to make the youth job-ready.
Moving more toward an outcome-based appraisal system rather than an input-based appraisal system (based more
on actual student learning rather than on how much money is spent or how many hours schools are open).
Leveraging the power of technology to enable better accessibility and cost-effective availability of educational resources.

Creating specific innovation infrastructure. For a robust innovation infrastructure to develop, there have to be
certain vital cogs in the wheel. One tool that has been globally recognized is innovation incubators, which are
programs designed to ensure adequate hand-holding for small businesses. In India, the concept is still in its nascent
stage, with a few like the Centre for Innovation, Incubation and Entrepreneurship at the elite Indian Institute of
Management, Ahmedabad, trying to house businesses. But the country needs many more of those and governments
and private investors must come forward to build such innovation hubs. It also helps in easier transmission of
knowledge between various innovators and experience in the United States shows its a profit-making venture.7

Building a culture of entrepreneurship. In India, there are basically two cultural obstacles to innovation flourishing:
A majority of Indians are satisfied in taking up a cushy job with a monthly salary and job security rather
than starting out on their own. This has been basically brought about by societal pressures, and success in the
Indian middle-class being measured more by comfort and security rather than on the propensity to take and
execute risky ventures.
There is not enough celebration of entrepreneurship and innovation in India. Institutes like the Indian Institutes
of Management have tried to circumvent the first problem through concepts like placement holidays where
students who start off on a new venture right after graduation can come back and seek placements after two years if
their risk does not pay off, and some media houses have recently instituted awards for entrepreneurs and innovators,
but more needs to be done in this regard.

The journey to churning out innovation is pretty rough, but the prize is sweet enough to merit it. India, with its vast
resources of talent, young people, and huge unmet needs surely has the potential to produce the next Google, but its
stakeholders must get together to bring about a holistic innovation framework. The quicker they do it, the better.

1 Innovation in India, National Knowledge Commission (India), June 2007.

2 List of countries by research and development spending, Wikipedia, accessed October 29, 2013.
3 Doing Business, World Bank, June 2013.
4 Creating a Vibrant Entrepreneurial Ecosystem in India, Government of India Planning Commission, June 2012.
5 Dev Lahiri, The Pisa Shocker, The Times of India, October 9, 2012.
6 Prithvi Yadav, Imperative for change, ASSOCHAM, September 2012.
7 Business incubation as a profit-making venture, Small Business Notes, accessed October 29, 2013.