First Post: Modi govt vying for India’s long-term growth story, but lacks reforms on protecting intellectural property rights

February 15, 2016

Kalpana Reddy

Prime Minister Modi has succeeded in putting India back on the world economic map and as the global economy is witnessing lingering slowdown, India has been one of the few countries to emerge relatively unscathed.

Eliminating the license raj, combatting corruption, making investments in infrastructure improvements, and simplifying the maze of regulations required for businesses to operate in India will obviously contribute to India’s growth. But, India must also successfully harness its innovative capacity to realise its full growth potential.In fact, India has become a preferred destination for foreign direct investment, improved its ranking in the World Bank’s Ease of Doing Business Index, and may soon become a global hub for manufacturing through the “Make in India” campaign. However, questions still remain regarding whether Modi can deliver on the reforms required to kick-start India’s long-term growth story.

Prime Minister Modi has presented the “new” India as one being driven by technology and one that is “committed to protecting IPR which is essential to fostering creativity.” However, this recognition has not been realised as the Indian government continues to investigate, analyse and tinker with its innovation and IP policies.

As a result, the Americans, Europeans, and Japanese continue to lead the world in technological innovation, while India tries to force them to share their discoveries sooner through the use of heavy-handed mechanisms such as compulsory licensing or forced localization.

Unfortunately, as of now – and ahead of a potentially landscape-changing national IP policy – Modi’s India still looks very much like the India of yesterday as influential figures continue to question or reject the well documented correlations between strong intellectual property (IP) protections, innovative output and economic growth.

However, the fact remains that most developed countries increasingly rely on their innovative capacity to remain globally competitive. And, innovation is carefully nurtured by implementing measures to prioritise innovate output by strengthening IP protection and enforcement systems, increasing R&D funding, and developing the skills of the next generation of scientific and engineering talent.

The recently released 4th edition of the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) International IP Index, “Infinite Possibilities”, which ranks the IP environments in 38 economies around the world based on 30 criteria critical to innovation, underscores this fundamental truth that strong IP protections are related to increased economic growth, stimulate job creation and spark greater innovative activity.

For example, the Index found that countries with vigorous IP frameworks, as outlined by the Index, are more likely to attract venture capital and private equity funding as well as increase their attractiveness as a foreign investment destination. Taking incremental steps to strengthen the IP environment helps to bolster the legal and regulatory framework, in turn giving investors assurances that their innovations will be protected.

As new investment flows into a country, the underlying economy is further strengthened. The Index found a direct positive correlation between a robust IP system and growth in high-value jobs, with nearly triple the workforce concentrated in knowledge-intensive sectors. Additionally, economies with favorable IP protections possess on average 2.5 times more research and development (R&D)-focused personnel within their workforces. The creation and sustenance of these jobs helps continue a country’s growth on the trajectory to becoming a truly knowledge based economy.

Investment in research and development, resulting in the incremental and game-changing discoveries which enhance our daily lives, completes the innovation lifecycle. The Index reveals that strong IP systems not only lead to greater innovative outputs but also provide consumers with 30% greater access to the most recent technological developments. IP provides the framework which allows a concept to be translated into a viable commercial product.

These are a few of the significant correlations identified by the Index, but the possibilities of a strong IP regime to economies around the world are infinite. It’s important for policymakers around the world, and in India, to understand the significance of a strong IP environment, not only to the national economy but to a society at large. The Index is a tool to help make that case.

India continues to languish amongst the lowest ranked countries in the Index, and its inability to improve its overall ranking after 4 years may cause industry to question its commitment to innovation. As we await the release of the final National IP Policy, we can only hope that the government prescribes reforms which recognize the promise of the future rather than remaining rooted in the protectionist past.

True IP reform must go beyond simply raising IP awareness and addressing the staffing and operational deficiencies of the Indian IP Office. India must also take a serious look at its existing IP laws and implement changes that will incentivize innovation in all sectors, including pharmaceuticals, and provide the proper deterrent for IP infringement if it hopes to become a global manufacturing and innovation powerhouse.

Indian innovators and entrepreneurs deserve to participate in and benefit from their creations and inventions by having ready access to start-up financing and a path to bring their discoveries to market, an advantage their competitors in other key economies already have enjoy.

Taking meaningful steps to address the deficiencies in the Indian IP environment outlined in the Index will deflect the consistent criticism that India has endured and will provide the basic IP protections which international investors seek. Over time, this will translate into direct economic benefits for India and drive annual GDP growth well in excess of the current 7% per year.

The writer is a senior director of international intellectual property for the Global Intellectual Property Center (GIPC) at the U.S. Chamber of Commerce.