India’s declining innovation performance as compared to other countries is crying out for timely policy intervention by the government.
Asit K. Biswas and Kris Hartley
The Business Times | March 4, 2015
Goes the oft-quoted maxim: “You can’t manage what you can’t measure.” Governments and institutions have often taken this adage to heart. Leveraging improved data collection technologies and captivated by numerous competitiveness rankings, governments have made a Taylorist pivot in promoting economic growth: measure, rank, repeat. The push for global visibility, as often embodied in such rankings, has led countries to focus on conveniently measurable dimensions of development. Among the less conveniently measurable is innovation, which is increasingly seen as a critical indicator of growth potential.
The yearly Global Innovation Index (GII) is in its seventh edition. Declaring itself the “leading reference” on innovation among comparative indices, the GII is a collaborative effort by Cornell University, INSEAD, and the United Nation’s World Intellectual Property Organisation (Wipo). It adopts a broad view of innovation, measuring seven analytical pillars covering capabilities (inputs) and results (outputs). Capabilities in the 2014 edition include institutional conditions, infrastructure and market sophistication. Results include knowledge and technology outputs, and creative outputs.
The GII has undergone several rounds of revision. Since its debut in 2007, it has witnessed significant turmoil in the global economic and social environments, along with unprecedented scientific and technological advances, and an increased role for entrepreneurial initiative in innovation. The general themes of each GII report, and associated metrics, reflect the prevailing trends of the moment.
The first GII report in 2007, ranking 107 countries, focused on globalisation and interconnectivity as drivers of innovation. The “innovation outputs” sub-index was measured in terms of national competitiveness and wealth. The second GII report was released in 2008 at the height of the financial crisis, and the third report (2009/2010) continued the call for an innovation-based economic recovery.
The third GII introduced social welfare and “wellbeing” as components of the “innovation outputs” sub-index (measured by Gini coefficient and per capita GDP). This shortlived metric appeared to show a belief in the power and duty of innovation to improve livelihoods. However, in the 2011 GII report, this metric was incorporated into the “knowledge impact” component of the “scientific outputs” sub-index, which also included GDP growth rate, new businesses and software spending. This effectively diluted the welfare component through its statistical conflation with a variety of largely unrelated measures.
Emphasising linkages, policy relevance and enabling infrastructure, the 2012 report introduced online creativity to the innovation outputs sub-index. The 2013 report emphasised local and regional innovation, lending an economic geography perspective that aimed to empiricise innovation “hub” development. The 2014 report emphasises the “human factor”, recognising contributions from both individuals and groups in a nod to the democratisation of information and research.
There are many stories sitting behind seven years of GII data. Few, however, are more compelling than trends in India and China over that time. The first chart depicts the performance of four selected countries in the rankings. The indexed value approach creates a “starting line” against which each country’s yearly performance is measured relative to its original position. This method controls for the often significant gap between countries in absolute rankings (for example, United States ranked #6 in the 2014 index but India ranked #76). So the point of the exercise is not to highlight scores but to compare how countries are improving their performance.
The chart shows that both China and Singapore improved their rankings, with China having more volatility during the financial crisis. The US slipped at the beginning of the crisis, and has slowly but incompletely recovered its position since. Most notable is India’s dismal performance – flattening after a precipitous decline during the crisis, but continuing its distressing trend more recently.
The performances of China and India in the innovation input and output sub-indices are shown in the next two charts, and stark differences are evident. First, the two countries diverge in innovation input trends (second chart). Components of this sub-index include government effectiveness (India ranks #82 of 143, 15 places behind China), regulatory quality (India ranks #108 of 143, 16 places behind China), and ICT (information and communications technology) access (India ranks #111 of 135, 37 places behind China). India’s performance on most metrics has been consistently poor.
Innovation outputs include development and dissemination of knowledge and “creative” goods in particular. India is again outperformed by China (third chart).
The 2014 report includes a separate chapter about education in India, arguing that the country should improve education in dimensions including overall quality, graduate education capacity, equality of access, and research prowess.
According to the report, India’s expenditure on education as a percentage of GDP (in 2011) was 3.17 per cent – a ranking of #109 out of 132, and below many less developed countries. Such statistics signal to policymakers that human development is a critical element of innovative capacity and, by extension, competitiveness in the new knowledge economy. Innovation by nature is linked with knowledge, whose development is contingent on the quality of education.
The GII’s comprehensive metrics highlight a variety of dimensions in which India has considerable room for improvement. The usual constraints – infrastructure, regulation, and market functionality – are policy hobgoblins that perpetually haunt developing nations the world over. They are also metrics of easy resort for critics advocating enhanced, but often contentious, policy interventions. However, education is a sector where intervention is necessary, feasible and politically defensible, due to its proven returns on investment. Specific policies should focus on access, research capacity and global connectivity. Improving education quality is a good development strategy, both for competitiveness rankings and general social welfare. Indian leaders would do well to take notice.
Asit K. Biswas is distinguished visiting professor at the Lee Kuan Yew School of Public Policy, National University of Singapore, and Kris Hartley is a doctoral candidate at the School.
Article published in The Business Times, March 4, 2015