Recommendations to address current challenges news
25 July 2007

Recommendation 1
NASSCOM to scale existing innovation initiatives

NASSCOM will recognize breakthrough innovations and support these with necessary global marketing and funding support. It will also institutionalize an annual innovation survey that will track and capture the performance and perspectives of Indian IT-ITES companies on different aspects of innovation.

Recommendation 2
NASSCOM to promote an ''Indi Innovation Framework''

The ''Indi Innovation Framework'' will adopt a three-pronged approach:

  • Establish Indi Innovation Certification Programme - basis a rigorous evaluation criteria that will holistically address an entrepreneur''s need for branding, mentoring and networking support thereby increasing the probability of entrepreneur''s success. Certified entrepreneurs will have an advantage while competing in the market place for resources and provide access to a support network especially created under the ''Indi Innovation Framework''.
  • Set-up an India Innovation Fund - focused on seed / angel stage funding, a stage where the risk is the highest and least amount of funding exists. The fund promoted by NASSCOM will follow key guiding principles such as:

    o Promote innovation in emerging technologies
    o Develop sustainable linkages between entrepreneurs, centres of research excellence, and established firms
    o Foster technology seeding and exchange of information globally
    o Promote and nurture IP driven entrepreneurship
    o Provide priority to commercialisation of domestic R&D

The fund will be created through a public private partnership. This approach will allow the government to play a passive role of being a ''limited partner'' (supplier of capital) while the investment decisions are made by a set of professional fund managers. The government''s funding support will ensure that investments at the riskiest stage of business can be funded adequately by low cost domestic capital. Additionally, the fund will also attract private firms to invest as it will give them access to a unique PPP fund managed by professional managers.

  • Thematic Innovation Platforms - NASSCOM will bring together several ecosystem constituents to launch theme-based fundamental and applied innovation platforms to provide thought leadership in themes which are relevant to the Indian IT-ITES industry. Fundamental innovation platforms will focus on basic science themes while applied innovation platforms will focus on themes that apply these scientific innovations to specific problem domains.

Recommendation 3
Government should synergise its innovation-related initiatives

There are several mechanisms that the government can adopt to synergise its disparate innovation initiatives to drive a focused national innovation agenda. These include:

  • Creating a National Innovation Policy which identifies the strategic focus areas, operational guidelines, capacity building roadmap, key institutions, funding mechanisms, etc. Specific innovation-related programmes can be launched under the aegis of the National Innovation Policy.
  • Launching national mission mode projects in key technology areas like automotive, aerospace, defense, space, healthcare, etc. Adopting a mission approach will obtain better synergies through co-ordination of different initiatives and collaboration among industry and research institutions.
  • Establishing National Innovation Commission, a nodal body to provide innovation thought leadership to both the government and the private sector.

Irrespective of the chosen coordinating mechanism(s), the three guiding principles for a national innovation agenda should be social welfare goals such as IT enabled healthcare or education delivery among others; academia and research interests and commercial and usability considerations for technology.

Recommendation 4
Establish Innovation Clusters of research institutes, academia and industry

For promoting these innovation clusters, focus should be on building thematic clusters, which leverage local industries and institutions and allows the cluster participants to leverage the concentration of talent already available in the vicinity or attract talent around a particular theme. Such thematic innovation clusters would lead to focused research and accelerated creation of IP assets. As an illustration, Pune and Chennai could be innovation clusters for automotive and wireless technologies respectively.

Recommendation 5
Government should implement bold changes in policies related to innovation

While some of these changes will be amendments to existing regulations, there is also a need for introducing some bold measures in the following areas.

Patents & Copyrights: The overall IPR environment in India can be improved still further by undertaking several initiatives such as:

  • Creating a National Patent Fund or encourage existing funds to provide financial support to technology entrepreneurs (especially new start-ups) for the entire patent life-cycle management.
  • Establishing more patent offices and improving efficiency of existing patent offices
  • Investing in capacity building for IPR enforcement in judiciary
  • Creating IP courses in secondary and tertiary education curriculum, especially in technology, management and law institutes

Business Environment: Some recommendations for improvement are:

  • Simplify entry and exit procedures for firms through ''single window'' clearances
  • Streamline the import and export procedures and make custom offices more efficient
  • Structure the Indian bankruptcy law along the lines of developed countries
  • Simplify procedures for entrepreneurs to exit from businesses and rationalise statutory compliance requirements which for entrepreneurs
  • Provide special incentives to encourage the Indian Diaspora to invest in technology start-ups in India

Venture Capital: While risk capital availability in India has shown a tremendous surge, some policy reforms are required to stimulate further growth:

  • Seed stage funding should be part of priority sector obligations for banks that invest in venture funds
  • Stimulate seed capital funding by providing strong financial incentives including tax write-offs for losses, no tax on profits for a stipulated period, direct tax benefits for investments, etc.
  • Provide incentives to local industry firms and financial institutions to invest in domestic venture capital funds. Incentives could include investments in VC funds being classified as R&D expenses, zero capital gains tax on returns from VC funds, etc.
  • Relax constraints on institutional investment in domestic venture funds
  • Allow creation of venture capital funds as Limited Liability Partnerships (LLP) and Limited Liability Corporations (LLC)
  • Stimulate investments by High Net Worth Individuals (singly or as a group) in technology start-ups by providing financial incentives including offsetting the investment against taxable income

Commercialisation of domestic technology: To stimulate the demand and supply side of technology development, some specific recommendations are as follows:

  • Provide priority funding for technology development projects
  • Encourage public private sector partnerships for R&D in areas such as defence, space, atomic energy, etc.
  • Preference in government procurement for IP assets created in India
  • Create enabling legislation to encourage commercialisation of IP assets created through government funding
  • Encourage research institutes to invest in industry focused research by linking a proportion of the funding provided to institutes to the number of patents generated / licensed by the institute
  • Remove restrictions on the participation of research scientists and academics in commercialisation of their research outputs
  • Encourage technology educational institutes to set up incubation centres to stimulate entrepreneurship among both the academia and student community.

Recommendation 6
Collaborate with international educational institutes to increase quality of local research

India produces less PhD scholars in IT technologies annually than any one leading academic institution in the US. Bilateral collaborations will benefit both Indian and the international institutes. While Indian academia get access to cutting edge technology and process know-how for accelerating the quality and quantum of research, the international institutes will get access to the Indian talent and knowledge about the domestic market.

To make such collaborations sustainable, the government and the Indian academia will need to take some bold steps especially around operational autonomy of academic institutes and allowing FDI in the education sector.

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Recommendations to address current challenges