The latest Global Innovation Index (GII) report ranks 130 countries based on their innovative capacities and outcomes, utilizing 78 indicators to measure innovation. The report highlights the significant differences between the innovative ecosystems of the United States and India. The United States is a developed economy with a GDP per capita income of around $81000, while India aims to become a developed economy by 2047, with a GDP per capita of approximately $2,450. These disparities are reflected in their GII rankings: the United States ranks third, whereas India has made remarkable progress to secure the 39th position— a substantial increase from its previous ranking of 81st in 2015. There is still a significant gap in the performance of both countries at the sub-national level that needs to be addressed, particularly for India, which aims to break into the top 25 of the Global Innovation Index (GII). It is essential to understand the factors driving the differences in performance at regional economies, as these contribute to both countries’ varying innovative capabilities and outputs.
The innovative ecosystem of the United States thrives on factors such as robust R&D infrastructure driven by high R&D investment and a skilled STEM workforce. Silicon Valley and Massachusetts are globally renowned for their blend of the triple helix model, access to venture capital, and high levels of private R&D spending. In contrast, India’s innovative ecosystem is driven by five states: Karnataka, Delhi, Maharashtra, Chandigarh, and Tamil Nadu. Significant strides in innovation are driven by tech hubs such as Bengaluru, Gurugram, Delhi and Hyderabad. However, the challenge these tech hubs and other emerging tech hubs in India face is in matching the depth and breadth of US sub-national level innovation capabilities. U.S. tech clusters show strikingly higher levels of patent intensity and research output. Area San Jose- San Francisco alone has recorded approximately 7,885 Patent applications, more than 25 times higher than India’s leading hub, Bengaluru. Similarly, U.S clusters such as Boston-Cambridge produce over 17000 scientific articles across even revolving sectors such as AI, biotechnology and earth sciences sectors, whereas India’s S&T clusters of Bangalore, Chennai, Mumbai and Hyderabad produced less than 2000 scientific articles as revealed by World Intellectual Property Organization (WIPO) data for Science and Technology Cluster Ranking 2024.
At the same time, the intensity of research and development (R&D) in India, measured as a percentage of GDP, is around 0.7 per cent. This figure is significantly lower than leading global economies among the top 25 countries. In India, the government, including the higher education sector, accounts for 59 percent of R&D spending, while the contribution from the private sector remains minimal. These trends are also evident at the subnational level within India. In contrast, developed economies like the United States see over 70 percent of their R&D funded by business enterprises. Differences are also exacerbated when it comes to STEM workforce engagement. In India, Union Territories (UTs) such as Puducherry and Chandigarh have high engagement in the STEM workforce, although these regions have smaller populations. Other states in India only record about 2 percent STEM engagement. In contrast, leading innovation hubs in the United States, such as New Hampshire, have 27.8 percent of their employment in STEM fields. This distribution of STEM workforce engagement highlights the need for stronger triple helix linkages, especially since India produces the highest number of STEM graduates globally but struggles to convert them into an active workforce. Disparities exist in R&D funding models, STEM workforce engagement, and the role of the private sector in driving innovation.
The Disparities in regional economies we discussed above result from differences in stages of development, as many Indian states are transitioning from a factor-driven economy to an innovative one. Bihar and Uttar Pradesh are still factor-driven states with lower per capita incomes. On the other hand, in the United States, even regional economies with lower GDP per capita, such as Mississippi, have a per capita income ten times higher than many Indian states. This disparity in per capita incomes – often referred to as a measure of the prosperity of a region – further influences innovation ecosystems in both countries. States in India vary widely in economic development, from Bihar’s around $420 per capita income to Sikkim’s $4,304, underscoring the need for decentralised innovative strategies to allow less developed regions to improve their innovative capabilities.
Key to addressing these differences is for Indian states to look at California’s journey from an agriculture-driven economy to a technology powerhouse. Silicon Valley’s evolution since the 20th century owes much to foundational pillars such as the strength of education institutes like Stanford, which influences entrepreneurial culture rooted in academia-industry collaboration; the Role of venture capital alongside immigration policies that brought skilled labour workforce from China and India, who have been instrumental in sustaining silicon valley’s growth. Indian states can learn from US regional economies how these regions have dramatically evolved through education, government support, and entrepreneurship.
This year, the U.S.-India Innovation partnership has been significantly boosted with initiatives such as the U.S.-India Initiative on Critical and Emerging Technologies (ICET) and the India-U.S. Innovation Handshake. These initiatives establish a structured pathway for collaboration in advanced technology sectors, including semiconductors, artificial intelligence (AI), quantum computing, and renewable energy. The ICET framework specifically focuses on securing semiconductor supply chains, while the Innovation Handshake promotes collaboration between start-ups, venture capitalists, and the private sector in both countries. The strong partnership between the U.S. and India offers significant opportunities for collaboration in developing critical technologies to tackle challenges such as supply chain resilience and climate change. To maximise this partnership, Indian states should adopt a blueprint incorporating lessons from U.S. regional economies. This involves studying their innovative ecosystems, effectively integrating universities, government, and industry to enhance regional innovation capacities and foster long-term collaboration.
The article was published with Business World on December 4, 2024.
