The competitiveness of India in science-based innovation within the global landscape

Keynote by Ravi Venkatesan, Chairman, Bank of Baroda on the competitiveness of India in science-based innovation within the global landscape, at the National Competitiveness Forum (NCF) and Porter Prize event held recently in Gurgaon.

“In our own lifetime, most experts are predicting we will see a point that is called singularity, which means the moment when machines and software become as smart as we are, and the scary thing is they keep getting smarter and we don’t.”

“India is facing a huge job crisis. We have to create 120 million jobs over the next ten years. Right now, we are probably on course to create 50-60 million jobs.”

According to a recent report released by The World Economic Forum, India has moved up 38 places in the world’s competitiveness rankings in the last two years, which is good progress. I am going to talk about India’s competitiveness when it comes to science-based innovation. In the year 1750, India was very competitive and accounted for 25% of the world’s industrial output and China accounted for another 25%. By 1900, just 150 years later India’s share of output had declined to less than 2% and the reasons for this were multiple. Firstly, the Mughal Empire went into decline and as it declined there was lot more war and conflict between various kingdoms that impacted output. The second factor, which was probably a bigger cause, was colonization by Britain, which was very extractive. They extracted resources and exported it. But the biggest third factor was that India missed out on the Industrial Revolution, which was about the invention of the steam engine and the power textile loom and it created an unbelievable growth in productivity, which overpowered India’s handloom industry. So, the handloom industry got decimated and India de-industrialized extremely rapidly.

The same thing happened to China, but in the last 25 years China has re-industrialized with a vengeance. The Industrial Revolution was, to use business jargon, a disruption. It was a giant disruption. The countries that embraced the Industrial Revolution like Britain, France, all the colonial powers, went from rags to riches. The countries like India and China that missed out went from riches to rags. Today we are in the beginning stages of what is called the fourth industrial revolution and this promises to be even more disruptive than the previous three industrial revolutions. The first revolution was steam, second was electricity, third was the first wave of computerization, which began in the 60’s and now we are in the fourth. Will India be able to ride this tidal wave to prosperity or are we more likely to be swept away by it?

Now what is this fourth industrial revolution?

The way people are using it basically is shorthand for huge advances in multiple fields. An advance in genomics, materials, computer science and manufacturing technologies but the common thread is they are all driven by what is called science-based innovation. As a result, machines are closing in on human capability at an amazing speed and robots are displacing people not just in factories but are beginning to make their appearance along with drones everywhere. So, by 2025 or maybe a decade later we will see colonies on Mars and the moon. In our own lifetime, most experts are predicting we will see a point that is called singularity, which means the moment when machines and software become as smart as we are and the scary thing is they keep getting smarter and we don’t.

Already, we are at a point where scientists can edit genes just like you edit a software program and you can use that to create favorable traits in life forms. You can engineer an organism to do something specific, for instance absorb carbon dioxide. Across the board, science-based innovation is making science fiction into reality. This is happening without most of us even realizing it. We don’t add it up to see what is the real picture. Now as with all industrial revolutions before, new technologies will destroy lot of old jobs. It will also create new ones. The rise of the robots and smart software is displacing people not just on the factory floor but also knowledge workers, including, lawyers, stockbrokers and even CEOs.

A recent report released by McKinsey stated that 50% of the tasks done in a CEO’s office could be automated. The real issue is whether this will create more jobs than it destroys or will it destroy more jobs? In the long run probably more jobs will be created. But in the short and medium term many jobs are likely to be destroyed, than new ones created. A study from Oxford tries to quantify this and states that 47% of all jobs in the US, 69% of all jobs in India, and 77% of all jobs in China will not exist by 2025. But there are two interesting statistics, which make this real. Last year, China installed more new robots in their factories than they hired people. This year the employment in the Indian IT industry has peaked. The industry will grow 10% or thereabouts, but net employment will not grow. And from here on most people are predicting that employment will decline. We know jobs are going to be destroyed everywhere whether it is in Africa, India, China, Europe or the US. The important question is where will the nice, juicy, well paying new jobs be created. These would be created where innovation is happening, and most of the new science-based innovation is happening in the US, some of it is happening in China and some in Europe.

As a result, most of the American firms are the ones that are leading the world in disruptive innovation. If you think about the companies that have captured our imagination, they are in the realm of a Google, Amazon, Tesla Motors and there’s a company called Illumina in genomics. Disproportionately they are American firms. Now this has an interesting implication. If you think about the first industrial revolution what happened initially was lots of jobs were lost in England as well which was why they had a reactionary movement called the Luddite movement where they said they don’t like machines and they went around breaking machines. But very quickly England figured out that there’s a better way. They could export job losses to India and other colonies and could capture the gains of the productivity revolution in Britain. So India, Africa and China went into poverty and they became very, very rich. The next question then is what is likely to happen in the fourth industrial revolution? Are we assuming that few new, well paying jobs would be created in India? Or are we just going to become a market for innovations from other parts of the world? (That’s what we are today. We are a market for Amazon, Uber etc. and they are likely to be low or midway services jobs.) Are we likely again to become colonized, not this time by countries but by companies like Google, Monsanto, and Pfizer? What will happen to India’s prosperity? Will that growth continue or will it stall?

The answer to all the above questions depends on whether we are able to ride that tidal wave to prosperity or whether we are going to be swept away by it. This is the pivotal moment for us. India is facing a huge job crisis. We have to create 120 million jobs over the next ten years. Right now, we are probably on course to create 50-60 million jobs. But there’s a yawning gap out there. A million jobs challenge. How can we create one million income-generating opportunities in the informal sector in the next five years? Much more effort is needed and if this is the situation today, on top of this we have got this huge fourth industrial revolution. So what will it take for us to profit from it?

I wonder, when the next Google or Apple will come from India? The answer is never. We do not have the systems to create a Google or an Apple. The reason new companies emerge in US is because they invest an enormous amount on scientific research which happens in universities like Stanford and MIT, corporate labs like Xerox Park & Bell Labs; places like Microsoft Research, GE etc. The risky, early stage research is funded by the US government, usually by their Department of Defence through organizations like (Defense Advanced Research Projects Agency) DARPA. All the technologies in the iPhone were funded this way, from the display to the touch screen to the voice recognition technology etc. GPS came out of this and the Internet itself emerged through this process. Americans also figured out that they need better immigration policies. Over fifty years they have been able to attract the brightest, smartest people from every country to come work in their labs. Finally, they have a good entrepreneurial ecosystem that can take these innovations and commercialize them. So, new companies are not produced by accident but they are a result of an intentional approach.

Our leaders, whether in business, government, or academia, are mostly trying to play catch-up. There is no public discourse on creating something new and innovative. If we look at the rankings of the best global universities then Indian Institute of Science is ranked around 300 and IIT’s are way behind. There is no Indian company that is cutting edge.

If a young person wants to do research either he could go to ISRO or one or two CSR labs but usually he would have to go to the research lab of a MNC like GE, Microsoft or Google or else they will have to leave the country. Although we have a huge amount of start-up activity in our country in the last three or four years, much of it is copy-paste business models and very few are real game changers.

Indian companies need to spend more on R&D and innovation. The big institutes need to do more research. But are they going to change the game? I don’t think so. India needs a mission like the Apollo space program. You know 1961 America was lagging the Soviet Union and that’s when President Kennedy said he is committing the country to a goal of putting a man on the moon and returning him safely to Earth by the end of the decade. It’s one of the most motivational mission statements ever and the whole country got aligned and by July 1969 Apollo 11 landed on the moon. That wasn’t it. The spin-offs from that space program, powered the commercial success of any number of American companies. So, we can’t just leave it to individual effort. We need a collective effort and I hope we wake up in time.

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