Trade disputes between the US and China are an opportunity. India could become the next technology hub

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Bagmane Tech Park in Bengaluru. | Photo credit: Wikimedia Commons

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Global efforts to combat the Covid-19 pandemic have changed the perception of where innovation can take place and have led the world to see unprecedented levels of virtual collaboration and information sharing across borders. However, various global economies are now seeking within their borders to build resilient infrastructure and reduce dependence on external sources to avoid uncertainty. This shift in approach benefits countries like India which are working to increase their domestic manufacturing capabilities and welcome more people to join their workforce.

A recent KPMG report on technology innovation hubs shows that Bengaluru ranks among the cities that are the major technology innovation hubs in the world, and India as a nation ranks first among the countries and jurisdictions that show the most promise for the development of innovative technologies. The fact that India ranks first, while only a handful of Indian cities are equally recognized, shows its enormous potential and room for growth.

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Bengaluru – the Silicon Valley of India

Bengaluru has not become a center of technological innovation overnight. A variety of factors such as key policy changes and positive market forces responses over a period of over half a century have laid the foundation for the emergence of the city’s technological innovation ecosystem.

In 1984, with the announcement of new IT and software policies in India, imports and exports of hardware and software were liberalized. This paved the way for organizations like Wipro and Infosys to be established in Bengaluru and hire Indian programmers. Ties were also built with American companies offering advanced systems which Indian software companies have benefited enormously from. In 1985, Texas Instruments Inc. became the first multinational to set up a development center in Bengaluru, paving the way for more multinationals in the years and decades that followed.

Bengaluru currently accounts for over a third of the global internal centers (GICs) in India. This is mainly due to its strong concentration of high-level talent able to create customized software and complex solutions for companies at low cost. This is very attractive to global companies whose time-to-market pressure translates into their preference for a large number of skilled developers without the excessive labor costs.

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What is holding India back?

Despite its young and promising workforce, India still has a significant skills gap when it comes to technological innovation. According to a recent report by the India Brand Equity Foundation, India ranks eighth in the world for the number of students graduating in Science and Engineering, but it seems that not enough is being done to educate them with the relevant skills. A recent report on the employability of engineers in India showed that less than 4% have the technical, cognitive and language skills needed for tech startups and only 3% have new age skills in areas such as artificial intelligence, learning. automatic, data science, and mobile development.

The shortage of technology-ready workers available to private sector companies also contributes to significant levels of educated youth unemployment in the country. The private sector must work with the government and the Department of Education to address this problem: a similar way would be to integrate multiple technical training programs into the course curriculum that match industry requirements.

India is also in dire need of increasing investment in research and development (which currently invests only a paltry 0.6 percent of its GDP in research and development), and in fundamental technology research and product development, along the lines of the US Defense Advanced Research Projects Agency, in partnership with the private sector. If we analyze the success of technology innovation hubs in the United States and various European countries, it becomes increasingly clear that the government must be the largest consumer and largest investor in innovative technology. After all, technological innovation leads to the nation’s technological and economic progress.

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Path to becoming a global technology hub

Coupled with significant government support, foreign and domestic investment can help launch India as the next global technology hub. As the US and China continue to engage in trade disputes, India has the opportunity to attract technology-driven investments as an attractive alternative. In addition, greater investment in research and development by the government and a better quality of skilled workforce could put India in a favorable position to compete with China for technology-driven market dominance.

While global investors in the past have been reluctant to invest in Indian companies, due to the country being classified as high-risk, India’s fast-growing start-up ecosystem, coupled with strong political reforms, a improved investment facilitation and greater ease of doing business led to over $ 80 billion in foreign investment in the 2020-21 financial year. Domestic investment is also on the rise, as Indian companies now have a greater understanding of the opportunities arising from the country’s exponential digital transformation.

A recent report by Baker McKenzie on economic and macro trends in Asia Pacific suggests that 83 percent of senior Indian company executives believe “policymakers were behind the curve in terms of the laws they passed regarding technology and innovation “. Regulators could work with private sector companies to better understand complex technological advances and formulate supportive policy solutions to encourage innovation.

This process is already underway to some extent: the “Make in India” initiative, launched in 2014, was designed by the Indian government to promote self-sufficiency, encourage innovation, improve skills development and build a high quality manufacturing infrastructure. In early 2016, Narendra Modi’s government launched the “Startup India” initiative to support entrepreneurs and build a solid foundation for the start-up ecosystem. There is also the Modi government’s “Digital India” project which aims to digitally empower society and massively improve the size of India’s digital economy.

India has at its disposal the tools it needs to be a global leader in technological innovation, but it needs to overcome several obstacles to reach its potential. Encouraging more foreign investment, offering necessary skills training programs, greater efforts to retain home-grown talent, as well as creating an adequate and efficient regulatory infrastructure are all vital to greater technological innovation in the country.

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The new frontiers

India’s significant advances as a digital economy and related infrastructure, coupled with the efficient use of data, will shape its future as a center of technological innovation. With the unprecedented growth and expansion of the Internet of Things, Industry 4.0, artificial intelligence and software-defined networking, India must significantly increase its focus on digital engineering if it is to be a leader in technological innovation. While the pandemic may have had a significant impact on growth, it has also accelerated virtual work environments and thus increased the availability of talent. India’s abundance of digital technology talent, coupled with a mature ecosystem of startups, will drive a new phase of technological innovation and economic growth.

By incorporating digital technologies such as data analytics and artificial intelligence across the economic value chain, companies are reaching new highs in efficiency, productivity and customer satisfaction. This needs to be scaled down and integrated nationally to ensure an efficient supply of goods and services, both in the private and public sectors of our economy. This will stimulate large-scale investment and lead to large-scale technological innovation.

Although the Modi government has made significant progress in this regard through programs such as “Make in India”, “Startup India” and “Digital India”, it still has a long way to go when it comes to investments in support of fundamental research and innovation. technological. The private sector must partner with the government and compete to secure research and development grants for technological innovation programs that benefit the nation. India certainly has the potential, but the time is ripe to make it a reality and become the global standard in technological innovation.

This article is part of a series examining the relationship between global and local, in partnership with Carnegie India, through its 2021 Global Technology Summit (December 14-16, 2021). Click here to sign up.

RK Misra is a non-resident scholar at Carnegie India. Nitin Michael is program coordinator and research assistant at Carnegie India. Opinions are personal.

(edited by Srinjoy Dey)

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