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Subject: Economics

  • Vibrant Village Programme (VVP)

    village

    Union Home Minister said that borders can be permanently secured only when border villages are populated by patriotic citizens who are concerned for the country, asking the border-guarding forces to use the Vibrant Village Programme (VVP) for the same.

    Vibrant Village Programme

    • The program aims to improve infrastructure in villages along India’s border with China.
    • Infrastructure will be improved in states like Uttarakhand, Himachal Pradesh, and Arunachal Pradesh.
    • Under the programme, residential and tourist centres will be constructed.
    • It will also provide for improvement in road connectivity and development of decentralized renewable energy sources.
    • Apart from that, direct access of Doordarshan and education related channels will be provided. Support will be provided for livelihood.

    Key focus areas

    • It focuses on livelihood generation, road connectivity, housing, rural infrastructure, renewable energy, television and broadband connections.
    • This objective will be met by strengthening infrastructure across villages located near the Line of Actual Control (LAC).

    Need for such scheme

    • The programme is a counter to China’s model villages but the name has been carefully chosen so as to not cause any consternation in the neighbouring country.
    • China has established new villages along the LAC in the past few years, particularly across the Arunachal Pradesh border.
    • While China has been settling new residents in border areas, villages on the Indian side of the frontier have seen unprecedented out-migration.

     

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  • India’s tech startups and the dearth of funding

    startups

    Context

    • The Indian government is emphasizing and celebrating its tech startups as an important component of its economic development policy. Prime Minister Modi recently pointed out that the number of Indian ‘unicorns’ technology startup companies with a valuation of US$ 1 billion or more has doubled since 2021. Some sectors within these startups, such as climate tech, do demonstrate strong promise.

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    startups

    Funding a major problem

    • Though India has emerged as the third largest ecosystem for startups, funding is becoming a growing problem, with the number of unicorns dropping by half in 2022.
    • One of the sectors that appear to be not doing very well is the Indian online tech startups.

    Present status of Indian tech startups

    • Good performance during the pandemic: These Indian tech startups did very well during the two-year-long pandemic. With the dramatic increase in work-from-home (WFH) office interactions, online consulting for various services but especially heathcare, online classes at schools and colleges and other educational centres, and other online services and platforms proliferate.
    • Indian techs became popular for online services: Overnight, technological solutions and electronic communications using virtual platforms, digital payments system, video consultations and edtech all became popular.
    • As people returning to normal lives Indian techs looks weak: But with the pandemic now relatively under control and people returning to normal lives, the future of Indian startups that provided online services is beginning to look bleak.
    • Negative assumptions: Going by recent media reports, the future of such tech startup companies is not so bright. Funds are drying up and not all startups are going to survive.
    • Global uncertainties adding up to the existing problems: Further, issues like the Russian invasion of Ukraine, a spike in global inflation rates, and fears of a possible recession have also brought down the prospects for many startups in general.

    Impact of shortage in funding to tech startups

    • Complete shutdown of many startups: Shortage of capital that is critical for the startups to sustain has led to cost-cutting measures with layoffs, mergers and consolidation and even complete shutdowns of some of them.
    • Shut down as it unable to find market fit product: According to Inc42, a tech media platform, eight startups shut shop in 2022. These include Matrix Partners-backed SaaS startup, Protonn, which closed its operations in January 2022 since it was unable to find the right product-market fit.
    • For instance, the funding case of Protonn: Protonn was a Bengaluru and San Francisco-based startup, focused on providing its platform to professionals such as lawyers, graphic designers and nutritionists to launch their businesses online, create videos, conduct live sessions, generate payment links, and track their business’s financial performance. The company had raised US$9 million in seed funding. The company, founded by former Flipkart executives, Anil Goteti and Mausam Bhatt, returned US $ 9 million to its investors.

    startups

    Problem faced by edtch startups in a post pandemic world

    • A case of edtech startup Uday: Uday ended its operations in April this year. The Gurgaon-based startup had difficulties finding ways to stay in business in the post-pandemic world. The startup co-founder, Soumya Yadav stated that the company was witnessing the post-pandemic world for the first time, as the kids went back to school, we faced roadblocks in growing the original model of online, live learning. We evaluated multiple different strategies and adjacent pivots however none of them were promising enough.
    • Financial crunch and laying off the employees by well-established edtechs: Edtech startups such as Vedantu and Unacademy are also facing severe financial crunch, leading to hundreds of layoffs or shutting down certain verticals.
    1. Vedantu for instance: Earlier in the year, Vedantu laid off around 620 employees. Unacademy, earlier in the year, shut down its medical test preparation vertical, USMLE.
    2. Unacademy laying off its verticle: As of November, Unacademy has done three rounds of layoffs, starting with 600-800 employees from its sales and marketing team.
    3. Byjus: Byju’sa rival of Unacademy has also felt the pinch and is reported to have laid off close to 2,500 employees.
    4. SuperLearn: Another startup in the education sector, a Bengaluru-based SuperLearn, shut its operations in June because of “a dearth of funds and diminishing investor confidence.”

    Other positive side of the startups

    • Biotech and healthcare startups did well: While the edtech is possibly the worst hit, startups in the biotech and healthcare sector and e-commerce and fintech may not be as badly affected in the coming year.
    • Healthcare startups not only survived but also benefitted: Several startups gained from the inadequacy of the Indian healthcare system and thus phenomena like online pharmacy, healthcare-at-home services, and fitness and wellness companies have sprung up and they are likely to stay.
    • Funds received by healthcare startups will be helpful: Healthcare startups reportedly received funds of around US$2.2 billionn across 131 deals. They also appear to have found an appealing business model that might help them pull on with reasonable success in the coming years.

    Way ahead

    • Nevertheless, there is a likelihood that after seeing a boom and a significant spike in the demand in these sectors in the last two years, there may be some balancing in the next two years.
    • Another possible way that startups will deal with the financial crunch, lack of adequate response is to consolidate the several different edtech and e-commerce platforms and so, one could expect a few merger and acquisition to come through in the coming years.
    • Enterprisetech sector saw some of this playing out already. Startups, at least within a few exclusive sectors, have gained fair amount of prominence and appears that they are here to stay despite the possibility of a rough couple of years until issues around funds and market are evened out.

    Conclusion

    • It is evident that not only the economic crisis caused closures, but growing businesses in post-pandemic conditions was proving to be a challenge. Overall, Indian tech startups therefore suggest a mixed picture. Strong government support is positive but business model and market competition issues need to be addressed.

    Mains question

    Q. Indian edtech startups are witnessing financial crunch however, healthcare start-ups are benefitting in a post pandemic world. Therefore, Indian tech startups suggest a mixed picture. Discuss.

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  • India’s first Waste-to-Hydrogen Project

    Hydrogen

    Context

    • India assumed the Presidency of the Group of 20 this December. The world’s third largest emitter is moving beyond a transition strategy based squarely on solar development by branching out into emerging fields such as hydrogen.

    Present Energy status and future Predictions

    • Only country to keep promise: India is one of the few countries that has kept to its Paris Agreement (21st Conference of Parties or COP21 to the United Nations Framework Convention on Climate Change) commitments, with an exponential increase in renewable energy capacity.
    • Energy through renewables: It is anticipated that by 2050, 80-85 per cent of India’s overall power capacity will come from renewables by achieving the nationally determined contributions commitments.
    • Reducing the fossil fuel: India had committed to increasing the share of non-fossil fuels to 40 per cent of the total electricity generation capacity by 2030.

    Hydrogen

    Potential of hydrogen energy

    • 6 million tonnes hydrogen: India consumes about six million tonnes of hydrogen annually to produce ammonia and methanol in industrial sectors, including fertilisers and refineries.
    • Rising demand of hydrogen: This could increase to 28 million tonnes by 2050, principally due to the rising demand from the industry.

    Efforts to promote Green Hydrogen

    • Search for technology to generate: Ever since the Union Ministry of New and Renewable Energy (MNRE) shared that it is time for green hydrogen, private players have been looking for new technologies to generate it.
    • Electrolyser is inefficient: With the challenges of electrolyser capacity for generating green hydrogen globally, finding alternatives to foster green hydrogen in the country is essential.
    • Incentives from central government: The central government, the prime facilitator of such projects, has been coming up with new initiatives, policies and schemes to unleash the potential of green hydrogen generation and boost its demand.
    • Rational utilization of resources: The long-term low-emission development strategy of the country submitted to UNFCCC at COP27 focused on the rational utilisation of national resources for energy security in a just, smooth and sustainable manner.

    Idea proposed by Pune Municipal Commission

    • Partnership with private player: PMC has partnered with business management consultant The Green Billions (TGBL) to manage its waste and generate it into useable green hydrogen. TGBL’s special purpose vehicle or subsidiary, Variate Pune Waste to Energy Private Ltd, will be undertaking the work.
    • Waste management: The new facility for generating hydrogen from waste will solve major problems of Inefficient waste management and carbon emissions. Waste management is one of the prime issues in the country, which is blamed for generating pollution in the surroundings.
    • Reducing carbon emissions: Pune, the second largest city in Maharashtra, hosts many industries, including steel, fertilisers and pharmaceutical industries. The emissions in the city increased by 12 per cent to 1.64-tonne carbon dioxide equivalent (tCO2Eq) per capita in 2017 from 1.46 tonne tCO2Eq per capita in 2012.

    Hydrogen

    How Hydrogen will be generated?

    • Hydrogen generation for 30 years: Variate Pune Waste to Energy Private Ltd will be managing and utilising the municipal waste of 350 tonnes per day (TPD) for generating hydrogen for 30 years. This waste will comprise biodegradable, non-biodegradable and domestic hazardous waste.
    • Plasma gasification technology: The Refuse-Derived Fuel (RDF) from the waste would later be utilised to generate hydrogen using plasma gasification technology. The technology has been developed while closely working with the Bhabha Atomic Research Institute (BARC) and the Indian Institute of Science, Bengaluru.
    • 9MT Tonnes of H2: It is estimated that 150TPD RDF and 9MT tonnes of H2 would be generated out of 350 TPD waste.
    • Decarbonising the city: The hydrogen generated at the facility will be utilised locally to help the city lower its emissions. As the Centre is focusing on industrial decarbonisation and facing the challenges of just transition, the project can prove to be a game-changer in helping industries reduce carbon emissions.

    Hydrogen

    Conclusion

    • In India, where the hydrogen industry is nascent, it is imperative to keep the cost of hydrogen competitive to expand its usage in various sectors. TGBL will work on the same by making hydrogen affordable and easier to switch in the just-transition.

  • Cotton textiles: India was/is/ and will be a leader in sustainable production

    cotton

    Context

    • When we look back at Indian handlooms, what is certain is that the craft world has changed, not in the slow-paced gradual way of changes in the past, but much faster than before. India can be a world leader in the sustainable production of cotton textiles.

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    cotton

    Background: Indian handlooms

    • Supplier from the ancient times: The weavers of India have supplied the markets of the world with cotton cloth since at least the first century of the Common Era.
    • Fine varieties of cotton were the source of wealth: In pre-industrial times, the many varieties of Indian cotton cloth bafta, mulmul, mashru, jamdani, moree, percale, nainsukh, chintz, etc were the source of India’s fabled wealth.
    • Spun by hand: Until colonial times, the yarn for handloom weaving in India had been spun by hand.
    • Invention of spinning machines: With the invention of spinning machinery in Britain and the import of machine-spun cotton yarn, this occupation vanished.

    cotton

    Impact of colonial policies on Indian handlooms

    • Economic policies dictated by British: Since India was a British colony, the British dictated its economic policies.
    • Raw material exported while machine made fabric imported: Machine-woven cotton fabrics began to be imported, while raw cotton was shipped out to supply British industry.
    • Variety of cotton from India was not suitable for machinery, so they forced uniformity: Though Indian varieties of cotton produced the finest fabrics the world has yet seen, the famous Dhaka muslins, they were unsuited to the newly invented textile machinery, while American cotton varieties that have a longer, stronger staple, were more suited to machine processing. The machines needed a uniform kind of cotton, so the hundreds of varieties of Indian cotton which had been bred over centuries now had to become uniform. Diversity, until then valued, became a handicap.
    • By 1947 uniform production established and variety lost: By 1947, mass production was well established, and India’s own spinning and weaving mills took over the role of Lancashire. American cotton varieties and their hybrids gradually replaced native ones, so now, native varieties grow only in a few pockets

    What did this mean for Indian cotton farmers?

    • New practices changed the nature of production from sustainable to commercial: Cotton in India is grown largely by small farmers, and the new practices have changed the nature of farm practices from sustainable, family-based agriculture to intensive commercial farming with severe and tragic consequences.
    • Seeds from companies were expensive: Seeds come from large multinationals, rather than the farmer’s own stock, and are expensive.
    • Desi varieties of seeds were rainfed lost rapidly: While the desi varieties were rain-fed, the American varieties need irrigation, which increases humidity. Humidity encourages pests and fungi.
    • Cost of cultivation increased with use of fertilizers: A cocktail of chemicals fertiliser, pesticide and fungicide is used which adds to the cost of cultivation, but does not guarantee a good harvest.
    • Debt increased farmers misery: The farmer runs up huge debts hoping for a good crop, but India’s weather is variable, groundwater is fast depleting. If the crop fails, the risks are entirely the farmer’s. The distress of the cotton farmer has even led to suicides. The introduction of genetically-modified seeds has led to more severe problems.

    Relationship between energy shift and the cotton production

    • Renewable energy in 21st century: Just as energy from fossil fuels ushered in the era of mass production in the 19th century, it will be clean, renewable energy that will take the small-scale environmental Indian industries to the top of the heap in the 21st century.
    • Emphasis for low energy manufacturing: As fossil fuels deplete, earlier notions of efficiency will change, and low-energy manufacturing processes will gain value.
    • Handwoven fabrics will gain importance again: At the same time, markets are becoming saturated with look-alike products from factory-style mass production, and there are more customers for the individualised products dispersed production can offer. Small-batch handwoven fabrics will become desirable in the changing markets.

    cotton

    Interesting: Malkha a sustainable fabric

    • Malkha is pure cotton cloth made directly from raw cotton in the village close to cotton fields and combines traditional Indian principles of cloth making with modern small-scale technology.
    • Malkha is energy efficient, avoids baling and unbaling of cotton by heavy machinery and unnecessary transport.
    • It provides an alternative to the mass production of cotton yarn.
    • Malkha has also added natural dyeing of yarn to make its fabrics even more sustainable.

    Conclusion

    • The world is looking for green industries. Over the next 25 years, as independent India turns 100, handloom weaving located close to cotton fields can make it a world leader in sustainable production.

    Mains question

    Q. The weavers of India have supplied the markets of the world with cotton cloth since at least the first century of the Common Era. In this context Discuss the impact of British policies on Indian handloom.

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  • What is Social Stock Exchange (SSE)?

    social

    The National Stock Exchange of India (NSE India) received an in-principle approval from the Securities Exchange Board of India (SEBI) to set-up Social Stock Exchange (SSE) as a separate segment.

    What is Social Stock Exchange (SSE)?

    • SSE is a novel idea in India, and a stock exchange of this kind is intended to benefit the private and non-profit sectors by directing more capital to them.
    • During her Budget speech for the fiscal year 2019–20, Finance Minister first proposed the concept of SSE.
    • The Securities Contracts (Regulation) Act, 1956 was then invoked by the government, which subsequently published a gazette notification announcing a new security as “zero coupon zero principal”.
    • The SSE will function as a distinct division of the current stock exchanges under the new regulations.

    Who can list on SSE?

    • The SSE will be a distinct division of the current stock exchanges under the new regulations.
    • Not-for-profit organisations (NPOs) and for-profit social enterprises with social intent and impact as their primary goal will be eligible to participate in the SSE.
    • Additionally, such an intent should be shown by its emphasis on social goals that are appropriate for under-served or less privileged populations or areas.
    • The social enterprises will have to engage in a social activity out of 16 broad activities listed by the regulator.

    The eligible activities include-

    1. Eradicating hunger poverty, malnutrition and inequality
    2. Promoting healthcare, supporting education, employability and livelihoods
    3. Gender equality empowerment of women and LGBTQIA communities
    4. Supporting incubators of social enterprise

    Who are not eligible?

    • Corporate foundations, political or religious organisations or activities, professional or trade associations, infrastructure companies, and housing companies, with the exception of affordable housing, will not be eligible to be identified as social enterprises.
    • According to SEBI’s framework, minimum issue size of ₹1 crore and a minimum application size for subscription of ₹2 lakh are currently required for SSE.

    Minimum requirements for sustenance

    • NPO needs to be registered as a charitable trust and should be registered for at least three years, must have spent at least ₹50 lakh annually in the past financial year.
    • They should have received a funding of at least ₹10 lakh in the past financial year.

     

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  • Amrit Bharat Station Scheme

    The Ministry of Railways, as part of its station redevelopment drive, has formulated Amrit Bharat Station Scheme to modernize over 1,000 small stations over the coming years.

    Amrit Bharat Station Scheme

    • Under this, stations will be equipped with facilities inspired by the mega-upgradation of marquee stations such as New Delhi and Ahmedabad, albeit at a lower cost.
    • Key features of these proposed stations include provisions for roof top plazas, longer platforms, ballast-less tracks, and 5G connectivity.
    • The scheme will subsume all previous redevelopment projects where work is yet to begin.

    Implementation strategy

    • The model envisages low-cost redevelopment of stations which can be executed timely.
    • Zonal railways have been given the responsibility of selecting stations, which will then be approved by a committee of senior railway officials.
    • Plans and consequent budgets will only be approved on the basis of factors such as footfall and inputs from stakeholders.

    Facilities Planned under this Scheme

    • Provision for Roof Plaza to be created in future
    • Free Wi-Fi, space for 5G mobile towers
    • Smooth access by widening of roads, removal of unwanted structures, properly designed signages, dedicated pedestrian pathways, well-planned parking areas, improved lighting etc.
    • High level platforms (760-840 mm) at all stations with a length of 600 metres
    • Special amenities for the disabled

     

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  • Why India’s bankruptcy regime needs to be fixed?

    The government is proposing to make changes to India’s six-year-old Insolvency and Bankruptcy Code (IBC).

    What is the Insolvency and Bankruptcy Code (IBC)?

    • The IBC, 2016 is the bankruptcy law of India that seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
    • It is a one-stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
    • The code aims to protect the interests of small investors and make the process of doing business less cumbersome.

    Key features

    Insolvency Resolution: The Code outlines separate insolvency resolution processes for individuals, companies, and partnership firms. The process may be initiated by either the debtor or the creditors. A maximum time limit, for completion of the insolvency resolution process, has been set for corporates and individuals.

    1. For companies, the process will have to be completed in 180 days, which may be extended by 90 days, if a majority of the creditors agree.
    2. For startups (other than partnership firms), small companies, and other companies (with assets less than Rs. 1 crore), the resolution process would be completed within 90 days of initiation of request which may be extended by 45 days.

    Insolvency regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it. The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the RBI.

    Insolvency professionals: The insolvency process will be managed by licensed professionals. These professionals will also control the assets of the debtor during the insolvency process.

    Bankruptcy and Insolvency Adjudicator: The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies:

    1. National Company Law Tribunal: for Companies and Limited Liability Partnership firms; and
    2. Debt Recovery Tribunal: for individuals and partnerships

    What are the changes being proposed?

    bank

    • Easier settlements: The process is being proposed to be divided into two phases—phase I will focus on finding potential buyers and handing over the management to the acquirer. Phase II would address the distribution of proceeds among creditors and settle inter-creditor disputes. This would make an effort to revive the units with better management, wherever possible.
    • Preventing delays: Average days taken to resolve a case has risen to 679 days in H1FY23 from 230 days in FY18. The changes presently under consideration seek to address inter-creditor disputes, which have been identified as the leading cause of delays.

    Why is the IBC seen as a game-changer?

    • The IBC has proved to be a deterrent for many unscrupulous borrowers and imparted tools to banks to be reasonably confident about recovering NPAs.
    • Fear of losing control of the firm nudges debtors to settle their dues.
    • Till September 2022, 23,417 applications for initiation of the Corporate Insolvency Resolution Process (CIRP), with an underlying default amount of ₹7.31 trillion, were resolved before admission.
    • Indirectly, the code provides an exit route by winding up commercially unviable units.

     

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  • AVGC-Extended Reality Mission for Gaming Sector

    avgc gaming

    The Animation, Visual Effects, Gaming and Comics (AVGC) Promotion Task Force report has proposed a national AVGC-Extended Reality Mission with a budget outlay to be created for integrated promotion and growth of the sector.

    What is AVGC?

    • While the etymology of the word surrounds everything to do with Animation, Visual Effects, Gaming and Comics, the overarching term is an umbrella for all the sub-sectors that are contributing to India’s digital economy.
    • This includes-
    1. Animation Studios
    2. VFX Studios
    3. Game Development Studios
    4. Platforms
    5. Hardware Manufacturers
    6. Software developers
    7. Virtual Production Studios and many more entities
    • The sector saw immense growth with technological adoption as is, but it witnessed steep uptake with the onset of the pandemic.

    Why focus on the AVGC sector?

    • Emerging sector: The global AVGC industry amounts to $800 billion, and the Indian AVGC sector is brimming with the potential to bag up to 5 percent of the global share ($40 billion).
    • India’s IT prowess: India today contributes about $2.5-3 billion of the estimated $260-275 billion worldwide AVGC market.
    • Skilled workforce availability: According to industry experts, the Indian market which currently employs about 1.85 lakh AVGC professionals, can witness a growth of 14-16% in the next decade.
    • Employment generation: Not only does the sector contribute significantly to the economy, it also creates an abundance of employment opportunities for several skilled sectors, with over 160,000 jobs that it could provide yearly.

    Key recommendations by the task force

    The report has also recommended-

    • “Create in India” campaign with an exclusive focus on content creation
    • Establishment of AVGC accelerators and innovation hubs in academic institutions
    • Democratizing AVGC technologies by promoting subscription-based pricing models for MSME, Start-ups and institutions;
    • Indigenous technology development through incentive schemes and Intellectual Property creation; and
    • Setting up a dedicated production fund for domestic content creation from across India to promote the country’s culture and heritage globally.
    • Memorandum of Cooperation with developed global AVGC markets — U.S., Japan, South Korea, Germany etc.

    Way forward

    • Policy vision: Because of the wide range of sub-sectors that are amass under AVGC’s wide umbrella, there is a need for a broad vision to help further incubate this industry.
    • Up-skilling: There is a requirement for not only financing and resource allocation for the sector, but also education and talent development.
    • Collaboration: Gaming, VFX, and animation markets in the likes of the US or South Korea, for instance, has been heavily incubated, and are thus at the crest of the wave on a global scale today.

    Conclusion

    • If it gets the correct atmosphere to grow in–especially one that covers all the bases under it, the Indian AVGC sector has the capacity to become the zenith of Digital India and the hallmark of the ‘Brand India’ dream that PM envisages.

     

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  •  ‘PRASAD’ Scheme to create a slew of facilities at Srisailam

    President of India inaugurated ‘PRASAD’ project at the tourism facilitation centre in the pilgrim town of Srisailam in Andhra Pradesh.

    About Srisailam

    • The temple at Srisailam is the ancient and sacred place of South India.
    • The presiding deity of the place is Brahmaramba Mallikarjuna Swamy in natural stone formations in the shape of Lingam.
    • It is listed as one of the twelve Jyotirlingams existing in the country.

    Development with PRASAD scheme

    • The pilgrim town will get a pilgrim complex, amenities centres, an amphitheatre, sound and light show, digital intervention, parking areas among others.
    • There is total outlay of ₹48.03 crore under the PRASAD project.

    Back2Basics: PRASAD Scheme

    • PRASAD stands for Pilgrimage Rejuvenation and Spirituality Augmentation Drive (PRASAD).
    • It is 100% Centrally Sponsored Scheme under Tourism Ministry.
    • Provisions under the scheme include-
    1. Tourism Promotion and Tourist Ecosystem
    2. Vocational Training for Tourists and Hospitality Business
    3. Hunar se Rozgar tak (HSRT) and earn while you learn programs
    4. Improving Tourist Infrastructure

     

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  • Research and Development Scenario in India

    development

    Context

    • US, has retained its global leadership for almost a century since World War I thanks to the culture of innovation backed by a solid base of research and development (R&D). China is challenging the leadership of US based on technology and innovation. If India wants to be a Vishwa guru it must invest in R&D.

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    Innovation and missing R&D Investment

    • Engine of growth: Innovation is rightly recognized as an engine for economic growth.
    • Atal innovation Mission: In 2016, the government launched the Atal Innovation Mission (AIM) to create an ecosystem to promote innovation and entrepreneurship in the country.
    • Actual spending is less: All these are steps in the right direction, but the foundation of all this lies in how much India actually spends on R&D, both in absolute terms as well as a percentage of its GDP, in relation to other G20 countries.
    • Sustainable Target: SDG Target 9.5 calls upon nations to encourage innovation and substantially increase the numbers of researchers as well as public and private spending on R&D. Gross domestic expenditure on R&D (GERD) is the proposed aggregate to quantify a country’s commitment to R&D.

    What is the scenario of Global Investment in R&D?

    • Institute for Statistics (UIS): According to UNESCO’s Institute for Statistics (UIS) latest report, the G20 nations accounted for 90.6 per cent of global GERD (current, PPP$) in 2018.
    • Increased spending on R&D: Global R&D expenditure has reached a record high of about 2.2 trillion current PPP$ (2018), while Research Intensity (R&D expenditure as a percentage of GDP) has gradually increased from 1.43 per cent in 1998 to 1.72 per cent in 2018.
    • Investment in PPP terms is inaccurate: Though looking at spending in PPP terms is a reasonable metric for welfare measurement in the economy, when it comes to technological prowess in high-end activities of R&D, it all boils down to measuring hard currency in US dollars.

    development

    Investment in R&D by G20 countries

    • G20 leader in investment: The G20 countries, accounting for 86.2 per cent of the global GDP and over 60 per cent of the global population in 2021, are the leaders in every way.
    • USA spends the Highest: The US leads the G20 by spending $581.6 billion on R&D followed by the European Union ($323 billion), and China ($297.3 billion) in 2018.
    • India spends negligible amount: India lags way behind with a paltry R&D expenditure of only $17.6 billion in 2018. In terms of their relative shares in G20 R&D expenditure, the US is way ahead with 36 per cent, followed by the EU (20 per cent), and China (18 per cent). India’s share is less than 1 per cent of G20 R&D expenditure in dollar terms.

    development

    Linkages between Research Intensity and Expenditure on R&D

    • Percentage to GDP: While the absolute expenditure on R&D provides a sense of scale, their percentage to the respective GDP provides the research intensity (RI).
    • South Korea Highest RI: It is interesting to note that in 2018 for which the latest information is available, South Korea has the highest RI at 4.43 per cent, followed by Japan (3.21 per cent), Germany (3.09 per cent), the US (2.83 per cent), France (2.19 per cent), China (2.14 per cent) and EU (2.02 per cent). India is ranked 17th in the G20, with a RI of 0.65 per cent (see infographics).
    • Example of Israel: One of the non-G20 countries is Israel, which, while having an R&D expenditure of just $18.6 billion, a population of only 9.3 million and a per capita income of around $51,430, has the highest RI of over 5 per cent. No wonder, Israel is known as a land of innovations, be it in defence or agriculture.

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    What India can learn from Israel?

    • Innovation growth and competition: The innovation system in Israel is a fundamental driver of its economic growth and competitiveness.
    • Active role of government: The government has played an important role in financing innovation, particularly in SMEs, and in providing well-functioning frameworks for innovation, such as venture capital (VC), incubators, strong science-industry links, and high-quality university education.
    • India can emulate Israel: Israel builds a strong case to show that despite being a smaller nation, sustainable growth can be achieved by prioritising investments in R&D. A lesson India can learn.

    Mains Question

    Q. What is difference between investment in R&D and research intensity? What is the missing part in India’s R&D and innovation ecosystem?