Where does innovation come from? Where is it born? These two questions, I would like to argue, through this essay, are the two fundamental questions that the 2020-21 Economic Survey seeks to answer.
It understands, quite like Swami Vivekananda once suggested that you cannot teach a hungry man about God, for innovation to thrive, the most important element is an atmosphere, an ecosystem for innovation. Innovation cannot occur, for instance, if people are unwell. Therefore, it not only devotes not a large part of its analysis in trying to understand how and why India was effective in tracking, tracing, and controlling the Covid-19 pandemic, and better than many other countries with far greater resources, it also (in a chapter titled ‘Healthcare takes Centre Stage, Finally!’) diligently notes all the myriad things that can be done to further the cause of low cost healthcare for all in the country. It notes that mere private initiative alone would not solve the problem, and that greater public expenditure could help reduce the out-of-pocket expense levels.
Innovation, the Economic Survey, seems to suggest in mood and spirit must have innovators, and those innovators do not rise automatically—they need a supportive environment, the basics taken care of, innovators are not isolated products. This ecosystem for innovation is a joint creation of both the state and businesses. The chapter on innovation for instance notes the “crucial role of literacy, education, physical infrastructure and policies enabling ease of doing business”, but also highlights where the missing initiative in R&D lies.
In 2020, India entered the top 50 innovating countries for the first time since the Global Innovation Index (GII) began in 2007. In 2015, its rank was 81, in 2020, it was 48 (of 131 countries). How can it do better? The Survey points out by improving on scores in areas like education, and pupil-teacher ratio in secondary education, among other things.
For innovation to truly become atmanirbhar (self-reliant), the Survey points out that Indian businesses must step up on gross expenditure on R&D; to quote, “The business sector in India contributes much less to gross expenditure on R&D (about 37%) when compared to businesses in each of the top 10 economies (68% on average). This is despite the fact the tax incentives for R&D were more liberal in India when compared to those in the top 10 economies. The government does a disproportionate amount of heavy-lifting on R&D by contributing 56% of the gross expenditure on R&D, which is three times the average contributed by governments in the top 10 economies. Yet, India’s gross expenditure on R&D at 0.65% of GDP is much lower than that of the top 10 economies (1.5%-3% of GDP) primarily because of the disproportionately lower contribution from the business sector.”
Innovation, the Economic Survey, seems to suggest in mood and spirit must have innovators, and those innovators do not rise automatically—they need a supportive environment, the basics taken care of, innovators are not isolated products. This ecosystem for innovation is a joint creation of both the state and businesses. The chapter on innovation for instance notes the “crucial role of literacy, education, physical infrastructure and policies enabling ease of doing business”, but also highlights where the missing initiative in R&D lies.
If human capital is one of the key ingredients of innovation, as noted by the GII, and India’s needs to improve on that count, then it cannot but follow that healthier humans would make for greater human capital. This is where the adoption of the Pradhan Mantri Jan Arogya Yojana (PM-JAY) comes in. A mass programme to provide free access to healthcare for the underprivileged, it had, the Survey points out, striking results, “Across all the states, the proportion of households with health insurance increased by 54% for the states that implemented PM-JAY while falling by 10% in states that did not. Similarly, the proportion of households that had health insurance increased in Bihar, Assam and Sikkim from 2015-16 to 2019-20 by 89% while it decreased by 12% over the same period in West Bengal. From 2015-16 to 2019-20, infant mortality rates declined by 12% for states that did not adopt PM-JAY and by 20% for the states that adopted it. Similarly, while states that did not adopt PM-JAY saw a fall of 14% in its under-five mortality rate, the states that adopted it witnessed a 19% reduction.”
Perhaps the most striking argument underlying that growth and innovation needs a suitable climate comes from a chapter on ‘bare necessities’ which constructs a Bare Necessities Index (BNI) at the rural, urban and all-India level. It uses 26 indicators on five dimensions—water, sanitation, housing, micro-environment, and other facilities and places Indian states on the index in a comparison between the status in 2012 and 2018.
Compared to 2012, access to “the bare necessities” has improved across all states in the country in 2018. Notes the Survey: “Access to bare necessities is the highest in the states such as Kerala, Punjab, Haryana, and Gujarat while it is the lowest in Odisha, Jharkhand, West Bengal, and Tripura. The improvements are widespread as they span each of the five dimensions viz., access to water, housing, sanitation, micro-environment and other facilities. Inter-state disparities in the access to ‘the bare necessities’ have declined in 2018 when compared to 2012 across rural and urban areas. This is because the states where the level of access to ‘the bare necessities’ was low in 2012 have gained relatively more between 2012 and 2018. Access to ‘the bare necessities’ has improved disproportionately more for the poorest households when compared to the richest households across rural and urban areas. The improvement in equity is particularly noteworthy because while the rich can seek private alternatives, lobby for better services, or if need be, move to areas where public goods are better provided for, the poor rarely have such choices.”
In the last Economic Survey (2019-20) there was a special emphasis of grassroots wealth creation, and this year, no doubt fuelled in part by the Covid-19 pandemic, the analysis has gone a step deeper to dig into the systems and processes, and the bare necessities, which fuel innovation and economic aspiration. The very bare necessities for Atmanirbhar innovation.
Views are personal. The author is a historian and multiple award-winning author of nine books. He is a World Economic Forum Young Global Leader.
