Geographies in Depth

How innovation is playing an increasingly central role in India diplomacy

People hold an Indian national flag during a protest rally against last week's militant attacks, outside the Taj Mahal hotel in Mumbai December 3, 2008. U.S. Secretary of State Condoleezza Rice urged Pakistan on Wednesday to cooperate "fully and transparently" in investigations into the Mumbai attacks that have upset India-Pakistan relations. REUTERS/Punit Paranjpe (INDIA) - GF2E4C3182B01

Image: REUTERS/Punit Paranjpe

Anshul Pachouri
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Innovation is increasingly becoming a buzzword in India. In 2016, the country launched its flagship innovation programme, Atal Innovation Mission, focused on scaling start-up incubation centres and promoting innovation culture among schoolchildren by providing them with hands-on experience in 3D printing, the internet of things (IOT) and robotics.

A consistent policy focus on innovation seems to have helped India improve its ranking in the Global Innovation Index, from 81st in 2015 to 57th in 2018. Notably, this strong domestic policy focus is supplemented by the country’s ongoing diplomatic efforts in forging strong economic ties with other nations, based on innovation - a strategy known as 'innovation diplomacy'.

India’s ongoing efforts in promoting bilateral investment and cooperation in the area of innovation had a strong impact in 2017. The theme of innovation, R&D and start-ups remained an important agenda point in almost all the bilateral visits of Prime Minister Narendra Modi and in other diplomatic engagements. The launch of the India-Israel Industrial R&D and Technological Innovation Fund in August and India’s hosting of the Global Entrepreneurship Summit (convened by the US) in November reflected the serious intent of the Indian government with regard to innovation diplomacy.

The India-Israel Industrial R&D and Technological Innovation Fund - the India-Israel Innovation Fund for short - encompasses an annual investment of $4 million from each country for five years, putting its total value at $40 million. The launch of the joint fund could potentially emerge as one of the masterstrokes of India’s innovation diplomacy. To reveal its likely implications, it is critical to consider the famous Binational Industrial Research and Development Foundation (BIRD) programme, incorporated jointly by the US and Israel in 1977.

Under the ambit of BIRD, funding is provided for the joint development of new products and technologies by Israeli and US companies. The idea was that US companies would benefit from Israel’s high-tech talent pool, and Israeli companies from access to America's vast domestic and global market. The funding model adopted a hybrid investment banking approach, in which BIRD gives up to 50% of the total R&D costs, capped at $1 million, to be repaid along with returns only following the commercial success of each new product. It’s a win-win model for both the funding agency and companies, as BIRD takes no equity or intellectual property rights.

Since 1977, the BIRD programme has funded more than 967 projects, with a cumulative fund disbursement of $346 million. It has earned $386 million, in the form of endowments and repayments. The cumulative sales value of products developed from its projects is estimated to be $10 billion, demonstrating the tremendous commercial success and sustainability of BIRD over the past five decades.

Some of the biggest technology giants, including GE, Motorola and Texas Instruments, have been the beneficiaries of the programme. Needless to say, BIRD also played a very important role in the growth of Israeli companies into global powerhouses - the type of development that Indian SMEs and start-ups are pushing for at the moment.

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It is important to highlight that during the inception of BIRD, Israel was still recovering from the aftermath of successive wars with Arab nations. It was actively looking for key markets to which it could export its technology, to achieve higher economic growth in the light of a deepening strategic relationship with the US. This situation elicits a noticeable parallel to the current context, in which India is gearing up to tap the global market and experience innovation-driven economic growth while leveraging its growing strategic partnerships with both Israel and the US. Given the success of BIRD, one can only imagine the immense possibilities and market value that the India-Israel Innovation Fund could generate for both countries.

Along similar lines, India’s hosting of the Global Entrepreneurship Summit, together with Modi and President Donald Trump’s increasingly warm relationship, could be seen as a significant signal from the US that it is ready to expand its economic relationship with India in the areas of joint product development and innovation commercialization, like it did with Israel in 1977. The important question is: how should India position itself to reap the benefits of such opportunities, and lead the way towards innovation diplomacy?

India is the planet’s sixth largest economy. It presents huge market potential for almost every company in the world. The country suffers from a dichotomy: on one side, it has huge unmet needs for affordable healthcare, safe drinking water, agriculture, and pollution and disaster risk reduction; on the other side, it has a growing pool of young technology enthusiasts and innovators. This uncommon phenomenon ideally positions Indian start-ups and companies to collaborate with their global counterparts under the umbrella of bilateral innovation funds, to develop effective technological solutions for addressing social issues, with the potential to scale up for global markets.

In light of the above, it is imperative that the implementation and management of the India-Israel Innovation Fund should be done professionally, and in a manner similar to the BIRD programme. The success of this joint innovation fund will greatly help India to establish similar bilateral innovation funds for joint development with other advanced nations such as the UK, France, Germany and Japan. France is already showing a greater interest in deeper economic engagement. India will not let this opportunity pass. The time has come for it to define its terms of innovation diplomacy more assertively in the global arena.

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