Slowing growth in the world economy has placed India in a sweet spot.
In 2015, India’s growth rate was 7.6% compared to global economy’s 3.1%, demonstrating robust fundamentals underpinned by strong domestic demand and increase in foreign capital inflows.
However, there is a compelling case for India to achieve even higher growth rates by intensifying its efforts to boost innovation and Entrepreneurship.
Many economic theories have underlined the importance of innovation in achieving sustainable and high economic growth rates.
Joseph Schumpeter, father of innovation, first articulated the importance of innovation in spurring economic growth.
Solow-Swan and Endogenous growth economic theories assert that capital and labour are not the only growth ingredients, but innovation too is an essential component that increases total factor productivity of an economy.
Historically, innovation and Entrepreneurship have been two enabling components that propelled nations into higher growth trajectories.
In the 1960s and 1970s, Japanese companies disrupted the global market through their innovative goods in the electronics and automobile sectors. China witnessed over two decades of high economic growth that began with the spirit of entrepreneurship of its township and village enterprises in the late 1970s. This laid the foundation for it to become the leading supplier of parts and components in the global Value Chain.
Drawing lessons from other Asian countries, it is easy to understand that innovation and entrepreneurship are the pillars for steering a nation’s growth into higher rates.
Cognizant of the above facts, the Government of India has launched various initiatives to create an enabling environment that provides a thrust to innovation and entrepreneurship. With a considerable push to projects in mission mode, unprecedented in the economic history of the nation, such as Digital India, Make-in-India, Stand-up India, Start-up India, and Atal Innovation Mission, the nation is poised to create a new breed of innovators and entrepreneurs.
However, it is not the government which is solely responsible for developing an innovative society; it is the people who have to share this duty. The precursor to any innovation is the ability to take risks with an entrepreneurial mind-set. It is crucial that people capitalize on the opportunities where the government is providing the requisite digital and physical support infrastructure.
• Risk-taking ability: There is a strong need for a cultural shift amongst the people of the country. The nation needs to develop research and design oriented technical mind-set. The CEO of NITI Aayog stated “make India a nation of job creators over job seekers”. Businesses in India need to commercialise newer technological trends such as Artificial Intelligence, Big-data, Block-chaining, Cashless Society, Cyber Security, Internet of Things, Virtual Reality, 3-D manufacturing, amongst others, resulting in disruption of the current ecosystem.
• Shift to India wave: Businesses should not only Stay in India but also Shift to India. The Indian start-up ecosystem isn’t only limited to Indian entrepreneurs. There have been significant improvements in ease of doing business in the country, which coupled with favourable demographics and low cost of doing business, makes India an attractive destination for foreign nationals to start-up businesses. For instance, Bangalore is an attractive destination to setup businesses and grows. Comparing Bangalore’s cost of living (monthly) with Silicon Valley, $454 vs. $4,465 is just one indicator reflecting attractiveness of Shift to India.
India needs to leapfrog and become an innovative economy. Plenty of government initiatives are coming in place. It is now up to the people to grab the opportunity and maximize the potential and outcomes. It takes two hands to clap.
Source: Dr. Simi Thambi & Mr. Hamant Maini, NITI Aayog, GoI