The foreign direct investment policy in the retail sector has been a hot topic both inside and outside the parliament. Retail sector needs huge amount of resources to spread its reach across this vast country. The parliament activities disrupted many times as a part of protest against the FDI policy. But it does not make any sense in the present day world. In India, things get worse and better at the same time.

Even though we have in India many IIT’s and IIM’s and lot other private and government professional institutions, the research studies conducted in the Indian context could be observed no where. There is a lack of innovation in the top educational institutions in India, which has affected the corporate sector as well. As a result many of the research institutions from across the globe are reluctant to come to India for investments. Much effort is taken by the government in enhancing innovation in India and this has led to the setting up of National Innovation Council (NIC).

The National Innovation Council (NIC) report

The National Innovation council (NIC) has published its first report, which explains various innovative practices and initiatives. The NIC report details the different schemes and programs that will help to focus on innovation as a policy objective. The goal is to use the available resources and funds in a better way which will contribute to the development of the nation.

The recently released NIC report draws out innovation policy for many years to come, more precisely till 2020. The report has proposed an India Inclusive Innovation Fund, which will sum up to Rs. 5000 crore as time progress. This fund will be utilized to support organizations engaged in developing solutions in important fields such as health, education, handloom, handicrafts, and other small business enterprises.

Innovation as policy goal in the Indian context

Considering innovation as a policy goal makes it more meaningful in the Indian context. We have to exploit the rapidly expanding body of knowledge, known as the economics of innovation, for more useful policy design and follow through. However, as we concentrate on specific programmes and schemes, we need to rebuild the complete national system of innovation for integrated and comprehensive innovative effort.

Provide incentives and framework to gear up innovation

The catch is that we need system that will provide incentives and framework to gear up a much broader set of innovation insights than research and development (R&D) activity alone, in the case of innovative efforts of business firms and corporate. Such a policy that covers a wider area will pay richer dividend for a longer period of time. There should be a proper institutional system in place, through a proactive policy, in order for an economy driven by knowledge to blossom, boom, and sustain a high growth potential.

Innovation is not the outcome of market forces alone

Based on the present day theory of innovation systems, it is understood that what appears to be innovation at the aggregate, end process level, is the outcome of interactive processes that consists of many players at the micro and sectoral level. Even though factors such as credit, finance, and market forces are of great importance to sustain innovative activity, it cannot be claimed that demanding customers are required for innovative products; non market forces are also important.

The experts who have analyzed innovation in detail say that for incremental and radical innovative efforts, what are necessary are mentoring, knowledge accumulation, and user-producer interactive learning, search and exploration.

Importance of feedback and learning by experience

What is stressed is the process of feedback and learning by experience. The logic is that innovation includes the exchange of information on the applications and production possibilities of a good or service that is likely to go well beyond pecuniary principle alone.

Training, skill updating, and learning

This emphasize the requirement for institutions for training, skill updating, and learning more broadly, in order to step up innovation in the development delivery mechanism and in the industry, and be the driving force of productivity enhancement and continuous technology change.

Mobilizing resources to enhance innovative activities

The National Innovation Council report seems to be particular in sprinkling and spreading resources to enhance innovative activity. But a emphasize on academic research internally can actually abridge cross border research and development activity and, in fact, will lead to increased foreign direct investment, as recent study has shown.

Corporate research and academic research should go hand in hand

In the present scenario, we in India need corporate research and development, or search processes and academic research and development, this can be considered as exploratory studies, to develop a more productive ecosystem for innovation.

Innovation in education

The NIC report does justify the need for innovation in education, by proposing Innovation Design Centers and mapping local innovations across India. But it requires a more focused policy in order to propel academic research nationally to motivate global Research and Development to locate in India, and which, in turn will propel Foreign Direct Investment that is innovative and in the frontier areas.

How ever, in an increasingly open economy and complex state like India, the old fashioned industrial policy that has helped Japan and South Korea to develop, finish with activist trade policy, picking winners, etc, would not be relevant.

Academic research and foreign direct investment (FDI)

A research conducted in 2009 which included study of 40 host economies, 30 fields of technology and 176 major European, US and Japanese corporate during the periods 1995-98 and 1999-2002, has observed that strengths in country specific academic research increases the absorption and utilization of knowledge and has various spill over effects, including on Foreign Direct Investment. In the case of a capital scarce economy like ours, the latter finds more importance.

The future ahead is to boost academic research published in the leading journals, have increasing series of working papers and, of course, to initiate new journals in the emerging areas. The major outcome is that an expanding research literature underscores the importance of academic research for the collaborative, innovative performance of corporates and industry.