Expert Speak

Is India The Next Global R&D Base For Products?

R&d base products

T.S.Chandrashekar, Deputy Director, KOTRA

In Commerce and Industry India has no way but to conquer the world. If China makes everything cheap, and threatens to cut down local production, thereby impacting the existence of small and medium companies, India has to revamp its R&D, technology and innovation to save the SMEs.

Innovation from India has moved on from Ayurveda, yoga to cool internet products and apps. World Industries from Automobile to IT, to next generation products are moving work to India to tap the country’s engineering base and cost advantage. Initially cost arbitrage was the major attraction, however over time, the quality of Indian workforce has become very high and their ability to contribute to process improvement and innovation has improved tremendously. This has led to a snowballing effect and many l

And as they scale up in India, they are also looking at more indigenization and localization, which in turn would increase India’s role in World Trade. Talent pool, domain expertise and leadership are driving it. Furthermore, this talent pool has also built a strong domain expertise over the last 20-25 years from its experience of dealing with global customers.

R&D can be broadly divided into three kinds of activities: fundamental research, designing and engineering. Tata Nano and Mahindra XUV500 are two instances of Indian companies doing deep work in the last two spaces. By comparison, global companies have the benefit of tapping their parent. For example, the Suzuki Swift was done completely in Japan, while redesigning of the rear-end of Dzire, a derivative, was handled in India.

Finance minister Arun Jaitley in his budget speech has announced setting up of Rs 10000 Cr fund for MSME Sector to “create a conducive ecosystem for venture capital in the MSME [micro, small and medium enterprises] sector” by “providing equity, quasi equity, soft loans and other risk capital for start-up companies”. This also encourages innovation research and development.

In IT India is home to about 200 wholly-owned Centres of multinationals that deliver pure-play IT and ITeS services. The American semiconductor major Texas Instruments (TI) set up a R&D facility in Bangalore in August 1985 and became the first global technology company to establish its presence in India. Ever since, India has been an integral source of intellectual property for big multinationals.

Nearly close to 50% of the Fortune 500 companies have their facilities in India. Starting in May 1994, with a few employees operating from two rented rooms in Bangalore, Oracle today has a full-fledged R&D organisation in India with the presence of large research, development and expertise Centre’s across four major cities—Bangalore, Hyderabad, Noida and Thiruvananthapuram.

The other very important aspect of India is its growing domestic market. This is allowing multinationals to innovate products based on this market, which is extremely cost conscious, and then take it out to the rest of the developed world having leveraged the frugal engineering aspects. Another non-trivial advantage of setting up a Centre in India is its adherence to IP laws compared to some other countries in the region.

Large healthcare/life sciences companies like Royal DSM, Novartis, Cerner, Sigma Aldrich have been growing their capability from India. Pharmaceuticals is the other big sector where global R&D is moving to India. India’s largest drug maker Ranbaxy Laboratories launched Synriam, a treatment for Malaria. They claim this is India’s first new drug.

Allstate recently set up its own Centre in Bangalore and so did Wal-Mart, British Telecom, FICO, State Street etc. Amongst the Indian cities, Bangalore garnered the lion’s share in terms of new center set ups.

For example, electronics industry is envisioned to grow to $400 billion from around $70 billion currently in about a decade’s time by various stakeholders. Therefore, it makes complete business sense for the technology companies to understand this market well and build R&D capabilities locally in order to serve the domestic markets strongly with suitable products and solutions.

The second important factor is steady emergence of the overall ecosystem. Beginning with the presence of large number of technical universities and talent that comes out of these colleges, there is growing expertise in the engineering and service base in the country. The technology brain-drain which was prevalent earlier is no more an issue. This has helped to retain the experienced talent within the country, which is getting capitalised by this growth..

Most U.S. companies use R&D in India to create products that are largely exported to the world. A communications chip designed in India can wind up anywhere.

Some of the great success stories are examples of an e-management tool. It was made for employees of a inter-governmental organisation to efficiently spend donor funding during disaster relief work. Made at one-tenth of the cost of similar programs, it is now used in eight regions across the globe. The United Nations Office for Disaster Risk Reduction used the same technology for its One Million Safe Schools and Hospitals Campaign – a global advocacy initiative to make schools and hospitals safer in disasters.

Business software specialists SAP Labs is using India as an incubation engine of innovation for the entire company. The centre does both research work and software development. They’re not alone; global multinationals such as Microsoft, IBM, Cisco, Oracle, Adobe and Intel all have centres in India.

Another big innovator, Xerox, has a lab in India. Through a concept called Open Innovation, the company not only employs researchers but works with scientists and researchers from top Indian academic institutions.

Chinese telecom company Huawei has invested $500m in R&D campus in Bangalore. Zynga, makers of hugely popular online games like Farmville and Mafia Wars, have office too.

And Google’s engineering teams in Bangalore and Hyderabad were responsible for some key features of Google Drive, the search giant’s recently-launched cloud storage service.

In retail too global companies are looking to India for their R&D facilities.

In Defense and Aero Make in India is playing a big role. Aerospace majors such as Airbus and Boeing have formed partnerships with the IISc, IITs and IIM-Bangalore to develop their next-generation air-birds, including and they have opened there R&D Centers.

Atlast one can say that Yes India is the base for R&D in the world, how the R&D developed here will make India change and benefit us has to be considered. Until we don’t capture commerce and trade of world we will be left behind. Make in India and Make R&D for new products is the mantra.

(The author is the deputy director of Korea Trade Promotion Agency (KOTRA). He can be reached at kotrabangalore@gmail.com The views expressed in this article are those of the author and do not represent the views of Channel Times or any of the websites managed or operated by Trivone Digital Services)

 

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