Busting myths: Make in India' to Design in India'

Over two-thirds of international trade today is conducted through global value chains. For example, a mobile phone or a railway engine or a jet aircraft would be comprising of components from 30 different countries and assembled in a few, to be put out in the market under a brand. One area in which India has a comparative advantage is information and communications technology (ICT) equipment. Therefore, India has strategised to enhance this sector. However, if it has to gain a larger pie in the GVC of ICT goods and services, it has to focus on innovation to be ahead of other rivals.

This means that “Design in India” should have the same missionary approach as “Make in India”. The upcoming 5G ecosystem offers this grand opportunity.The government is aware of this and thus, in addition to the dream of Digital India, a programme envisaged to digitally transform the country, it has recently adopted the National Digital Communications Policy (NDCP).

However, in order to fulfil the aspirations of the rollout of the commercial deployment of 5G mobile communications technology by 2020, and of moving up the GVC in mobile phone manufacturing, more efforts would be required in moving from “Make in India” to “Creating Value in India”.

One of the objectives of the NDCP has been of enhancing India’s contribution to GVCs of mobile handset production. Since the launch of the “Make in India” initiative, mobile phone manufacturing has been touted to be a success story for India. The country has emerged as the second largest mobile phone producer in the world (second only to China) with an annual production of 11 million units in 2017.

However, a study titled “Standards Development and the 5G Opportunity: Mapping the way forward for India’s Telecommunications Industry”, undertaken by CUTS International, excavated beneath this success story. It revealed that a major chunk of the manufacturing activity in India is akin to assembling the components of mobile handsets. The Indian players were largely technology implementers, who depended on the foreign players for technology development.

Crucial indicators, such as Knowledge Creation, Patents by Origin, Knowledge Diffusion and Intellectual Property Rights (IPR) Receipts, etc of the Global Innovation Index (GII) related to value addition in local production and investment in research and development activities have witnessed a stagnating or a decreasing trend over the past three years (2015 to 2017).

Accordingly, Indian companies need to invest more in R&D, skills, etc, for capturing several opportunities of growth including (a) the opportunity to generate and leverage indigenous Intellectual Property (IP) and increase competitiveness of Indian startups and firms, thereby enabling economic growth and job creation; and (b) building an innovation and competition friendly ecosystem for emerging digital technology players, thereby enhancing productivity. This becomes more crucial in the wake of the emerging 5G technology, which is set to fundamentally change the way we live, work, interact with each other and with the interconnected things around us, coupled with the dynamism of the Internet of Things (IoT).

Also, the potential economic impact of 5G is expected to be unprecedented. It is set to act as the foundation for a global innovation ecosystem which will open up industries to disruptive and novel products as well as processes, thereby enhancing efficiency and productivity. Concurrently, this will profoundly enhance the capability of countries to leverage ICT for imparting sustainable societal change.

Alas, there are several myths surrounding the underlying technology development process in India which might hinder the prospects of 5G. First, as mentioned above, historically, Indian firms that manufactured ICT products have focused on assembling of ICT products in India and perceived it as a sustainable and competitive business model. However, it became evident that it was the stark opposite. The second misconception on the part of Indian firms was the underestimation of the importance of the international collaborative standards development process.

India’s participation in development of standards has been sub-optimal, and there is a need for participating in and leveraging standards development which is immensely important, since they bring forth various economic, technological and competitive benefits for the relevant stakeholders.

What we have failed to realise is that as technology-based competition intensifies, competitive success, at the regional and global levels, is critically reliant on control over IP rights. Instead of participating in the collaborative standards development process (which should have been the next organic step in order to remain globally competitive), many Indian implementers and manufacturers in India have advocated for the need to regulate licensing of the underlying patented technology of the standard, which takes the form of Standard Essential Patents. This approach also magnified their competitive inefficiencies and should be kept in mind by Indian firms who now seek to emerge as competitive players in the 5G technology ecosystem.

In the light of such ill-informed notions, there is a need for busting the myths through awareness and capacity building initiatives. This would cover various parameters, such as: the standard development process, R&D incentives, competition, innovation, interoperability, economies of scale, contribution to GVCs, etc, keeping in mind the interests of various stakeholders - such as technology developers and investors in R&D; technology implementers and network operators; and end consumers.

With this broader framework in mind, the policy considerations to be implemented include: increasing specialisation and providing incentives for firms to move up the GVC ladder; encourage participation in international Standard Development Organisations (SDO); and maintain a fine balance among IP Protection, Competition and Innovation.

This will enable the country to slowly but steadily build and foster an innovation ecosystem, thereby unlocking the true potential of India’s digital economy.