Embracing 'Make Products in India'

It is time shift the focus from 'Make in India' and foster local innovation to create high-income jobs and improve the quality of life for Indians

The vision of Viksit Bharat sets forth a challenging agenda for India. A pivotal aspect is the imperative to elevate the per capita gross national income (GNI) from the current $3,348 to over $14,000, transitioning the nation from a lower-middle-income to the coveted high-income category.

However, India faces the prospect of ageing before prosperity if it does not reach this goal by 2047, when 14 per cent of the population will be 65 or above. India’s annual growth must consistently surpass 10 to 12 per cent, compared to the present 6 to 7 per cent, to avoid the middle-income trap observed by Asian tigers like Malaysia, Thailand and Indonesia. South-Korea’s success story in raising GNI per capita from $2,130 in 1983 to $23,860 in just 25 years, attributed to developing products in domains like electronics, automobiles, and defence, offers important revelations.

In a tech-driven knowledge economy, a product’s intellectual property contributes half its value, making it challenging to equalise value-creation through manufacturing alone. China recognised this reality, changed course, and now aims to become the world leader in innovation by 2050. India’s path to Viksit Bharat necessitates a shift from “Make in India” to “Make Products in India”. The new strategy could draw insights from innovations during Covid-19 and in defence.

First, it is important to open up research and development (R&D) beyond the public sector, as in the case of space and drones. We need to add atomic energy and deep-sea exploration to this list. The opening up needs to be reinforced by proactive government measures to prevent legacy institutions from hindering private-sector entry. In defence, although the private sector was allowed in 2001, substantial participation was achieved only after 2018, when Make-2 and iDEX schemes took shape and indigenous solutions started emerging at a fraction of the cost and time. Creating an industry-led regulator like InSpace has also helped. Transforming competition into meaningful partnerships has yielded success too. For instance, during the Covid pandemic, the National Institute of Virology, an ICMR lab, isolated the strains of SARS-Cov-2 virus and shared them with Bharat Biotech. This led to the development of Covaxin, which was made commercially available, in a matter of months. Another option is public-private partnership (PPP), which has yielded great dividends in the infrastructure sector. For R&D it can be suitably modified.

Second, “Ease-of-doing innovation” should be the new mantra. This would require an overhaul of the regulatory framework, acknowledging that innovative products may challenge existing paradigms and rules. Regulators must, therefore, prioritise innovation over adherence to rules. This again was exemplified during the pandemic, when, despite the rules not providing for emergency use authorisation, authorities invoked a generic provision and issued restricted use licences for vaccines. Regulatory approvals by the review committee for genetic modification were given in days rather than months or years. A similar approach was seen in iDEX. Departing from the practice of rigorous compliance and demanding specifications, the armed forces embraced agile specifications based on broad functional needs and set up a project facilitation team to handhold developers.

Third, government procurement should be leveraged to promote innovation. An OECD survey in 2017 revealed 80 per cent of nations supported innovation procurement through policy or legal instruments. Government procurement acts as a validation for innovators, instils consumer confidence, and ensures revenue streams, thereby mitigating risk. Assured procurement after successful development is an important factor in the success of innovation during Covid-19 or iDEX challenges.

However, it is also true that government authorities are reluctant to procure items lacking multiple bidders or precedents, both unlikely for innovative products. A clear framework for procuring indigenously-developed-products, including defining an indigenously-developed-product and a mechanism for fixing a reasonable price, is needed.

Fourth, mitigate risk in product development through government funding. The announcement of Rs 1 trillion with a 50-year timeline in the Interim Budget is promising, but the operational details will need meticulous consideration. Successful models, including Darpa in the USA and Jozma in Israel, can provide valuable insights. India’s vibrant startup ecosystem and the success of fund of funds and iDEX models can be leveraged. Expanding the iDEX model to sectors beyond defence and introducing an R&D-focussed fund of funds, with increased government participation and a mandate to invest in long-term product-bets, will attract private investment and also mitigate risk associated with innovation.

Fifth, India’s demographic advantage needs to be leveraged to create a sizable talent pool in emerging technologies. Academic universities must transform into hubs nurturing entrepreneurship and innovation, learning from the success of Stanford university.

Sixth, amidst intense global competition, developing a brand for indigenously-developed products is crucial to challenge the mindset favouring imported goods. “Vocal for local” needs to go beyond popular peoples’ campaigns to a proactive government policy. During Covid-19, when a malicious attempt was made to undermine Covaxin, the Prime Minister quelled the campaign by becoming the first recipient of Covaxin. Indian Brand Equity Foundation should be tasked with creating global brands for indigenously-developed-products. Additionally, as a state policy, the government should promote export of indigenously-developed products through bilateral and multilateral mechanisms.          

Seventh, the centrality of standards-making to product development and its adoption cannot be over-emphasised. Geopolitics plays a huge role in standard-making, as seen in the delayed World Health Organization approval for Covaxin. To assert influence, the government must collaborate with industry to secure decision-making roles in global bodies. As a preliminary step, national standard-making institutions need to be industry-led. An overarching enabling legislative framework needs to be created to transform the existing system.

Lastly, guarding against protectionism is essential to ensure a world-class product development ecosystem. Indian innovation can rival or surpass the best in the world, and Indian consumers should not receive inferior products under the guise of indigenous development. 

India as a “Product Nation” will create high-income jobs that will improve the quality of life for people. Moreover, innovations will help address social and environmental needs as well. “Make-Products in India” is a strategic imperative and immediate government attention post-elections may be necessary.

The writer is former defence secretary, and distinguished visiting professor, IIT Kanpur