India’s Moonshot Moment is Here, But Time is of Essence
A knowledge economy requires more than just graduates
NESTLED IN THE heart of Silicon Valley, Stanford University has spawned some 39,000 companies with combined revenues of $3 Trillion. Half a world away, India's sprawling educational system churns out millions of graduates annually, yet its innovation ecosystem is still in the process of taking shape. One of the most admirable steps taken by the government of Prime Minister Modi during his first term was the creation of a ‘tinkering’ economy. The goal was audacious: to create a "vibrant culture of innovation" connecting educational institutions with industry, villages and peri-urban clusters within the shortest span of time. With the National Education Policy following this, upon approval in 2020, it has already begun dismantling some of the system's rigid structures. The covid-19 pandemic has accelerated digital adoption across the subcontinent. Yet significant hurdles remain.
Big ideas, bigger challenges
For all its educational prowess—India boasts over 1,000 universities and 40,000 colleges—the system remains mired in rote learning and bureaucratic inertia. Only 2.5% of Indian graduates are considered readily employable in the global knowledge economy, according to NASSCOM, an industry association. Patent applications, a crude but useful measure of innovation, used to lag far behind peer countries but the rate of patents has accelerated now. The innovation index rankings across the spectrum are a testament to this.
The problem lies in the spillover lessons that have to be underscored further.
Learning from global successes
The Stanford model offers some instructive lessons. Its success stems not merely from academic excellence but from a complex ecosystem involving venture capital, supportive regulation, and a culture that embraces risk. Silicon Valley's famous "fail fast" ethos remains anathema across much of Indian society, where job security still trumps entrepreneurial adventure.
China provides perhaps a more relevant template. Its government has methodically built innovation hubs through direct investment and regulatory support. Shenzhen transformed from fishing village to technology powerhouse in a single generation through policies specifically designed to foster indigenous innovation. Hangzhou, home to Alibaba, similarly benefited from government backing.
India's approach appears more decentralised, leveraging existing educational institutions rather than creating new ones. Numerous potential projects, from drones and robotics to water conservation and village tourism. This breadth reflects India's diverse challenges but risks spreading resources too thinly. This is a sting in the tale that the innovation apparatus needs to address well. Efforts are being made to pilot different experiments across the innovation landscape, but they need to move beyond the orbit of just the premier educational institutions such as the IIT’s, NIT’s, for good ideas do not require an entrance exam.
The road ahead
Economic logic suggests that India's innovation deficit represents a market failure that government intervention could help correct. Knowledge spillovers—the benefits that flow beyond direct participants in research—tend to be underproduced in free markets. Universities, as semi-public institutions, are well-positioned to capture and direct these spillovers.
Yet successful innovation ecosystems cannot be created by fiat alone. The US innovation primacy emerged organically over decades. Even China's directed approach required patient capital and regulatory forbearance. Indian venture capital and regulatory approach needs to develop, it will need to resist the temptation for quick wins and headline-grabbing announcements.
The government recognition that innovation must extend beyond urban centres to villages and peri urban areas is particularly welcome. India's most pressing problems—water scarcity, public health, sustainable agriculture—affect its rural majority. Solutions that emerge from interaction between academics, entrepreneurs and local communities are likely to prove more durable than those imposed from above.
Implementation will test India's bureaucracy. The need is to create spaces to act as catalyst it aims to be. Success will require genuine authority to cut across ministerial silos and sustained political support and quick regulatory changes.
For international investors and partners, the last decade signals India's seriousness about moving up the value chain. A country long known for service exports and cost arbitrage is staking a claim to innovation leadership. This transition is essential if India is to create enough high-quality jobs for its youthful population.
The stakes extend beyond economic growth. As geopolitical competition with China intensifies, India's capacity for technological innovation increasingly matters to Western allies seeking alternatives to Chinese suppliers. The proposed council thus serves both domestic development and strategic positioning.
India has no shortage of well-intentioned initiatives that wither once political attention shifts elsewhere. This one deserves a different fate. By recognising educational institutions as the potential fulcrum of innovation rather than merely degree factories, the proposal addresses a fundamental barrier to India's economic advancement.
The success of Stanford and its Silicon Valley offspring required a delicate alchemy of academic excellence, entrepreneurial spirit, available capital and supportive institutions. India has the first in abundance. The task is to cultivate the rest and fast if India is to be richer before it gets older.