INDIA INNOVATION INDEX 2020: IMPLICATIONS FOR MADHYA PRADESH

Prepared By Anshumita Singh Tarunesh Umrao

Dr. Swati Chauhan (Center for Economic Sector)

Atal Bihari Vajpayee Institute of Good Governance and Policy Analysis (AIGGPA)

Innovation is the process of creation, development and implementation of a new product, process or

service with the aim of increasing the efficiency, effectiveness and competitive advantage. It in itself hints

at originality in building strong economies which will ensure a higher standard of living and better quality

of life. Innovation reflects the human ability to adapt and survive in fostering or adverse environments.

Modern technology, owing to the fourth industrial revolution and the globally intertwined nature of

nation-states, has revamped the sketch of operations and interactions significantly- having permeated

across various regions and socio-economic groups. Its spread has aided the fast materialization of ideas

and products. Preparation of a vaccine against coronavirus in a record time-span of 18-months being a

major illustration of how globalization and innovation through substantial exchange and creative

problem-solving have enabled businesses, societies and economies survive, evolve and sustain. This

ushering in of new ideas in material form drives social and economic transformation.

The vision of this nation to become a $5 trillion economy would significantly hinge on the innovation-

orientation towards economic development. The ambitious ‘Make in India’ and ‘Atmanirbhar Bharat’

schemes could prove to be strong ushers for economic empowerment. India has also aimed at enhancing

its research capacities by introducing the new Science, Technology, and Innovation Policy 2020.

Collectively, these will boost the production, research and innovative capacities of the country and

highlight it as an innovation-driven economy. The goal has been to make innovation a part of India’s policy

agenda, in order to develop and strengthen the existing innovation ecosystem that drives positive impact.

India quickly grappled and met the demands of the healthcare industries as the pandemic spread.

Innovation has been its savior in circumstances of drought, famines, and natural calamities much like the

coronavirus outbreak. Standing at the 30-year mark of the economic reforms of 1991, this milestone urges

one to question the way the spirit of innovation has been absorbed in the Indian economy. India enjoys a

crucial competitive advantage in the world, with its demographic dividend. 70% of its population is under

30 years of age which is higher than most developed nations. However, any progress largely depends on

how efficiently it leverages the potential of its working-class population and addresses the low labour

force participation rate (having the lowest female LFPR).

Innovation Index

The need to innovate is intrinsic for a robust economy in order to harbour the spirit of competition.

Economic growth is no longer defined merely through factors of production, but rather through aspects

that directly influenced them such as research and development, and human capital. Through the medium

of competition, different firms can utilize resources that have the power

to create value through new products.

The Global Innovation Index is a joint collaborative effort between the WIPO, Cornell University, and

INSEAD that annually ranks the innovation performance of more than 130 economies. India ranked 48th

in the GII as of 2020. Moreover, it ranks the highest amongst central and southern Asian countries and is

a new entrant to the Top 3 innovation economies among the lower-middle-income group nations with

Vietnam and Ukraine.

Enablers

Human Capital Investments Knowledge

Workers Business

Environment Safet and Legal Environment

Performance

Knowledge Output

Knowledge Diffusion

India Innovation Index Report

On the lines of such global indicators, Niti Aayog developed an Innovation index of a sub-national level in

2019. The India Innovation Index is the outcome of extensive research and analysis for evaluating India’s

innovation readiness. It seeks to provide a comprehensive framework for examining the nation’s internal

‘innovation-ecosystem’. This index identifies key areas for innovative development, provides an

understanding of the reasons behind differential regional performances along with the strengths and

weaknesses. It gives a view of the spatial dynamics of the same, and gives insights to states for achieving

the dual goal of social and economic development.

The index is tabulated based on globally considered parameters such as % of GDP spent on research and

development. The India Innovation Index measures innovation inputs through ‘Enablers’ and innovation

output as ‘Performance.’

Enabling Pillars include:

Performing pillars Include:

These pillars were selected considering the state of the Indian economy, for instance, the fact that India

is dominated by low-cost or frugal innovations, has been captured by incorporating the number of

grassroots innovations. The India Innovation Index intends to help in better understanding of a state’s

innovation ranking and relative performance.

It incorporates key indicators (described ahead) relating to seven pillars that can be used to understand

the performance of a state with regard to its innovation capabilities. The pillar performance rankings can

also serve to identify key areas where a state is under or over performing.

INDIA INNOVATION INDEX FRAMEWORK

Data Sources for Report

Information regarding these parameters has been taken from the report published at national level.

Government departments have also availed some information from the center. Confederation of Indian

Industry’s (CII) team of officials played a major role in collecting state-level data from departments in the

states including data from the departments of - industry, science and technology, technical education and

higher education.

In this Index, more weightage has been placed on the following parameters:

Information Technology and Intellectual property Act

Number of pending cases in the court

Knowledge intense employment

Foreign investment

Venture Capital deal

ICT exports

Status of Madhya Pradesh vis-à-vis Innovation Index

Madhya Pradesh has been placed as a major state in the Index, where out of the 17 states listed, it ranks

13th with a score of 20.72. It was placed 14th in the index of 2019. Madhya Pradesh’s 13th position is based

on enabling and performing indicators with a cumulative index score of 20.82– 2.58 points less than the

national average (23.4). Delhi (UT/City State) has the highest score of 46.6 followed by Karnataka (Major

State) having scored 42.5 points on the index. The Gross State Domestic Product of MP is ₹56,498.

The index takes into account indicators clustered under the pillars of enablers and performance. Each

dimension score is taken to be a simple average of its pillars. The rationale being the absence of any

theoretical or empirical proof to weigh any of the pillars higher than the others.

MP’s pillar-wise score has been represented in the table below:

Pillar MP’s Rank Among 17 States M.P. Score Mean Score of 17

Major States

Year 2019 2020 2020 2020

Human Capital 14 13 32.7 40.99

Investment 11 9 7.47 9.97

Knowledge Workers 10 10 8.36 12.20

Business Environment 12 13 14.79 21.07

Safety and Legal

Environment

13 4 63.66 53.61

Knowledge Output 14 11 13.74 18.17

Knowledge Diffusion 11 12 18.75 28.07

Within the pillars, the state has scored higher in the following 5 out of 36 parameters:

1. Higher Education and Teacher-Pupil Ratio

2. Colleges and Universities connected to NMEICT

3. Number of students enrolled in Engineering and Technology

4. Number of Incubator Centers

5. Percentage of Schools with ICT labs

Parameters with a low state score:

1. Common Facility Centers

2. Venture Capital Deals

3. Expenditure on Higher and Technical Education

4. ICT Exports

5. Number of Publications by Institutes

Detailed Performance Analysis: The cumulative ‘enabler’ score – an average of the five pillars including human capital, investment,

knowledge workers, business environment, safety and legal environment, was estimated as 25.4 for the

state. Whereas it’s ‘performance’ score- and of the knowledge produced and knowledge diffused was

comparatively lower, aggregated at 16.24. Both scores fall below the national average of 29 and 17.9,

which indicates that despite having significant potential, the state is unable to leverage its investments,

resources and infrastructure and translate it into successful innovation output. This is also highlighted by

the state’s efficiency ratio: a simple ratio of the scores of two pillar scores- which rounds up to 0.63 for

Madhya Pradesh.

The State scored the highest on the parameter of safety and legal environment (63.66) which exceeds

the national average where even the economically prosperous states are found lagging. The state seems

to be over performing on the aspect of pendency of court cases. However, the number and effectiveness

Performance Comparison

Investment

Knowledge Workers

Business Environment

Knowledge Diffusion

Performance

Knowledge Output

Index

Enabler

Human Capital

Safety and Legal Environment

0 10 20 30 40 50 60 70

MP score national score

of cyber-crime police stations can be improved. MP has also scored relatively better on human capital

(32.70), indicating decent investment in education, knowledge-based employment, etc. The state is over

performing on the ease of doing business.

Investment is a parameter with the lowest score for the country (10.9) as well as the state (7.47). MP’s

score falls much behind the national average- with a gap of 3.43 and the country’s best score (41.18) - a

gap of 33.71 points. This highlights the need to increase expenditure on higher and technical education,

increase venture capital deals and ways of attracting foreign direct investments into the state.

The score of performance parameters indicates that it has immense scope to build on and expand its

knowledge output and diffusion. Knowledge diffusion (18.75) in the state is represented more than the

knowledge output (13.74). The Knowledge Output in the country can be mainly attributed to new

business registrations, start-ups, publications, and grassroots innovation. This development is an outcome

of several business-friendly policies that have encouraged many to undertake new ventures. Number of

publications greatly influence this score. There is a vast difference between the country’s best

performance in knowledge output and MP’s performance- 69.08 points, which should be effectively

addressed through motivating and promoting a healthy start-up ecosystem.

Broad Areas for improving Madhya Pradesh’s Performance:

Madhya Pradesh needs to invest in its educational institutions with an aim to provide basic facilities and

access to technology. This might increase the score on Higher education institutions with an A or above

NAAC grade (currently 3.64). This will help improve the state’s human capital. Amplifying research and

development (especially private) and providing more space for the involvement of NGOs in knowledge-

intensive areas as well as knowledge-based employment will also improve the not only the human capital,

quality of knowledge workers, but will help in correspondingly increasing the knowledge output.

As per the innovation index report, state’s focus needs to be placed on venture capital deals, common

facility centres, research and development, quality of educational institutions, PhD. Programs, ICT,

grassroots innovation, expenditure on science and technology, design efficiency, and investing in its human

capital while efficiently leveraging, supporting and motivating it to derive high quality, innovative outputs

The report has elaborated on a few topics to improve the innovation ecosystem in the states at the end:

emphasizing primarily on promoting business clusters, incorporating best practices and innovations of

other states and focusing heavily on research.

Glossary of terms:

Human Capital Human capacities which determine the level of progress and innovation. It

depends upon the quality of education and scope for research and development.

Investments Funding- both private and public indicate the state’s overall scenario and its

expenditure on capacity building as well as R&D. It also gauges access to financial

institutions and support for ventures and expansions.

Knowledge

Workers

Level of business sophistication. Assessing their productivity, competitiveness,

and innovation potential through the quality and patterns of employment.

Business

Environment

Ease of doing business ranking, governmental technological adoption, factors

affecting private entrepreneurial endeavours and ability of the state to provide a

supportive environment for innovation.

Safety and Legal

Environment

Open and fair procedures, efficient market regulation, protection of property

rights, reducing regulation burdens.

Knowledge output Number of patents, articles published, etc. that reflects on the extent and quality

of research and development ultimately leading to creation of innovative

products.

Knowledge

diffusion

Hi-tech and manufacturing exports, commercialization of intellectual property,

handicraft, handloom and Geographical Indications sales in the states. This pillar

reflects the extent to which the state’s economy has grown from been resource

driven to innovation driven.