Context

Karnataka has bagged the top rank in NITI Aayog’s India Innovation Index, 2021, which determines innovation capacities and ecosystems at the sub-national level.

About

• The India Innovation Index is released by NITI Aayog and the Institute for Competitiveness every year.
• The index attempts to create an extensive framework for the continuous evaluation of the innovation environment in all States and Union Territories; it ranks them based on their scores.
• This is the third edition of the Report, which highlights the scope of innovation analysis in the country by drawing on the framework of the Global Innovation Index.
• The number of indicators has increased from 36 (in the India Innovation Index 2020) to 66 (in the India Innovation Index 2021).
• Categories: The Innovation Index is divided into three categories—major states, Union Territories, and hill and North East states.

Indicators Used:

• There are 7 pillars in the index - five ‘Enabler’ pillars measure the inputs and two ‘Performance’ pillars measure the output.
  • The indicators that the survey uses include the level and quality of education and parameters such as:
  • Several Ph.D. students and knowledge-intensive employment.
  • Enrolment in engineering and technology and several highly skilled professionals.
  • Investment in R&D and number of patents and trademark applications filed.
  • Internet subscribers.
  • FDI inflows, business environment, and safety and legal environment.

Key-highlights of the findings

• Major States: Karnataka topped with a score of 18.05 followed by Telangana and Haryana.
  • Bottom States: Bihar, Odisha, and Chhattisgarh scored the lowest on the index, which put them at the bottom in the “major States” category. Chhattisgarh ranked last with 10.97 points.
• Hill and North-East States: Manipur is leading the category followed by Uttarakhand and Meghalaya.Nagaland ranked last (10^th).
• Union territories/Small States: Chandigarh is the top performer with a Score of 27.88 followed by Delhi and Andaman and Nicobar.

Reasons for Karnataka topping the Index: Karnataka’s success is attributed to its peak performance in attracting FDI (Foreign Direct Investment). Karnataka, with a score of 19.06, is the top performer in terms of investment. This is largely due to its high performance on various indicators, including FDI inflow. Karnataka received the fourth-highest FDI inflow in India, with about ?30,74,617 (in lakhs) which is about 2.7 percent of its GSDP. It was also able to manage the highest number of venture deals in the country. Karnataka also scores high in the ‘Performer’ dimension, with the highest share of ICT exports and GI registrations. The percentage of schools with ICT labs increased from about 29% to about 46%. With the robust network of academic institutions, industries, human capital, and the recent boom of startups that the state has been able to produce more. All this has been reflected in the state’s ‘performers’ whereby trademarks and industrial design applications increased.

Challenges

• On average, the country has not performed well in the knowledge worker pillar, as much as it has in the human capital pillar.
• The expenditure on human capital has been unable to create that knowledge base in the country.
• Innovation is skewed against the manufacturing sector due to the problems pertaining to and the missing middle.
• Missing middle,e., there are too many tiny, informal enterprises, and too few large, formal ones to employ thousands of people.

Recommendations

• GDERD (Gross Domestic Expenditure on R&D) needs considerable improvement and should touch at least 2%, which would play an instrumental role in India achieving the goal of a 5 trillion economy and further influence its innovative footprint across the globe.
  • Increasing GDERD promotes private sector participation in R&D and closes the gap between industry demand and what the country produces through its education systems.
  • Countries that spend less on GDERD fail to retain their human capital in the long run and the ability to innovate is dependent on the quality of human capital; India’s GDERD as a percentage of GDP (Gross Domestic Product) stood at about 0.7%.
• The private sector needs to pick up pace in R&D, public expenditure is productive up to some extent; once the growth follows a trajectory, it is desirable to shift to R&D mostly driven by the private sector.