Harnessing India's Technological Potential

By RAJEEV MANTRI
Over the last decade, clean technology and nanotechnology have emerged as prominent investment themes in venture capital.

According to New York-based research firm Lux Research, venture capital investment in cleantech and nanotech has grown at about 40% annually since 1997. Rapid advances in the physical sciences and materials engineering have ushered in everything from hybrid-electric cars and lighter airplanes with substantially enhanced fuel efficiency to eco-friendly specialty chemicals and stain-resistant apparel.
As China and India industrialize, there is a glaring need for such innovation to ensure that limited natural resources are consumed with high efficiency. Venture capitalists have a key role to play in fostering that innovation.
VCs typically consider India to be just a technology deployment market. That view is too narrow: India has not just the entrepreneurial competence but also the scientific talent to invent and lead in science-driven innovation.
“Profit is still a dirty word in India's academic circles.”
The American model for technology commercialization has proven to be highly successful. Corporate giants such as Hewlett-Packard, Genentech and Google took root at universities.
More recently, President Barack Obama unveiled the government's biggest infrastructure investment plan since the creation of the U.S. highway system with energy efficiency as its cornerstone.
Prof. C. N. R. Rao, chairman of the Prime Minister's Scientific Advisory Council and one of India's most distinguished scientists, has worked tirelessly for the cause of science education and research, recently obtaining a grant of over $200 million from the central government for fundamental research in materials science and nanotechnology. When I met him in July last year, he lamented the lack of enthusiasm for science and technology in India, and commended China's nationalist zeal for building prowess in high-technology.
There is no dearth of scientific ability in India, but Indians prefer to work in laboratories abroad thanks to the lack of cutting-edge infrastructure in their home country. What's missing here are incentives for innovation and entrepreneurship.
The Indian government has promoted investment in renewable energy sources such as solar and wind, and these sectors are beginning to see some traction. However, India is still way behind both the U.S. and China.
Economist Joseph Schumpeter feted the entrepreneur as the growth-driver of an economy, the "wild spirit" who would cause creative destruction by innovation and disruption. A market-based mechanism must be adopted, but the government has a vital role to play in setting effective policies. The government should invest in basic scientific research and introduce reforms in higher education, allowing for the creation of more world-class universities.
Culturally, Indian scientists are hesitant to partner with entrepreneurs and external investors. For some Indians, the traditional concept of education clashes with the notion of commerce. Profit is still a dirty word in India's academic circles. This malaise is partly caused by the red tape stifling Indian educational institutions.
Basic mechanisms for technology transfer are absent or deficient at leading Indian universities. When the appropriate systems are in place and research institutions are forthcoming, venture capitalists and entrepreneurs can license and commercialize technology, moving it from the lab to the market. Taxpayers get a return on their investment in the form of better products and increased productivity if investors and entrepreneurs are able to beat the odds and succeed.
Otherwise, research remains research. IIT Delhi and IIT Bombay have taken the lead by establishing sophisticated infrastructure for technology transfer and venture incubation. I've seen technology transfer offices at some of the world's leading universities, and the offices at these two Indian institutions are comparable to the best. Others would do well to follow their example.
The next step should be the establishment of a national group to represent the voice of science-driven innovation, on the lines of the Indian information technology industry's Nasscom. With prudent government policy and a thriving ecosystem, private capital can kick-start the transformation of laboratory inventions into marketable products.
India missed the information technology and electronics manufacturing wave. If India is to transform itself from an economy driven by agriculture and services to one with high-technology industry and manufacturing as its bedrock, it should put in place effective policies to ride the new Schumpeterian wave of creative destruction driven by physical sciences-based technology.—Rajeev Mantri is executive director of Navam Capital, a Kolkata-based venture capital firm