Much is being made of the fact that India is rapidly becoming a global hub for research.
At last, the popular view goes, India's formidable intellectual capital is being recognised and leveraged to profitable effect. Whether it is in pharma, IT or even engineering, global companies are increasingly looking India-ward to garner the dividends of low cost and high ability.
No one can deny that India stands to make significant gains from this new found intellectual arbitrage. The constant irony of four decades of economic protectionism was that India boasted the third-highest scientific manpower base but recorded abysmal growth rates.
The discovery of India as an R&D hub has certainly helped garner jobs for the scientific boys who lacked the wherewithal to find employment in the well-funded overseas institutions. The question, however, is how far this trend will propel India to the kind of position that put the US and Europe on the map as world economic powers.
Pharma research, the current racehorse in the global R&D stakes, is a case in point. An August 2006 report from the Chemical Pharmaceutical Generic Association says India accounts for the major share in the world's pharma contract research business.
Valued at $60-70 million, India's share is nearly double that of Italy, its nearest competitor, and four times as much as the next competitor, Spain. China, with $23-28 million, is way behind in these standings.
The point to note, however, is that this dominance is fuelled by the top ten multinational pharma companies that have made India a hub for cheaper production of active pharmaceutical formulations and finished formulations.
Indian companies, champions at reverse engineering, still lag global R&D budgets by huge margins.
In other industries too, whether it is Suzuki's global small car project or Lever's R&D on new products, it's the multinationals rather than domestic companies, that are leveraging India's intellectual capital.
In other words, India is increasingly emerging as the producer of cutting-edge research for other leading economies of the world, but not the owner.
Should this matter? It should, if Indian companies are looking for the kind of sustained competitive advantage that will propel them to global leadership. In the new paradigm of global competition, ownership of intellectual capital is as much, if not more, of a competitive advantage as land, labour and capital.
History has shown that global domination lies with countries that have or have had a monopoly on technology. The industrial revolution, for instance, was the edifice on which Britain built a world empire that lasted two centuries.
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