A study group comprising of Dr KV Raghavan as Coordinator and Dr DP Misra, Dr MO Garg and Dr AN Maitra as Members was constituted to undertake the research study on “Impact of R&D on Indian Chemical Industry”. The basic objective of the study is to study the impact made by the R&D on Indian Chemical Industry as a whole and on all its important subsectors in terms of R&D intensity, intellectual property management, industry – university (I-U) linkages, fostering new enterprises, government funded R&D utilization and human resource management. The project team collected enormous data from the open literature as well as through opinion surveys and direct interaction with subject experts to develop the current profile of the Indian chemical industry. This exercise has shown that the turnover of Indian Chemical Industry has crossed USD 60 billion, achieved an export / import ratio of greater than unity and the pharma, biotech and petrochemical sectors have attracted significant FDI inflows as compared to other subsectors.
The overall R&D intensity (R&DI) of Indian chemical industry is estimated to be 0.9% with knowledge intensive chemical sector registering 4.5%, specialty chemical sector recording a moderate growth at 1% level and the basic chemical sector touching 0.5% in 2007-08. A sample analysis conducted on 250 leading companies in various subsectors has brought out the mismatch between their turnover growth and R&D expenditure. While the sectors like pharma and organics have shown the sensitivity of R&D Intensity to the firm size, this behaviour is somewhat muted in all other sectors. Interestingly, the subsectors of Indian chemical industry have exhibited different threshold limits for incurring R&D expenditure with the drugs / pharma and fertilizer sectors on the higher and lower ends of the scale respectively.
During 1992-09, the chemical export growth remained steady at a CAGR of 17% and its FDI growth recorded a CAGR of 13.9% with somewhat unstable growth profile. The forward and backward FDI-economy linkages in Indian chemical sector are quite strong. During 1998-03, 24 chemical oriented R&D centres were established by MNCs in India with a planned investment of USD 1.7 billion.
The intellectual property generation and protection profiles of Indian Chemical sector during the transition and post WTO periods, provide strong evidence of internationalization of research in terms of constantly dropping Indian inventor contribution to the patents filed at IPO, upward trend in overseas collaborations in Indian research publications and Indian inventors filing significant number of patents in overseas patent offices. The PCT route has emerged as the most favorite pathway for the overseas inventors at IPO. While research papers in chemical and allied sciences are being published by more than 250 Indian institutions, the top performers with a consistent record are limited in number in most S&T sectors. A silver lining is the significant increase in the quality of research papers published during 1995-09 by the top 10 performing Indian institutes. While public funded research institutions have done relatively well in publishing research papers, the contribution from universities and industry is somewhat disappointing. An area of concern has been the suboptimal performance of Indian universities in intellectual property protection possibly due to their weak industry linkage and lack of incentives for faculty to pursue industrial research. The studies have also shown the initial successes achieved in product patenting in India after 2005 with overseas pharmaceutical companies filing the maximum product patents.
As far as industry – university (I-U) linkages in chemical sector are concerned; the suboptimal performance of Indian universities, with few exceptions, in generating industrially relevant knowledge is evident. Even though 2500+ projects have been funded by the government in Indian academic institutions with more than Rs. 100 corers funding during 2000-10, they have very little industrial relevance except in the case of IIT’s in which certain degree of success has been achieved in making some of their projects industry driven.
The INAE team studied the R&D scenario of micro, small and medium scale enterprises (MSME’s) in Indian chemical sector. Their number in organized sector is more than 40,000 with nearly 20% of them exist in 80 chemical clusters spread over 20 Indian states. Inspite of the central and state government facilitation to Chemical MSMEs, their R&DI is extremely low on account of insufficient R&D inputs. This is a matter of great concern considering their overall importance to the growth of Indian chemical sector. Bold initiatives are needed in this area.
The INAE team noted the strength of the knowledge intensive segment of Indian chemical industry in promoting new technology ventures during the post economic liberalization period. It has, however, shown the need to establish more such ventures in specialty and basic chemical sectors propelled by a strong I-U linkage.
The INAE studies have clearly established that R&D impact on Indian chemical industry is non-uniform across its subsectors on account of system heterogeneities, varied scales of operation, uneven responses to globalization challenges and wide variation in human skills and innovative capabilities. In order to enhance R&D impact on the Indian chemical industry, following recommendations have been made in this report:
Enhancing the reach and effectiveness of government funded R&D programmes in seamless manner
Integrated approach for R&D capacity building in chemical MSME clusters
Enhancing R&D intensity and investment in 3 prioritized turnover zones
A Technology mission to formulate and pilot test novel I-U linkage models
Establishing technology innovation centres through PPP in frontier S&T areas
A two pronged approach to enhance Indian inventorship of patents filed in India
Improving Environmental Brand Image to sustain future growth
Technology vision and foresight development for critical chemical subsectors
New growth oriented HR management policies for chemical subsectors
Innovative policies to make transnational R&D and FDI as vehicles for Indian innovation.
Apart from the above recommendations, several implementable actions and special studies have been suggested under each chapter of this report.