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India innovation opportunities

by: Tatjana Guznajeva, Technopolis Group

 

Why should I read this document? 

 

When confronted with the differences between your own market and the market of India you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like India, will allow your company to innovate. Not only will operating in India lead to new insights to be more successful in India, you will most likely also pick up on ideas to be more successful in your home market. 
 
This document provides a short overview of innovation aspects, business opportunities and challenges in India. It will also give advice on best practices for starting and developing an innovative business venture, considering India’s country context. May it help you to explore India and lead you to innovation and success.
 

 

 

Opportunities and tips for innovation and doing business in India 

 

  • The agricultural value chain system in India is underdeveloped, as many local farmers fail to process, preserve and export their products and deal with environmental challenges in farming. At some point 35 percent of the fruits and vegetables grown were wasted due to poor storage facilities. Thus, devices or applications which connect and support farmers digitally in trade, farm-specific and data-driven diagnostics to determine soil health and respond to above-listed challenges could represent great opportunities for innovation enterprises. 
  • India has a large ICT sector, developing high-tech market, a broad manufacturing base and a pool of qualified engineers for the development of innovative goods and services. This allows product customisation, using digital technologies and big data.
  • There is an increasing demand for customised goods and services in India, whereas Indian market is only starting to learn about the benefits of product-service combinations and cooperation within the value chain. Tapping into the Indian market through innovative business models could thus provide opportunities.
  • The growing income in India results in a large demand of goods and services in sectors of advanced engineering, education, life sciences, energy, food processing and infrastructure
  • The Indian government introduced five industrial corridor projects and invested in the development of smart industrial cities along these corridors. In addition, the Indian government has set a new policy initiative “Make in India”, which is designed to strengthen industrial sector and transform India into the next manufacturing center of the world. It is a good time to start a manufacturing enterprise in India, focusing on digitalisation of industrial processes and design of “smart” products.
  • India has a large English speaking population, substantial share of consumers from different income classes, booming internal market, low operating business costs, and a good investment climate. Hence, study demand behaviour, consider business opportunities which allow to exploit local advantages and introduce aggressive marketing strategies, such as street advertising.
  • There are two identified ways to break into India’s consumer market: by using India’s supply chain (low labour costs, cheap production materials) or the explosive growth of e-commerce (online selling to Indian and foreign companies/consumers). 
  • The use of ICT and credit cards in India are low, therefore use mobile phone-based strategies and allow for cash payments.
     
On Level 2 you can find information about innovation climate in India, while Level 3 will tell you more about business activities in India. 

 

Innovation climate in India

 

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in India.
Indian government has devoted a lot of attention to innovation in the last decades. As a result, India’s innovation growth rate is far above the average and it has outperformed many upper- and lower-middle income countries on the Global Innovation Index (see Figure 1). 

 

At the moment, India is the third most attractive investment destination for technology development in the world and is expected to become one of the biggest world tech hubs. The creation of a number of innovation/tech hubs and the National Innovation Foundation contribute to a dynamic improvement of innovation ecosystem in India. And so do some major initiatives, such as “India Innovation Growth Programme”, “Make in India”, “Startup India” and “Visiting Advanced Joint Research Faculty”. The development of a digital infrastructure, in particular, broadband, mobile connectivity and cybersecurity, start to receive significant governmental attention and funding.
 
Figure 1: Performance of India on Global Innovation Index 

 

Source: Global Innovation Index. (2017). Global Innovation Index. 

 

 

Innovation sectors and technology 

 

Currently, investment in innovation is directed primarily to the following sectors: electric mobility, biotechnology, IT, advanced manufacturing technologies, such as robotics, automation, precision manufacturing and nanomaterials. Electronics, telecommunication, chemistry and metallurgy sectors make up 45% of the innovation output from India during 2011-2015. India is famous for developing technologies within the biotechnology, IT, energy and space sectors. Some of the major recent inventions are a solar water purifier, solar panels, satellite ASTROSAT, non-invasive heart condition detector, a vaccine to combat hepatitis C smartphone-turned-malaria-detector, affordable lens for cataract patients.

 

Innovation culture and practices 

 

India is one of the leaders of high-quality, low cost innovation from available local resources.
The great number of street vendors exemplifies that Indians have learned to create jobs for themselves and to adjust to changing local needs by developing diverse products, at different price levels and in various packages (from very small for people with low spending capacity to big packages for growing middle and upper classes).
 
Most Indian companies rely on internal R&D, as linkages in innovation between industries, universities and government are relatively week. Hence, it is advisable for foreign companies to make an intitiave in building a dialogue with authorities, local companies and universities for improvement of the innovation ecosystem.
 
Indians extensively use business networks, as many SMEs are family businesses with long-lasting connections. For generation of innovative ideas, Indians carefully collect feedback from customers, clients or partner companies. Social media is becoming increasingly popular and useful in communication with customers. Product innovation in India is less common, in contrast to process and business innovation.
 

 

Business activities in India

 

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in India. In addition, you will find the list of websites, which provide some hands-on information. 

 

What is the country known for? 

 

Sectors
The biggest sectors are: textile, food processing, chemical, cement, software, mining and petroleum industries. 
 
The service sector is the key driver of India’s economic growth, in particular due to growing online, mobile, real estate and financial services. IT is the major sector of growth within the service sector, for example, IT-related services represent 45% of Indian service sector export.
 
Iconic products 
Gold and diamond jewelry, clothing, oil-based products, heavy machinery for manufacturing industries, cars and automotive components, organic food products, rice, spices, tea and mangoes.
 

 

How easy is it to do business in India?  

 

Based on the World Bank ranking:
 
India  
EU average
Emerging markets average
Overall - ease of doing business
130
30
83
 
India does not have a good score regarding the ease of doing business. Regulatory procedures and permits can be a barrier to companies. For instance, the costs of starting a business in India are quite high, and also paying taxes, enforcing contracts and registering property are significantly harder in India than in Europe or other emerging markets. In addition, corruption can be an issue in India, thereby the costs of starting a business increase. Arranging more practical aspects, like getting credit or electricity, are however easier in India compared to Europe and other emerging markets. 
 
The bureaucratic, regulatory and tax systems are very complex in India, as they vary from one state to another and, at times, it is not clearly defined which governmental body has the ultimate authority and which procedure applies. However, in contrast to many other developing countries, India has a stable government and predictable policies.
 
India’s patent regime, does not always provide the same level of effective protection of innovations as in Europe, therefore it is necessary to learn about IPR and best practices of securing rights in India.

 

Business trends in India

 

Before technological advances and the rise of e-commerce, the cooperation between companies within the supply chain has been relatively weak in India. The industrial sector has been promoting B2B in India, due to stronger supply chain collaboration within automotive, textile, chemical and heavy engineering sectors.

After introduction of technological advances, many Indian companies started to collaborate both domestically and internationally, and sell products on a global market. Due to relatively developed IT sector, the B2B is rapidly growing in India, in contrast to other emerging counties. The increasing customisation and integration of services into manufacturing sector contribute to development of B2B. In India, B2B contributes to SME’s growth in sales, assists in expanding customer base and serves as a new source of the forgein direct investment for Indian companies

The levels and patterns of consumption in 29 Indian states are very different, due to significant inequality amongst the population. The majority of people with above-average income live in metropolitan cities.  The high-potential metropolitan clusters are expected to account for about “77% of India’s economic growth, 72% of its consuming-class households, and 73% of its income pool from 2012 to 2025”. In the next years, the maximum consumer spending is likely to occur in the food, housing, consumer durables, transport and communication sectors
 

 

More hands-on info 

 

 

 

Bibliography 

 

Level 1:
Kumar, S. and Sharma, A. (2016). Agricultural value chains in India: Prospects and Challenges. Retrieved from: http://www.cuts-citee.org/pdf/Agricultural_Value_Chains_in_India_Prospec...
Halde, P. (2016). Innovation in Food Industry: Opportunity and Challenges. Retrieved from: http://www.nuffoodsspectrum.in/inner_view_single_details_print.php?page=...
Mathur, H. (2017). Five Trends in Agritech Innovation in India to Watch Out for in 2017. Retrieved from: https://agfundernews.com/five-trends-in-agritech-innovation-in-india-to-...
The Hindu. (2016). India ranked top exporter of ICT services: UN report. Retrieved from: http://www.thehindu.com/news/national/india-ranked-top-exporter-of-ict-s...
Make in India. (2017). http://www.makeinindia.com/live-projects-industrial-corridor
Startupindia. (2017). India. Retrieved from: http://startupindia.gov.in/actionplan.php
Bergtaler, W. (2015). Innovation. Indovation: How to innovate for India. Retrieved from:
http://www.maiervidorno.com/indovation-bait-appeal-fish-fisherman/
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Vageesh, N. (2015). Credit card penetration remains dismally low. Retrieved from: http://www.thehindubusinessline.com/money-and-banking/credit-card-penetr...

 

Level 2:
India Brand Equity Foundation. (2017). Science and Technology Development in India. Retrieved from: https://www.ibef.org/industry/science-and-technology.aspx
Global Innovation Index. (2017). Global Innovation Index. Retrieved from: https://www.globalinnovationindex.org
The Innovation Policy Platform. (2017). Retrieved from: https://www.innovationpolicyplatform.org/content/india
Chourasia, A. (2017). 2016: State of research and innovation in India for a “Creative India, Innovative India”. Retrieved from:  http://stateofinnovation.com/2016-state-of-research-and-innovation-in-in...
Vijaykumar, n. (2017). The 8 IISc Inventions Will Make You Proud of India’s Innovations in Science and Technology. Retrieved from: https://www.thebetterindia.com/51941/8-useful-innovations-iisc-bengaluru/
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Jayachandran, S. (2006). Marketing Management. Retrieved from: https://books.google.nl/books?id=FVKRX9fy9r0C&pg=PA107&dq=aggressive+mar...

 

Level 3:
Make in India. (2017). Retrieved from: http://www.makeinindia.com/sector/it-and-bpm
The World Bank. (2017). India. Retrieved from: http://www.doingbusiness.org/data/exploreeconomies/india
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Dutta, S. and Lanvin, B. and Wunsch-Vincent, S. (2016). The Global Innovation Index 2016: Winning with Global Innovation. Retrieved from: http://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2016.pdf
International Growth Centre. (2017). Reinvigorating India’s manufacturing sector: Integrating the services value chain with Southeast Asia. Retrieved from: http://www.theigc.org/blog/reinvigorating-indias-manufacturing-sector-in...
Entrepreneur Inidia. (2017). Business To Business. The Next Big Thing In India?
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Confederation of Indian Industry. (2016). E-Commerce in India: A Game Changer for the economy. Retreived from: http://italiaindia.com/images/uploads/pdf/april-2016-e-commerce-in-india...
Bhattacharya, P. (2016). India’s richest 20% account for 45% of income. Retrieved from: http://www.livemint.com/Politics/AvHvyHVJIhR0Q629wkPS5M/Indias-richest-2...
Muir, J. (2017). India’s middle class drive demand for high end goods. Retrieved from: http://www.aircargoweek.com/indias-middle-class-drive-demand-high-goods/