The Indian government gives cash award to Olympic medal winners making a podium finish, with gold medal winners getting the highest. This has stoked interest in our youth in sports beyond cricket. Sturdy Haryana lads have taken to boxing with gusto enamored as much by cash awards as by the enormous soul satisfaction international recognition begets. It is futile for governments to run sports academies and nurturing talent as politics and its adjunct favoritism can prove to be counterproductive sooner than later.
The government would do well to take a leaf out of its sports reward policy in shaping its R&D worldview. As it is, research spend begets a whopping 200% weighted tax deduction. To wit, if a company spends Rs 100 crore on its approved in-house R&D, its profit comes down by double that amount---Rs 200 crore---in a manner of buying one and getting two. Leg up to R&D by the income tax law has spawned charlatans, me-toos and also rans so much so that our factories invariably have a proforma R&D centers with often nothing to show for them.
The Finance Minister Arun Jaitley has promised to take a close hard look at this rather licentious tax regime obtaining for research in the upcoming budget 2016-17. He would do well to reward research when it bears fruits for the nation just as the government rewards only podium finishing athletes.
In other words, fiscal rewards for research should not be front-ended but when it starts yielding dividend for the nation. The World Intellectual Property Organization’s statistics make a dismal reading in so far as Indian research effort is concerned---just 1400 filings or application for patents as against 24,000 by Chinese, 45,000 by the Japanese and 63,000 by Americans. To add salt to injury, as much as 80% or more of patent applications filed in India itself are by foreigners and foreign companies.
At less than 1% of the GDP, research spend in India needs a lot of catching up to do with China at 1.8% but it would be idle to expect things to improve only by massive outpouring of money given the grim reality that massive spends on the back of tax breaks gives encouragement to charlatans too. The proof of pudding is in eating.
Instead of giving tax breaks in anticipation, they should be given on fulfillment. Let generous tax breaks and financial rewards by all means be given to Indian residents working their patents in India on commercial scales but let no one fatten himself at state expense through pretense or otherwise when he has nothing to show.
Research indeed is a prolonged and patient affair, with lion’s share of the efforts turning out to be infructuous. But that does not mean government must bear a part of the brunt with front ended tax sacrifices. Companies must sponsor both in-house and university research from out of their own funds in anticipation of course of rewards in future.
Patents alone are the ultimate touchstone of the quality of research despite evils like ever greening and readiness of the western world to grant patents for anything and everything inviting derision and imitation from the eastern world. The Prime Minister’s make in India pitch would gain traction only when we encourage patents. Foreign patent holders are reluctant to work their patents in India fearing copycats.
India stands to gain immensely if Make in India picks up on the back of patent driven manufacturing that alone can prise open the finicky and quality conscious export markets. In short, we need manufacturing startups backed by state of the art technology more than startups that design apps.
Acknowledgment: Statistics borrowed from article titled Why India needs stronger IPR by Rod Hunter in Business Standard of 22nd August 2015