Monday, January 18, 2010

A Financial Times Article "India: A Nation Develops"

India: A Nation Develops

By Joe Leahy

Published: Financial Times, January 10 2010

Walk into the John F. Welch Technology Centre in Bangalore and you could be forgiven for thinking you have strayed into Q division – the laboratory dedicated to inventing new gadgets – from a James Bond film.

In one area of General Electric's 1m-square-foot research and development centre, named for the company's former chief executive, scientists are testing a special "pedestrian-safe" bumper bar for cars, which can hit people at speed without maiming them. Elsewhere, boffins are working on locomotive engines that run on methanol extracted from grass growing alongside India's railway lines, and on super-compact medical equipment that costs a fraction of the price of similar products in the west.

Opened in 2000 with 275 scientists and engineers, today the centre employs 4,300 – or one in six of GE's researcher "technologists" worldwide. This year, this ratio will increase to one in four, according to Guillermo Wille, the centre's managing director.


Location, location
India had 200 research and development centres belonging to multinational corporations as of early 2007 – up from three in 1985, according to a study by the National University of Singapore's Asia Research Institute. About 40 per cent were in Bangalore, India's Silicon Valley, about 20 per cent in Delhi and about 15 per cent in or near Mumbai. The remainder were scattered throughout the country.

Frugal engineering
Measuring innovation is a difficult exercise, particularly when it involves research and development centres that, though located in India, belong to large multinationals.
A study published in September by the National University of Singapore's Asia Research Institute sought to establish whether these centres simply provide support to the R&D capabilities of their parent groups, or whether they are indeed contributing their share of ideas and innovation.
Professors V.V. Krishna and Sujit Bhattacharya, the co-authors of "Internationalisation of R&D and the global nature of innovation: emerging trends in India", found that the number of patents granted in the US for innovations developed in the Indian R&D centres of multinationals rose sharply in the past decade, from fewer than 50 a year before 2000 to more than 300 by 2007. During the same decade, the number of patent applications soared to 500 a year by 2007, the study found.
Indian R&D centres belonging to Texas Instruments, IBM and General Electric were the leading recipients of US patents.

Prof Bhattacharya says this shows a shift taking place. In the past, manufacturing could be moved around the world easily but R&D capabilities were only rarely located outside the rich countries of the Organisation for Economic Co-operation and Development. But now R&D is being conducted by foreign companies in India.

Combined with an Indian mindset, – cost consciousness is innate to the culture – there are hopes among academics and industrialists that these centres could prove formidable in coming up with innovations.

To illustrate this frugal approach, Prof Bhattacharya recalls a recent trip to Calcutta, India's former industrial powerhouse. "[Calcutta] has always prided itself on affordability – you can get whatever you want, you will be able to afford it no matter what your spending power," he says. "There I saw these cups in which you can buy tea – small cups no bigger than a shot glass, priced at one rupee or two rupees or three rupees, like you might use for whisky, but these were for tea."

Paolo Martelli, regional director for South Asia at the International Finance Corporation, the private sector arm of the World Bank, which invests in Indian companies, says this mentality has already changed the telecommunications industry, with mobile phone calls in India today costing less than one US cent per minute.

"A lot of industries are being reshaped based on this different model, which entails a very low cost of production, huge [volumes] and very low margin but, overall, incredible cash flow," he says.

Indeed, while multinationals are only just beginning to tap into India's gift for low-cost innovation, domestic conglomerates are already producing numerous such goods for emerging markets.

Aside from the Tata Nano, the world's cheapest car, the country's engineers have come up with a battery-powered ultra-low cost fridge for districts that suffer from electricity blackouts, and an automatic teller machine for rural areas that costs very little to buy and uses minimal electricity.


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