First NDA Government under the leadership of Shri Vajpayee drafted a great plan to promote indigenous industrial research. However, successive Governments failed to make any headway
Shri Atal Behari Vajpayee with a foreign business delegation
The biggest policy impetus to indigenous industrial research in Bharat was provided by the former Prime Minister (PM) Atal Bihari Vajpayee. During his term, Section 80-IB (8A) of the I-T Act in 2002 was introduced; which provided an Income Tax break for ten years to companies that only sell research aka Intellectual Property (IP) output. This scheme was withdrawn in 2007, though some companies continued to avail the benefits till 2017.
It brought disruptive indigenous technologies to market, which were then usually licensed to manufacturers — for instance, a drug molecule, processor designs, engine designs, better-yield seeds for agriculture, switches etc. These companies are non-service and non-manufacturing and help give impetus to manufacturing and services.
Insight and Intervention
Bharat, generally, had very few companies selling technology research or IP till 2002 and through this policy impetus, Bharat built around forty such companies on a sustainable basis like Biocon Limited, a biotechnology IP company.
PM Vajpayee understood building sustainable technology research aka IP selling company is one of the most difficult businesses in the world. The chances of failure are high; the first field trials of the product can fail and iterative incorporation of improvement, until it succeeds, can be time and fund consuming. And by the time the company gets it right, the opportunity may have vanished. It is the reason why Bharat didn't produce many Scientific & Industrial Research companies, and we have been dependent on imports for the same.
PM Vajpayee saw Bharat as a market and cheap labour destination in the absence of our industrial research capability. He felt that outsiders cannot solve our chronic problems, more so for our strategic sector. PM Vajpayee knew it well that GPS was denied to India during Kargil war or embargo after nuclear tests denied critical technology to our strategic sector. And only way forward for the Nation was to build its industrial research ecosystem. And as a leader, he gave the impetus it deserved.
These companies had no political clout and no lobbying capability, which calls for deep pockets. PM Vajpayee knew that these are the entities that improved the quality of our citizens by offering technology solutions to problems that we encounter by paying taxes that they generate when they become sustainable. These companies would also lead to job creation; cost-effective price in our own country for the same class of products, reduction of imports, enabling higher education and building our nation’s capability.
NITI Ayog deliberated on the issue in October 2016 and recommended reintroduction Section 80-IB (8A) of the Income Tax Act. The action on the recommendation is awaited and is works in progress.
(The writer is a high technology entrepreneur and CEO of Powai Labs)