A NITI Aayog panel on innovation has recommended that the private sector should help fund research and development, including in research labs at universities and startups.
In contrast, Google’s origins can be traced to research projects that were funded by the U.S. National Science Foundation and a large part of Apple’s success can be credited to the U.S. government’s small-business administration program that provides investment assistance to startups.
The Indian panel has also recommended improved tax benefits for investments equivalent to a percentage of corporate profits in research labs in universities and startups.
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“One per cent of corporate profit could be directed toward research labs in universities and/or industry-university collaborative research…A percentage of corporate profit could be directed towards corporate venture capital funds, for the purposes of investment in start-ups and/or incubators. The government could offer tax credits against this,” the panel, headed by Prof. Tarun Khanna, suggested in its recently submitted report. The panel has also recommended that all contracts with foreign defence companies above $5 billion should include a clause for five per cent of contract value to be directed to establish research-centric universities with strong emphasis on its core product areas in particular and broadly focused on the related areas in general.
In his budget speech, Finance Minister Arun Jaitley had allocated Rs.150 crore for Atal Innovation Mission (AIM). Post this, a committee was set up to suggest ways to promote innovation and build an entrepreneur-friendly ecosystem to drive job growth. The panel also suggested a ‘Make in Universities’ program which would involve setting up 500 tinkering labs, where aspiring entrepreneurs can experiment to create products that address local problems, with one 3D printer per institute. For these labs, the panel recommends utilisation of half of the Rs.1,000 crore Mr. Jaitley had set aside for the Self Employed and Talent Utilization (SETU) scheme.
The expert committee also recommends “Grand Prizes” approach to finding ultra-low-cost solutions to India’ s most intractable problems, on the lines of what is followed in some developed countries. “Incentivised innovation has worked around the world in stimulating innovation. In the U.S., XPrize is giving tens of millions of dollars to those who can provide solutions to major technological challenges,” it said. The committee recommends that the AIM budget of Rs.150 crore be used entirely to award up to 12 grand prizes annually. Each challenge should carry a prize of between Rs.10 crore and Rs.30 crore, it said adding that AIM should also consider setting aside part of the prize money to place orders for the products and services that are generated by winners as this will help in creating a market for winners’ products.
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The panel also pitched for an increase in investment in business incubators with up to Rs.200 crore public spending per year and roping in the private sector for the purpose. Another key recommendation of the panel is establishing a ‘fund-of-funds (FOF)’ by the government to seed other early stage venture funds with a corpus of Rs.5,000 crore.