India is one of the world’s largest economies, ranked number 9 by the International Monetary Fund. Many countries would gladly trade their growth rates with India’s, which is forecast to be more than 7.0 per cent for next year. Like the US, India’s economy is largely dependent upon domestic consumption and not on exports – a model that makes India less vulnerable to the whims and fancies of global markets.
In the top 10 are the other BRIC countries – China at second place, Brazil at the seventh place and Russia at the tenth place. The BRICs are so powerful that they have a combined economic size larger than the next 20 economies combined, including Canada, Australia, South Korea, Switzerland, Sweden, Norway and Austria.
Yet the BRICs are different in one important dimension. They have few, if any, products with world appeal. Italy in the number 8 spot is known for products and brands the rest of the world covets, such as the Ferrari, Fiat, Versace and Vespa. South Korea has Samsung, Hyundai, LG and Kia. Switzerland is known for Rolex, Lindt, Swatch and Nestle.
What products are the BRICs known for?
To be sure, there are a few. Russia’s Cold War legacy made its MiG fighter plane and the AK-47 (Kalashnikov) rifle household names worldwide. But most people wouldn’t be able to name even a couple of additional brands/products from the former Superpower. China’s Huawei, Haier and Lenovo are major players in the telecommunications, appliances and technology industries respectively but for the country’s status as the world’s second largest economy, just three brands to boast of seem like a rather small number.
Weak in innovation
India also has a few companies whose products the world knows about – Jaguar, Landover and ArcelorMittal, come to mind – but all of these were because of acquisitions or mergers. Many people have heard about the Tata Nano because of its distinction as being the most inexpensive car in production anywhere in the world. The Nano, however, would be unfit for use in the top 30 countries because it would fail safety, emission and other standards of those nations.
So, most people would never be able to experience driving a Nano unless they visited India.
Why is it that the BRIC economies appear to be so weak in innovation - in creating and marketing products and services that the world can use? Indian engineers and scientists rank among the best in the world and are behind some of the world’s most sought after products – yet, what is the reason that these very engineers haven’t created an Indian company that can take on a Cisco, Qualcomm or Facebook?
Knockoffs galore
A loaded, open-ended question such as this always incites strong, sometimes even emotional opinions.
Some will say that countries boasting stable brands have outstanding public infrastructure, low population densities, excellent higher-education systems and wealthy economies - all of this make sense. But the one reason that is often overlooked may be the most significant factor of all: the BRIC countries do not provide the same level of Intellectual Property protection as the advanced economies of the West. Without protection, intellectuals have little incentive to create because their works can be blatantly copied and resold. And in India, we have seen this to be true - knockoffs such as Tosiba, Fony and Pespi are quite popular in Indian markets and bazaars.
The one country that consistently ranks among the top in innovation is the US. The US has all of the ingredients for capitalistic success - a strong democracy, functioning markets where capital can be easily raised, fairly open immigration laws which attract a steady stream of talented workers from around the world and abundant natural resources including land and water. But Canada and Australia also have all of these characteristics – why is it that the US alone seems far above the rest?
Strong IP laws
The simple answer is that the IP protections in the US are world class. Patent law is complex but everyone in the country takes it seriously. Patents are awarded solely on the basis of the merit behind the product. Ideas cannot be patented - only products can be. And once a patent is granted, it is vigorously enforced through the arm of the law resulting in both civil and criminal penalties when non-compliance can be proved.
People around the world experience the impact of this enforcement on a regular basis even if they have never visited the US. Consider Youtube, one of the ten most-visited online destinations. Many viewers have wrung their hands in frustration at trying to view copyrighted content, like a Hollywood movie even from as far back as the 1970s. While the Digital Millennium Copyright Act exempts Youtube from culpability if pirated videos are played on its platform, Youtube takes its responsibility seriously. The moment a copyright holder asserts that a violation has occurred; Youtube takes swift action to take it down.
The rule of law in the US and the willingness of the justice system to enforce those laws are at the centre of the country’s lead in innovation. Unless India creates a similar environment, we are unlikely to see the next life-saving drug or wonder-machine come out of India’s companies.