Doubting India’s Investment Future

By Rina Pal and Kelly Anderson

Over the past few months, both industry and U.S. government officials have raised their extensive concerns with the intellectual property (IP) and investment environment in India. With the rampant piracy of copyrighted materials, destructive IP tax policies, and the invalidation of countless patents, there is no question that the IP climate in India has deteriorated rapidly over the last two years. But how does this affect American businesses’ decision to invest in India?

On November 14, the GIPC set out to answer this question at an event in the heart of the investment community, New York City. The event entitled “Innovation in India: A Risky Investment?” featured a dialogue with investors, academics, and industry about India’s future as a destination for American investment. The answer was clear: the Indian government’s recent disregard for IP will significantly damage both the country’s investment environment and its future as a knowledge-driven economy.

Shanker Singham, the Managing Director of the Competitiveness & Enterprise Development Project at Babson Global, spoke about the ways that erosion of IP rights can lead to an anti-competitive market distortion, which adversely impacts the economy. Singham pointed to the fact that improving the IP environment has resulted in both companies increasing their market share and countries experiencing a rapid increase in venture capital, as was the case in Italy and South Korea. Singham also noted that a continued disregard for IP and innovation will lead to a further brain drain from India to the United States, which bolsters U.S. companies’ ability to attract scientists from other countries, and damages the long-term innovation and entrepreneurship environment in India.

Paul Howard, a Senior Fellow at the Manhattan Institute, also spoke about India’s potential, should it decide to improve its IP environment. Howard specifically cited the steps taken by the U.S. pharmaceutical industry in order to make the market more attractive. Howard noted that creating a stable regulatory environment, producing a tech transfer system, and encouraging universities receiving federal funding to commercialize their intellectual property, which led to the creation of bio-tech hubs throughout the U.S., increased the appeal of the U.S. market for foreign investors.  However, Howard noted that the future of the pharmaceutical industry is in emerging economies – like China and India – not only because these economies offer the industry tremendous opportunities to grow but also because the U.S. and EU markets are largely saturated. But in order for India to take advantage of this opportunity, intellectual property protections must be strengthened.

Both panelists agreed on one key fact: the potential in India is great. Countless examples exist of the ways that strong IP protections foster innovative, knowledge-driven economies that attract foreign investment. If India is to harness its potential to become a destination of foreign investment and a major player in global marketplace, India must follow the example of other innovative economies and embrace strong IP protections.

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