Strengthen IP policies

India's modest improvement in the World Bank's ‘Doing Business Index’ this year, along with the Bank's projection that the economy will continue to experience merely moderate growth, were not the boosts that Indian officials hoped for. The Bank's assessment, however, highlights several persistent shortcomings that continue to dampen investment, perhaps most notably the need to improve India's intellectual property (IP) regime.

IP rights provide the foundation for innovation and the investments that drive it, which economists have long recognised as most important factors that can raise a country's trend growth rate. Robust IP rights and enforcement protect individuals and companies willing to risk their sweat and capital to develop next technologies and products by ensuring that they can enjoy the returns from those labours.

And in the advanced industries, a strong IP regime protects revenue streams that support R&D investments, creating the virtuous circle that characterises the world's most successful economies today. In the end, nations that provide an environment that promotes substantial R&D, starting with a strong IP regime, generate more growth and more productivity gains, which ultimately produce higher incomes.

Robust IP rights and enforcement also help countries like India attract more foreign direct investment (FDI) and the advanced technologies and business methods which accompany those investments. A strong IP regime also encourages those foreign direct investors to undertake their own R&D in the developing economies that host those investments.

In so doing, strong IP rights provide a path to more rapid economic modernization. Moreover, without such protections, foreign companies will look elsewhere to invest. Recently, along with my colleague Dr Aparna Mathur, I analysed India's IP rights regime and projected how improvements in those rights and protections could stimulate growth and employment, as well as FDI, in India's most advanced and R&D intensive industries.

Our analysis shows clearly the potential to spur faster growth and development in India, especially in its most advanced industries, by strengthening IP rights and protections; and that progress would quickly produce more jobs and higher wages. By so doing, India could finally see dramatic improvements in both its rankings by the World Bank and its investment rate. (Robert J. Shapiro is the chairman of Sonecon, a private economic consultancy based in Washington and former under secretary of commerce for economic affairs under president Bill Clinton.)

By Robert J. Shapiro