Innovation in Indien

How real is innovation in India?

Indian innovation and its impact on developed nations is a topic of increasing relevance in today's world. A recent study published by the Bertelsmann Stiftung and carried out by the international consulting firm Roland Berger illustrates the landscape of innovation in India and offers recommendations for establishing meaningful innovation cooperation between Germany and India.


Nine months of work show that innovation in India is both real and complex, and that it is gaining in monumentum. The study identifies two major characteristics of innovation in India.

First, "innovative imitation", which involves adapting products and services offered in developed markets to a heterogeneous and underpenetrated Indian market, is a key feature of many successful Indian companies. For an emerging economy, copying or imitation is a natural and inevitable part of economic development. In fact, a number of developed countries have begun their journeys by imitating others. Notable examples include South Korea, China, Japan and even Germany.
Second, innovation in India is typically "frugal", meaning that firms create sometimes radically new products, services and business models with limited resources. That resourcefulness is today driving a systematic mindset oriented toward innovating with less, which is one of India's exceptional strength in order to develop goods for emerging markets.

Five organization types are at the forefront of innovation in the country, namely Transnational Innovators (multinationals with R&D centers in India), Corporate Titans (large Indian companies which are 'institutionalizing innovation'), Smart Spartans (companies leveraging India's frugal innovation advantage), Meteoric Mavericks (start-ups with disruptive offerings), and the Relentless Researchers (select group of leading research institutions).

Innovation at the industry level

The study also tried to understand how innovation is driven at an industry level, focusing on the automotive, engineering, pharmaceutical, finance and IT-sector. It identified the following main trends:   

  • Automotive Sector: India is expected to become the third-largest passenger vehicles market in the world by 2020, surpassing Japan, the United Kingdom and Germany. The number of captive R&D centers and R&D intensity among automotive manufacturers and suppliers is expected to increase. Currently, 62 multinationals in the automotive industry have set up R&D centers in India. 
  • Engineering Sector: So far, India trails most developed markets with regard to the degree of automation and industrial development. Indian companies, especially those with global customers, are slowly realizing the importance of Industry 4.0 mechanisms and the impact this could have on their productivity, quality and competitiveness. As a result, some are laying the foundation for Industry 4.0 within specific parts of their manufacturing operations. Moreover, engineering-related start-ups are becoming increasingly common in India, though they remain fewer in number than those in e-commerce or other Business-to-Consumers (B2C) sectors.
  • Pharmaceutical Sector: It is true that Indian examples of “first in the world”, globally scalable product innovations are few. However, especially in the pharmaceutical industry, the industry has steadily grown and the country is now one of the leading sources of generics (non-branded pharmaceutical drugs) in the world. As a consequence, companies are beginning to invest in drug-discovery research and innovating in the area of vaccines as well as exploring new business models so as to lower the cost of innovation.
  • Finance sector: This sector is mainly driven by the underlying need to increase financial inclusion and financial-service penetration within the country. India’s financial account penetration rate is just 53%, significantly trailing countries such as China (79%), US (94%), Japan (97%) and Germany (99%). The country is projected to become the fifth-largest banking market globally by 2020. It is therefore expected that there will be a) a boom in the online/mobile banking market; b) an ongoing disruption in the payments sector; and c) the emergence of innovative players in the financing and insurance area.
  • IT-sector: Intensifying competition from countries like Vietnam and the Philippines is pushing Indian companies to move up the value chain and focus on technology. The main innovation trends here include a) increasing efforts to create Intellectual property (IP) in areas such as the IoT and augmented and virtual reality; b) growth in the Software as a Service (SaaS) model and c) growth in the number of start-ups focusing on hardware such as 3D printing. 

Implications for Germany

Innovation in India has implications on the developments in Germany. The study observes that in the context of innovation, India plays multiple roles for Germany: 

  • Customer - Thanks to its large customer base, India is an ideal location to develop and test affordable goods for new markets and emerging middle classes.
  • Competitor -  The frugal mindset of Indian companies could prove to be competition for German companies in the future, especially in frugal engineering.
  • Collaborator – Germany is India’s second-largest partner in terms of collaborative research. India’s strength in software and engineering services and Germany’s dominance in heavy and precision-tools engineering could be harnessed to drive further co-innovation.
  • Talent hub - With over a million engineering graduates every year, India serves as a vast talent hub for skilled manpower, particularly in light of Germany's current demographic profile.
  • Ecosystem - Indian cities like Bengaluru offers German companies a diverse market along with collaboration and co-innovation opportunities.

For Germany, it therefore becomes paramount to leverage India’s complementary innovation skills such as those found in the area of frugal engineering. German research organizations should access the Indian market and the German government should develop a clear R&D internationalization strategy focused on India.

Based on assessing India's current innovation ecosystem and its implications for Germany, the study develops a number of actionable recommendations for Indian and German companies, academia, and policymakers to leverage the Indian innovation ecosystem. The study also derives recommendations on how Germany and India can work to create a synergistic innovation partnership. 

Please find the complete study with case studies and best practices here.