India is increasingly becoming a top global innovator for high-tech products and services, says World Bank in its report and recommends new ways to be explored to leverage the entrepreneurs and technologists of its Diaspora.

The report ‘Unleashing India’s Innovation’ reveals that about two percent of Indians who live abroad collectively earn almost two thirds of India’s GDP. It emphasizes how creating and commercializing ‘new to the world knowledge’ as well as diffusing and absorbing existing knowledge capital can help India sustain its faster growth rate.

“The world has acknowledged India’s R&D potential and more than 300 multinational corporations have set up R&D and technical centers in India,” said Isabel Guerrero, World Bank Country Director for India.

Innovation in India must be thought of as improving business practices across the entire economy. While India is emerging as a top global innovator in sectors such as biotechnology and information technology, only a meager three percent of the Indian workforce is in the modern private sector, while roughly 90 percent remains in the informal sector.

“The disparities in productivity levels across firms within the manufacturing sector is wider in India than in China, Mexico, the Russian Federation, and the Republic of Korea,” said Mark Dutz, World Bank senior economist and editor of the report. “The output of the economy could increase five-fold if all enterprises could achieve national best practices based on knowledge already in use in India,” he added.

To achieve this, the report recommends an increase in the fiscal and managerial autonomy of universities and colleges, and the encouragement of greater private participation in higher education.

Encouraging stronger competition among enterprises is particularly important. Since the Indian economy opened up in 1991, the vast majority of private sector investments in R&D were in sectors most open to competition.

The report suggests removing non-essential regulations in product, land, labor, capital, and infrastructure markets. Easing of remaining limits on small industries, restrictions on foreign direct investment, and barriers to import competition are also recommended.