The number of patents approved for Indian nationals is less in number than it is to foreigners, prompting the government to say "much needs to be done to encourage more domestic innovations”. The number of patents granted to Indian applicants has steadily decreased from a high of 41 percent in 2002-03 to a low of 17 percent in 2009-10 with rest belonging to the overseas applicants, according to an Industry Ministry document.

The proportion of patents granted to Indians when compared to the other nationals showed a radical drop from 28 percent in 2009-10 to 17 percent in 2010-11. While in 2010-11, from a total of 7,486 patents granted, Indians could claim only 1,272 granting the foreigners a total of 6,214 patents. On the contrary Japan gave a maximum number of 1,93,449 patents in 2009 followed by the U.S. (1,35,193), China (1,28,489) whereas India granted only 6,168 patents.

The main purpose of the Indian patent system is to, stimulate inventions among Indians and to encourage the development and exploitation of new inventions for industrial purposes in the country so as to secure the benefits there of to the largest section of the public.

In the document, the ministry said: "there are a number of fundamental challenges which need to be addressed to catalyze Indian innovation." National Intellectual Property Organization (NIPO) Director T C James said that the government should play a vital role by carrying out a comprehensive study to find out the main reason for declining numbers of patent in the country.

India’s Industry Ministry has proposed to analyze the viability of introducing utility models into the intellectual property rights regime. Utility models are a framework for providing limited protection to those innovations, which may not meet the standards of the Patents Act and yet are commercially exploitable and socially relevant. The patent shield for the home-grown products will be officially called the “Utility Models.” This practice is common in 55 countries like China, Japan and Germany.

Reflecting on the prime reasons for the fall in the patenting activity, one of the reasons could be the lack of responsiveness about IPR( Intellectual Property Right) and also the absence of institutional systems. There may be other constraints originating from agreements on technology transfer which do not allow patenting, but patents do help in differentiating between a more innovative firm and a less innovative firm.