India Innovation Index 2020

NITI Aayog, along with the Institute for Competitiveness, on January 20, 2021 released the India Innovation Index 2020 in a virtual event. The second edition of the India Innovation Index examines the innovation capabilities and performance of the states and union territories. The first edition of the index was launched in October 2019.

In the second edition too, theindex found that the level of competitiveness among the states and union territories was high, which is essential for them to continually improve on their enabling factors as well as innovation performance, year by year.


In the ‘Major States’ category, Karnataka continued to occupy the top position, while Maharashtra moved past Tamil Nadu to reach the second place. Telangana, Kerala, Haryana, Andhra Pradesh, Gujarat, Uttar Pradesh and Punjab completed the top ten in that order. 

Karnataka’s rank is attributable to its substantive number of venture capital deals, registered geographical indicators and information andcommunications technology exports.

Karnataka’s high Foreign Direct Investment (FDI) inflow has also enhanced the innovation capabilities of the state. Four southern states—Karnataka, Tamil Nadu, Telangana and Kerala—occupied the top five spots under the ‘Major States’ category this year.

Overall, Delhi retained its first rank, while Chandigarh made a big leap since 2019 and landed in the second place this year. Under the ‘North-Eastern/Hill States’ category, Himachal Pradesh moved up from the second position to emerge as the top ranker this year, while 2019’s top performer (in this category), Sikkim, slipped down to the fourth position.

Objective of the India Innovation Index

The objective of the India Innovation Index is to scrutinize the innovation capacities and performance of Indian states.
The index provides an extensive framework for the constant evaluation of the innovation ecosystem of the 28 Indian states and 9 union territories. The index intends to accomplish the following three functions:

  1. Rank all states and union territories based on their index score
  2. Identify opportunities and challenges
  3. Assist in modifying governmental policies to foster innovation

Five enabler parameters

The innovation inputs were measured through five enabler parameters, and the output through two performance parameters. While ‘Human Capital’, ‘Investment’, ‘Knowledge Workers’, ‘Business Environment’, ‘Safety and Legal Environment’ were identified as enabler parameters, ‘Knowledge Output’ and ‘Knowledge Diffusion’ were chosen as the performance parameters.

What is innovation?

Innovation is the creation, development and implementation of a new product, process or service, with the aim of improving efficiency, effectiveness or competitive advantage. Interestingly, the innovation ecosystem is run by two parallel economies, commercial and research. While fundamental research is the key driver of research economy, commercial economy is primarily driven by the marketplace.

R&D Expenditure

India spends around 0.7% of its GDP on research and development, which is much lower than the top spenders, such as Israel (4.95%), South Korea, Sweden, and Japan. This relative ranking puts India at par with other developing countries, such as Mexico, and much ahead of countries in the South and West Asian region. However, India lies below other BRICS nations in terms of the percentage of GDP spent on R&D.

However, in absolute terms, the Gross Expenditure on R&D (GERD) has consistently risen over the years, tripling from Rs 39,437.77 crores in 2007-08 to Rs 1,13,825.03 crores in 2017-18, as shown in the figure. For the year 2018-19, GERD in India is estimated to be Rs. 1,23,847.70.

R & D Expenditure By Sector

India’s break-up of GERD stands in contrast with other countries, wherein it is the business sector, dominated by private enterprises, that lead the expenditure as shown in the figure. Countries such as Israel have 88.26% participation of business enterprises in the country’s R&D expenditure, and the United States has 72.57%. Countries that do share a higher level of government spending in R&D are Russia at 34.43% and UAE at 25.42%.

Most of the European countries have a higher participation of the higher education sector in the research space, such as France, Germany, Austria, Denmark, Sweden, and the United Kingdom. In the case of Canada, the higher education sector contributes 41.73% of the R&D expenditure but sees low participation of the government.

In India, central agencies such as the Defence Research and Development Organisation (DRDO), Department of Space (DoS) take up the majority share at 31.6%, and 19% respectively.