Author: Julian Morris
Publication: The Economic Times
Date: May 12 2001
The past few years have seen explosive
growth in India's IT industry. At the same time, other knowledge-based
industries, such as pharmaceuticals and biotechnology, have languished.
The main reason for this is the
deficiency in India's intellectual property laws. Reform of these laws
could place India at the forefront of the important emerging field of bioinformatics.
As Dr R A Mashelkar, Director of
the Council for Scientific and Industrial Research, pointed out recently,
only fourteen new pharmacological molecules have been developed in the
past forty years in India, and 11 of those were developed by CSIR.
In other industries, the costs of
research and development may be recouped through strong initial sales,
made possible by a combination of secrecy and strong marketing, which give
the developer a `first-mover' advantage.
But for pharmaceuticals and the
products of biotechnology, development costs are typically very high, whereas
the products, once developed, may be easily copied.
In addition, the requirement that
products be rigorously tested prior to marketing increases development
costs and makes secrecy a bigger problem.
The result is that without product
patent protection there is insufficient incentive to engage in commercial
research and development on new pharmaceuticals and bio-tech crops.
India's information technology industry
has been less badly affected by the lack of product patent protection.
In part this is because computer code is protected by copyright; in part
it is because encryption makes it easier to keep the source code secret.
Indeed, the growth if the IT industry
has been the most dynamic sector in the Indian economy over the past decade.
In 1990, the IT industry produced $150 million; in 2000, this figure was
close to $6 billion, including around $4 billion in exports.
The IT industry will continue to
expand over coming years for several reasons. First, India will remain
a far cheaper place to source IT expertise than most other parts of the
world. Second, nearly 30 million people in India speak English.
Third, many of these people are
acquiring IT skills at private training companies such as NIIT, where a
month-long course costs only a fraction of what it would in the UK or US.
Expansion of the Indian IT industry
will also be driven by synergies with other industries particularly biotechnology.
Bioinformatics, or the application of databases and computer algorithms
to biological information, will be amongst the most important technologies
over the next few decades.
It is bioinformatics that underpins
the decoding of the human genome. And it is bioinformatics that will enable
the development of ultra-targeted pharmaceuticals and third generation
biotech crops.
Even without local patent protection,
bioinformatics companies have been sprouting in India relying on the possibility
of patenting pharmaceuticals in the US and elsewhere.
Ranbaxy Laboratories and Nicholas
Piramal have announced initiatives aimed at developing drugs using bioinformatics.
Meanwhile, four computer scientists recently announced the formation of
a bioinformatics company in Bangalore called Strand Genomics.
These new ventures are exciting,
but compared to efforts already underway in the US and elsewhere, they
are modest. US companies are already spending about $20 billion a year
on bioinformatics that's four times the total revenue of India's IT sector.
As with pharmaceutical research
more generally, inadequate patent protection is discouraging investment
in the Indian bioinformatics industry.
Fortunately this omission is due
to be corrected shortly. Under the Trade Related Aspects of Intellectual
Property agreement, India must establish a patent system that protects
such products by 2005.
But why wait? The next few years
will be crucial in developing an expertise in bioinformatics. If India
wants to become a world-leader in this field and it is otherwise well-placed
to do so it must enact strong product patent laws as soon as possible.
(The author is the director of the
science and environment unit at Institute of Economic Affairs, London.)
