PUNE-BASED KPIT CUMMINS, a technology solutions firm, took nearly three years to develop and build Revolo, a plug-in hybrid system for cars that improves fuel efficiency and reduces greenhouse emissions. It tied up with auto parts manufacturer Bharat Forge to make and distribute Revolo. But it’s going to take a long time for the two companies to see returns.

The question being asked these days, however, is not whether KPIT Cummins and Bharat Forge can afford to take such a risk by investing in an innovation, but whether such companies can afford not to. Experts say that if companies don’t back innovations, there’s a chance they will lose talent.

Nirmalya Kumar and Phanish Puranam, professors at the Aditya Birla India Centre at the London Business School, point out in their new book, India Inside, that patents filed in the U.S. by Indian subsidiaries of U.S. multinationals have shot up from less than 50 in 1997 to over 750 in 2007. “Ideas originate in India but come out of American corporations,” says Kumar. That’s because there’s little support for innovation in India. Which is why companies such as IBM, Intel, and GE find startups and experienced professionals in India ripe for the picking.

Currently, companies in China—the second-largest producer of innovations in the world—invest 1.2% of sales on R&D, compared with 0.6% by Indian companies. Vivek Wadhwa, senior research associate at Duke University’s Pratt School of Engineering, says Indian companies that don’t encourage innovation will see an exodus of talent.

He adds that the talent here is world-class because of the emphasis on math and science in the formative years of schooling. Yet, most of these talented professionals go abroad to companies that encourage them; those who stay back, end up in outsourcing companies that cater to the West.

It’s not that there’s a dearth of options in the local market, which is growing at about 7% and is demanding technology solutions for big-ticket projects. For instance, the Unique Identity Number project, called Aadhaar, needs about 200 million retinal scans done by March 2012. And the $35 (Rs 1,800) Aakash tablet offers a whole new market for developing applications.

As MNCs here are better equipped to seize that opportunity, Indian companies have to be alert not to miss the bus. If the 1970s saw the dearth of opportunities setting off a brain drain to the West, this time the absence of an environment to innovate could trigger that.

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