Has China and India become more innovative since the onset of reforms in the two countries?
China and India are definitely on a higher economic growth path, although the contribution of technology to economic growth is still not very clearly estimated. There is evidence to show that innovative activities in the industrial sector in both the countries have shown some significant increases during the post reform process. Knowledge content of both domestic output and exports are increasing in both the countries. The Chinese NSI is dominated by the SSI of the electronics and telecommunications industries and in the case of India it is led by the SSI of the pharmaceutical industry. In both the countries, increasingly much of the innovative activities are contributed by MNCs. In other words both China and India have become important locations for innovative activities. There is even some macro evidence to show that the productivity of R&D investments in India is higher than in China, although this proposition requires careful empirical scrutiny before firm conclusions can be reached. However continued rise in innovative activity is limited by the availability finance and of good quality scientists and engineers. Although the available supply appears to be very productive, its important that to sustain this on a long term basis and also to spread the innovation culture to other areas of the industrial establishment concerted efforts will have to be made to increase both the quantity and quality of scientific manpower. Fortunately the governments in both the countries are aware of this problem and have started initiating a number of steps towards easing the supply of technically trained personnel. But the governments still have to rethink its financial support schemes by reducing as much as possible the distortions that are currently in this area. Key words: India, innovation, R&D, patents, total factor productivity growth, high-tech industry, financing of innovation, HRST, R&D personnel. JEL Classification: O31; O32; O34