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- The metrics we use to measure innovation in an economy are aligned with the formal sector’s practices, and thus overlook innovation in the informal sector.
- A major element that differentiates informal-sector innovation is its use of experiential knowledge and locally available resources.
- Unfortunately, Indian policymakers have made no attempt to understand the values, motivations and beliefs that drive such innovation.
The informal sector is regarded as a site of low capital intensity and low-level productivity. Scholars and policymakers in India have looked at this space by focusing on its labour conditions and the gender dimensions. This is largely due to the large size of the informal sector in India: it provides employment to around 81% of the population and contributes nearly half of the country’s GDP.
The policy focus has been to suppress the informality, with little attention on its innovation potential. The metrics often used for measuring innovation in an economy, such as R&D, patents and publications, favour the formal sector and fail to highlight the innovative activities of the informal sector. Even countries where large scale surveys of informal economy exist have overlooked its innovation aspect.
Current discourse
A broad, heterogeneous and fast-growing academic literature exists today which attempts to identify the innovative activities in the informal sector. Several terms like ‘grassroots innovation’, ‘frugal innovation’, ‘inclusive innovation’ and ‘bottom-of-pyramid innovation’ are used interchangeably to define these innovations. While some of this literature focuses on the consumption side by serving people with appropriate products, the other focuses on acknowledging the knowledge and creativity of the people at the grassroots.
It is this second strand that emphasises the knowledge of common people and skills embedded in individuals and communities, which has implications for the innovation system in India. Informal innovations have been widely scouted and documented by the National Innovation Foundation (NIF). The stories of the innovators which have been documented and supported through the efforts of NIF bears testament to the fact that people outside formal boundaries of firms and S&T institutions can also be agents of innovations. NIF to date claims to have scouted around 3,22,000 innovations, ideas and traditional practices from all over the country (not all unique).
The innovations developed by communities or individuals at grassroots levels are mostly for self-use or their community members. The absence of any profit-seeking intention from the developed innovation and lack of knowledge about instruments such as patents make these innovations diffuse widely in the local settings where they are developed.
A major element that differentiates these innovations from those which are developed in private labs or research institutions is the use of experiential knowledge and locally available resources. Thus, most of the innovation process from the ideation stage to the implementation stage happens through informal networks. The innovation surveys in India conducted at firm level fails to account for these processes.
There are certain aspects to innovation that cannot be measured directly. Amit Basole writes that knowledge is one such attribute that exists abundantly in the informal sector but is poorly understood. This knowledge generated and put to use in the informal settings is tacit (learning by doing) and localised. The official surveys of the informal sector are inadequately designed that fail to describe this in-house knowledge of the workers, their informal networking and their ability to imitate and adopt the formal knowledge as per their need.
India’s previous S&T policies have always prioritised a top-down approach for developing innovations for the resource-poor and marginalised sections of the society. This is why one finds management and strategy scholars romanticise the ideas of developing frugal innovations or ‘bottom-of pyramid’ innovations to meet the needs of the poor people. The innovations which already exists are discounted as jugaad.
Informal sector and science policy
The draft 2020 Science, Technology and Innovation Policy of India takes a welcome departure from its predecessors and does acknowledge the innovation potential of common, resource-poor people. However, the aim of this draft policy remains again on mainstreaming these innovations by providing them finance for commercialisation and support for filing the patents. There is no discussion or talk to understand the process of knowledge creation at the grassroots levels which leads to innovation development.
The policy focus remains fixated on the conventional innovation metrics like IP, S&T collaborations and financing to encourage innovations from the informal sector. There is no attempt being made to understand the values, motivations and beliefs which drives these innovative activities. Past studies have argued that extrinsic motivations like patents, rewards, or profits drive only a small fraction of innovative behaviour, whereas intrinsic motivations like the joy of work, confidence and duty towards society plays a dominant role in the early stage.
Another interesting dimension of innovations generating from the informal sector is the willingness to share them openly with the community. Many grassroots innovators encourage copying and imitating their innovation. For them, diffusion and adoption are more important than appropriation. In some artisan clusters, methods like secrecy and community sanctions are followed to protect the innovations from being commercially exploited by outsiders. Such ethos of open sharing is also prevalent in the makerspaces and FabLabs, which are becoming platforms for open innovation in urban contexts. IP tools like patents or start-up funding which have proved useful in the formal sector context cannot be appropriate markers for informal sector innovations.
The impetus should therefore be on how to measure these innovative activities which are existing everywhere and are not only limited to firms and research labs. The indicators for measuring innovations standardised by the OECD manuals cannot be used as a substitute for the informal sector innovations.
To develop adequate metrics which can capture the innovation dynamics of the informal sector it is first required to understand the nature and process of those innovations.
Gautam Sharma is a senior project associate at the DST-Centre for Policy Research at the Indian Institute of Science, Bengaluru.