OPINION | India’s Innovation Handicap: How to overcome it

Regulations, though present, are often clear and predictable, giving innovators certainty that red tape won’t strangle their ventures before they mature.

When it comes to innovation, the U.S. remains in a league of its own. For decades, it has outpaced the world in nurturing disruptive technologies, financing bold ideas, and scaling startups into global champions. India, by contrast, has no shortage of entrepreneurial talent or raw intellectual firepower—but innovators here often feel like they are fighting a boxing match with one hand tied behind their backs. The difference between the American and Indian journeys is not one of genius but of the environment each country offers for ideas to thrive. If India aspires to match the US in innovation leadership, it must focus on removing the systemic obstacles that stifle its entrepreneurial ecosystem.

Why the US is the Innovation Superpower 

The American advantage is rooted in an ecosystem carefully layered over decades. Its universities function not only as centers of learning but also as laboratories of invention, where basic research is seamlessly connected with industry. Access to venture capital is abundant, with deep and mature markets willing to take risks, fail, and reinvest again. Regulations, though present, are often clear and predictable, giving innovators certainty that red tape won’t strangle their ventures before they mature.

Just as importantly, the US has imbibed risk-taking into its cultural DNA. Silicon Valley celebrates failure as a stepping stone, not a scar. Policies around intellectual property are robust, protections are enforceable, and ideas move quickly from the garage to the marketplace. Immigration has no doubt strengthened the ecosystem, with global talent converging to add fuel to the American innovation engine. Innovation in the US is not just encouraged; it is institutionally assured.

India’s Untapped Talent 

India has no shortage of bright minds or groundbreaking ideas. From frugal engineering to scalable software solutions, Indian innovators certainly punch above their weight. But the environment they operate in is fraught with detours and dead ends.

Complex regulations, inconsistent taxation, and layered approvals make launching a startup more about paperwork than product. A university degree here often prepares graduates for exams, not for experimentation. An idea that could reach the market in months in Boston or San Francisco may take years in Bengaluru, lost in the labyrinth of approvals.

The result is not that India cannot innovate, but that innovation often feels like an uphill climb, performed in heat and dust, with unnecessary weights strapped to the sprinter’s legs.

Five Barriers India Must Overcome 

1. Cutting Through Regulatory Thickets- Regulatory overhang remains India’s biggest bottleneck. Entrepreneurs confront unpredictable taxation, overlapping jurisdictions, and multiple layers of compliance. The solution lies in creating a transparent, single-window framework with time-bound approvals and digitally enabled processes. Predictability in rules is as valuable as permissiveness.

2. Financing Innovation, Not Just Growth- While India has seen an explosion of venture funding in consumer tech, financing for deep-tech innovations or high-risk ventures remains scarce. Angel investors confront tax burdens, and exit mechanisms lack fluidity. India must deepen its domestic venture capital pool through targeted tax incentives, create vibrant venture debt markets, and channel public R&D funding strategically into commercial partnerships.

3. Strengthening Infrastructure Beyond Metros- A young coder away from the metros should not suffer from unreliable internet or power while competing in a global digital economy. To democratize innovation, India must ensure physical and digital infrastructure penetrates beyond its urban islands of excellence. Entrepreneurial energy should not be geographically constrained.

4. Normalizing Risk and Failure- Culturally, India punishes entrepreneurial failure. Banks hesitate to finance second attempts, families attach stigma to failure, and society reinforces risk aversion. Transformation will require changing narratives through education, policy, and even popular media. Resilience must be celebrated as much as success.

5. Universities as Incubators, Not Exam Halls- India’s universities must shift from rote memorization to research-based, innovation-driven ecosystems. Stronger intellectual property enforcement, cross-border research collaborations, and links between academia and industry are essential. Campuses should not just churn out job-seekers but job-creators.

Fixing these obstacles is not merely about creating unicorns. At stake is India’s ability to shape its economic future, reduce dependence on imports of cutting-edge technologies, and command a stronger presence in global value chains. Innovation is also national security, determining whether India becomes a rule-maker or rule-taker in emerging technologies like artificial intelligence, clean energy, and biotech.

The H-1B Inflection Point

The recent hike in H-1B visa fees is not just a policy change in Washington—it is an inflection point for India’s innovation journey. For decades, Indian engineers and entrepreneurs have been the backbone of America’s tech dominance, often contributing more to Silicon Valley’s prosperity than to India’s own. This model worked as long as global mobility was frictionless.

But by raising entry barriers for Indian talent, the US has delivered a wake-up call: India can no longer depend on exporting its brightest minds while neglecting to build the environment they need at home.

The message is clear—if pathways abroad are narrowing, India must urgently create world-class pathways within. Every extra dollar charged in visa fees is effectively a penalty on India’s failure to reform its own innovation ecosystem. Rather than seeing this as exclusion, India should recognize it as a catalyst.

The H‑1B shock should accelerate reforms—simpler regulations, deeper funding pools, stronger university-industry linkages—ensuring that our best ideas find scale in Bengaluru and Pune, not only Palo Alto. This is not about replacing global opportunities but about ensuring India becomes an equal innovation magnet.

The window is narrow, and hesitation will only widen the gap. The visa fee hike is a jolt that India must use to untie the other hand and finally step into the ring at full strength.

Learning from the US without Copying It

India should not attempt to mechanically replicate the American model, because its socioeconomic context is different. What it can do is internalize the principle driving the US: the removal of friction between an idea and its execution. India’s frugal innovations and ability to scale lean solutions for vast populations are unique strengths. But to become a true peer to the US in technology and innovation, India must create policies that amplify these qualities, rather than obstruct them through red tape or regulatory uncertainty.

For a young country with more than 65% of its population under 35, the innovation dividend could fuel decades of growth and global leadership. But only if the environment allows its brightest minds to run fast—with both hands free.

Closing Note: The Urgency of Now 

The US did not stumble into innovation dominance; it deliberately built an ecosystem blending policy, finance, research, and culture over seven decades. India cannot afford the same leisurely timeline. The global race in AI, energy tech, and space exploration won’t wait for bureaucratic reforms. What India needs is regulatory courage, policy urgency, and a cultural rewiring that sees innovation as national infrastructure, not optional luxury. Innovation is India’s way forward. But the fight cannot be won with one hand tied. It is time to untie the other.

(Shishir Priyadarshi is President, Chintan Research Foundation.) 

Views are personal and do not represent the stand of this publication.