Role of Biotechnology in Stimulating Agribusiness R & D Investment in India

The seed industry is the most research-intensive agribusiness in India and over the last 15 years has had the fastest growth in research expenditure of any major agribusiness. In another paper (Pray & Nagarajan, 2012), we suggested that biotechnology could have been an important cause of research and development (R&D) intensity and growth in the seed industry. Promoters of biotechnology argue that it will stimulate R&D and innovation by providing technological opportunities to produce crop varieties that are more productive and have improved quality. Critics of biotech argue that genetically modified (GM) crops have not increased technological opportunity because the new crops are not more productive or are no more productive than crops developed through convention methods. They argue that the main impact of GM crops has been to increase the ability of major biotech firms to appropriate more money from their innovations because of the protection provided new traits through patents and the regulatory system. This may or may not lead to more research. The major biotech firms may do more research, but smaller firms may reduce their research because patents may be inaccessible and it may be difficult to move new technology through the regulatory system. As far as we know, no empirical research has been done on this issue. This article attempts to assess the impact of biotechnology on the Indian seed industry research. The next section describes the evolution of the Indian seed industry. Then we review previous literature on the determinants of Indian seed industry R&D and propose three hypotheses about how biotechnology may have influenced R&D in the Indian seed industry. Following that, we propose and test a simple econometric model of R&D using a unique R&D dataset from the Indian seed industry for the years 1987, 1994, 2005, and 2008/09. Finally, we discuss the implications of the empirical work for the issues raised in the previous paragraph and discuss the policy implications.