Rethinking innovation policy in India: Amplifying spillovers through contracting-out

At independence, India committed itself fully to foster, promote and sustain the creation of science and scientific research in all aspects. In this paper, we present first principles reasoning on the case for state action, and the optimal mechanisms for using taxpayer resources, to fulfil this commitment. We argue in favour of a reorientation of public spending on innovation: away from building vertical government organizations, and in favour of a contracting-out strategy. Such a strategy would induce knowledge and capabilities in the society, and through this, induce greater gains for the people of India. We present a preliminary sketch of the path to implementation.