The Times of India
28-Oct-2022

The partnership between the US and India has steadily deepened for well over a decade, both in the strategic and economic dimensions. But there are opportunities for even more accelerated growth in the India – US corridor, driven by a strong foundation of shared values, shared interests, and a strong people-to-people relationship.

As the impact of digital technologies continues to expand globally and additional sectors of India’s economy embrace technological transformation, the India-US tech

 corridor is primed for breathtaking growth. A key area particularly poised for break-out growth: deep tech.

The US and India’s shared mindset

The US and India share many traits which make them “natural allies’ in the words of both President Biden and Prime Minister Modi. The use of the English language is one: India has the largest number of English speakers in the world., enabling communication and collaboration across borders and cultures. The legal

 systems, based on common law and constitutionally guaranteed freedoms, are another complementary area. Lastly, and perhaps most importantly, Indian and American societies both possess a decidedly aspirational and entrepreneurial spirit. This similarity in generational attitudes, with bold ambitions motivating entrepreneurs in both countries, creates a common appetite for innovation and rapid social and economic progress.

India is also a top ten trade partner with the US, growing substantially over the last two decades. Within tech, nearly every major U.S. company has established operations in India, creating a dynamic technology corridor between the countries, with companies undertaking activities ranging from product development to advanced research. It was recently reported that 120,000 semiconductor designers work in India supporting global companies. Post-pandemic, the impact of this corridor will only grow further as enterprises continue to embrace the benefits of remote working and a global ‘one-team’ model. A hybrid India – U.S. presence is a strong competitive advantage, helping companies to efficiently develop best-in-class, globally scalable products. The joint competitive advantage is reflected in the steadily increasing corporate investments in both directions.

Much of the tech sector expansion within India, and indeed in the U.S. as well, has been enabled by the exponential growth of India’s tech talent base. India’s academic institutions offer globally competitive technology and engineering programs. Increasing numbers of Indian students have also begun attending American universities – quadrupling in number over the last 20 years – with many remaining in the States to work for global tech firms.

For over twenty years, Indian origin engineers have been a significant component of the talent base in Silicon Valley. Today, a disproportionate number of startups have Indian founders. These veritable cross-border synergies and deeply interwoven economic ties have helped to create an intensely strong bond between between the tech sectors of Silicon Valley and India.

So, what will this corridor of innovation yield next?

Why Deep Tech?

Technology allows humanity to address its most complex problems and often unleash its greatest potential. Today, technologies from many domains are now converging, dramatically enhancing the transformation potential in almost every sector of human activity. This diverse work, focused on complex technological innovation or significant scientific discovery, is the world of deep tech.

Increasing technology convergence, the pervasiveness of cloud computing, and the rising capacity and lowering costs of computing are all driving the expansion of deep tech. Areas including semiconductors, IoT, data processing, cyber security, ag tech, and blockchain, are undergoing rapid advancement.

Artificial intelligence is one of the most significant tech convergences we are witnessing. AI technology’s power to process ever larger (and increasingly unstructured) quantities of data is newly benefitting a broad array of industries and applications. By processing unprecedented volumes of data and yielding insights, AI is contributing to accelerated learning that in turn drives faster and more effective product development, as well as advanced analysis capabilities which can now be integrated into next-generation hardware and software products of countless types.

Similarly, application of the skills and concepts of semiconductor design and computerized systems are crossing over into biology, tissue culture, and molecular modeling, a field that is often called synthetic biology or bioconvergence. Analogous to cloud computing providing accessible infrastructures for software and services development, biofoundries are enabling innovation in synthetic biology.

Within this context of deep tech expansion, India’s digital transformation is also rapidly accelerating. India is the most connected market in the world – its high mobile penetration has catapulted India to the number one market in the world for digital payments, while amassing a digital consumer base of 600 million and counting. The cascading effects of this mobile broadband-first economy are driving the creation of new digital value chains within every major sector, including retail, healthcare, and agriculture.

Deep tech is an important growth opportunity for India, for commercial as well as strategic geopolitical reasons. Capitalizing on this potential calls for a multi-pronged approach, particularly increased public investment in research at the university and pre-commercial phases. China recognized the importance of AI very early on and has invested heavily in research and development along the entire span from algorithms to AI chips. The strength of talent and capital within India’s tech ecosystem can drive similar levels of innovation.

The Way Forward

The advancement of deep tech presents a generational opportunity: development of sophisticated, technology-rooted transformational innovations, propelled by blended teams of Indian and U.S. talent, and addressing markets in both countries.

While India has hitherto been most recognized as a strong global hub for IT, data processing, and apps and services, the tech landscape is now evolving to establish itself as a burgeoning hub for innovative tech R&D as well. Many of the well-established engineering centers and universities in India have served as a fertile training ground for a generation of engineers and product developers who are hungry, talented, and eager to become tech entrepreneurs in their own right. We are seeing this with companies like Arzooo, Connect and Heal, Freshworks, IdeaForge and others.

While market dynamics will likely be uncertain in the coming months, with capital tightening and valuations under pressure, deep tech will remain a fertile area for new investment. Deep tech has been a growing area of investment, growing more than 20 percent annually since 2016, now at nearly $60B per year. It is estimated that investment in deep tech will continue to grow strongly, with some analysts expecting it to quadruple over the next five years, driven by investment from ICT companies, biopharma, other large enterprises, and venture capital.

While deep tech can carry a higher level of technical risk, it also has inherent characteristics which offer resilience from market tremors. It is a space largely focused on solving complex challenges and helping to improve efficiency at a systems level. Within a recessionary environment, this makes deep tech solutions even more attractive to enterprise customers seeking ways to protect or improve their margins and balance sheets. Deep tech also works at the bleeding edge of new technology and methodology convergences, developing novel solutions that often address unmet market needs or create new markets entirely.

As India’s tech R&D space continues to advance, there will be a proliferation of deep tech companies emerging from India in areas such as AI, blockchain, robotics, IoT, quantum computing, and others. Entrepreneurs within the India – US. tech corridor are uniquely well-positioned, leveraging the best from both ecoystems, to address the challenges of building an innovative idea into a successful global enterprise.

This is where the accelerating cross-border synergies will pay rich dividends, helping to spawn the next generation of important global tech enterprises. Indian entrepreneurs will leverage the natural advantages of working with the US to more easily scale, tapping into world-class talent and capital resources, and helping them to build products for global markets. The ease of movement across borders and cultures will help more young companies establish a strong presence in both markets, as we’re already seeing many India-based startups move their c-suites and HQs to a US-based or hybrid model.

Today, we stand at the threshold of a once-in-a-generation growth opportunity in the India – US tech corridor. The ability to collaborate between markets and build successful companies is proven. The cross-border talent pool is rich with skills, experience, and entrepreneurial hunger. The speed and scale of tech innovation is reaching unprecedented levels.

Let us not miss the opportunity to seize this moment.

(Kumar previously served as the Chairman and CEO of KPMG in India, as well as the Assistant Secretary of Commerce for Global Markets and Director General of the US & Foreign Commercial Service (USFCS) in the President Obama Administration.)

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