Global Innovation Index 2021

  • The 14th edition of Global Innovation Index was released on 20th September 2021.
  • The Index is released annually by the World Intellectual Property Organization (WIPO).
  • The Global Innovation Index 2021 captures the innovation ecosystem performance of 132 economies and tracks the most recent global innovation trends.

Source: World Intellectual Property Organisation

Overall Findings

  • The GII 2021 finds that the innovative sectors of the global economy have remained strong, despite severe disruptions.
  • The GII 2021 finds that governments and enterprises in many parts of the world have scaled up their investments in innovation during the COVID-19 pandemic. Meantime, scientific output, expenditures in research and development, intellectual property filings and venture capital deals continued to grow in 2020, building on strong peak pre-crisis performance.

Global Ranking

  • Switzerland topped the table, followed by Sweden, the US and the UK. Angola was at the bottom of the table.
  • Among Asian economies, South Korea jumped to the fifth position, up from 10 last year. China was in the 12th position.

India on the Index

  • India has climbed 2 spots and has been ranked 46th in the Global Innovation Index 2021.
  • India has been on a rising trajectory, over the past several years in the Global Innovation Index (GII), from a rank of 81 in 2015 to 46 in 2021.
  • In Central and Southern Asia, India leads in 46th position, followed by the Islamic Republic of Iran (60th) and Kazakhstan (79th)respectively

Reasons for India’s Improvement in Ranking

  • The consistent improvement in the GII ranking is owing to the immense knowledge capital, the vibrant start-up ecosystem, and the work done by the public and the private research organizations.
  • The Scientific Departments like the Department of Atomic Energy; the Department of Science and Technology; the Department of Biotechnology and the Department of Space have played a pivotal role in enriching the National Innovation Ecosystem.

Note: This year, the NITI Aayog, in partnership with the CII and the World Intellectual Property Organisation (WIPO), is hosting, virtually, the India Launch of the GII and the Global Innovation Conclave during September 21-22, 2021.

Yield Curve

Why is it in News?

Yield curve in the US has inverted for the first time since mid 2007- a shift that has in past signaled recession.

What is the Yield Curve?

  • Yield curve is a plot between rate of interest earned on the bonds on Y axis and maturity period on the X axis.
  • Under normal circumstances there is proportional relationship between interest rate on bonds and its maturity period i.e. short term bonds have low interest rate while long term bonds have high interest rate

Breaking this Concept further:

  • Say at this instant health of the economy is sound, so the Government of the day will not pay high interest rate on the bonds which it issues for short term, but no one knows what will happen to the economy in long terms (say 50 years later), so it is generally seen that the interest rate is higher on long term bonds and lower on the short term bonds.

Graphical Representation of a Yield Curve:

Normal Yield CurveInverted Yield Curve

Under a normal yield curve, it is apparent that when the maturity period is less, interest rate is less. When the maturity period is long, the interest rate is more on the bond but it is reversed in the case of an inverted yield curve.

What happened in the US?

  • Government securities of US for 3 months maturity is paying the interest rate of 2.46%, while for 10years it is paying the interest rate of 2.44%, which is opposite to the normal trend (ideally it shall be more for long duration bonds).
  • Hence, it is evident that a yield curve is inverted in the case of US and inverted yield curve points to recession in the future.

Laffer Curve

  • This curve explains correlation between tax rate and tax revenues.
  • It states that if tax rates are very high, reducing them up to a point optimizes tax revenues as it will lead to lesser evasion and better compliance.

Some Deductions from Curve:

1. If we are to the right of T*, if tax rate decreases, tax revenue will increase.

2. If we are to the left of T*, if tax rate decreases, tax revenue will decrease.