India Innovation Index 2020: How is it calculated? Know NITI Aayog's methodology to rank States/UTs

India Innovation Index 2020 was recently released by the NITI Aayog, depicting innovative capabilities of States & UTs. Know here how is the India Innovation Index calculated and  methodology used to rank States/UTs.

Created On: Jan 22, 2021 19:27 ISTModified On: Jan 22, 2021 19:30 IST
India Innovation Index 2020

NITI Aayog & Institute for Competitiveness jointly released the India Innovation Index 2020 on January 20, 2021. This year, Karnataka continued to maintain its top position on the index among the Major States; Himachal Pradesh occupied the top spot among NE/Hilly states and Delhi topped among the Union Territories. This is the second edition of the index. The first-ever India Innovation Index was introduced by NITI Aayog in 2019.

The India Innovation Index depicts the innovative capabilities of India at the sub-national level. It assesses the innovation landscape of the states and Union Territories (UTs) and fosters competitive federalism among them. The 2019 edition of the Index was a first-of-its-kind metric based on which states' innovation capabilities were assessed.

In 2020, the world witnessed a tectonic shift with the outbreak of COVID-19 pandemic that triggered lockdown and economic shutdown. This second edition of the Index builds on the previous methodology of ranking states by introducing additional metrics for more comprehensive outlook of the Indian Economy such as the percentage of GDP incurred on research and development.

Know key findings and rankings of India Innovation Index 2020

Here in this article, we have shared below the methodology used by NITI Aayog to calculate the index. Let's first have a look at the objectives of the framing the index:

Objectives of India Innovation Index

The India Innovation Index is prepared to fulfill these major objectives:

- Rank the States and UTs on the basis of their index score

- Empower States and UTs to improve their innovation policies & capabilities with emphasis over their strengths and weaknesses.

- Identify the opportunities as well as challenges

How is the India Innovation Index calculated?

The India Innovation Index ranks the states and UTs on the basis of ‘Enablers’ and ‘Performance Pillars’. The innovation inputs are measured through enablers and innovation output are measured as Performance Pillars. Enablers are the factors highlighting the innovative capacities including policies, infrastructure, markets and capital and these indicators measure the extent to which a state or UT has build a favourable environment for innovation. On the other hand, Performance Pillars record the outcome of these Enablers or inputs in terms of wealth generation, knowledge creation and  competitiveness. Have a look at these Enablers and Performance pillars:

Enablers

Performance Pillars

Human Capital

Investment

Knowledge Workers

Business Environment

Safety and Legal Environment

Knowledge Output

Knowledge Diffusion

So, the India Innovation Index relies on these two dimensions and within each dimension, there are several indicators. Have a look:

Indicators

Steps of Index Calculation

The calculation of India Innovation Index involves a five-step process:

Step 1: Indicator selection and data collection

Step 2: Dealing with missing values

Step 3: Data transformation

Step 4: Data transformation

Step 5: Dealing with missing values

Indicators under Enablers & Performance Pillars

 Enablers

Performance

Methodology for calculating India Innovation Index

Evaluating the fit: The methodology for calculating the India Innovation Index involves evaluating the fit among the individual indicators through the calculation of Cronbach’s alpha for each pillar. Alpha provides a measure of internal consistency of a test and is presented as a number between 0 and 1. Alpha was developed in 1951 by Lee Cronbach. Have a look at the Alpha value of individual indicators:

Alpha Values

Aggregation: The Principal Component Analysis (PCA) is used for calculating the weights of these indicators within a pillar. The Pillar value is calculated through this formula:

Pillars = ∑ (wi * indicator)

The pillar score is determined in the values of 0 to 100 scale. This is done by using the best and worst-case scenario:

(Xj-Worst Case) / (Best Case-Worst Case)

Xj is the raw pillar value.

Dimension Scores: The score of each dimension is considered as a simple average of its pillars:

Dimensiond = 1/i ∑ Pillarc   (I=5 or 2)

Index Scores: Dimensions 'Enablers' and 'Performance' reflect equally importance of all the aspects of innovation. So, for calculating the index scores, equal weightage has been given to each dimension to highlight their roles:

India Innovation Index = 1/2 ∑ Dimensiond

Goodness of fit: Post the calculation of every pillar and index scores, the goodness of fit is evaluated. It is done using the Kaiser-Meyer-Olkin (KMO) measure. Have a look at the KMO values:

KMO Values

Relative Performance of States

The Index assesses the strengths and weaknesses of states on a relative performance basis. It uses scorecards to portray the relative performance. Red-coloured scorecard depicts performance below the peer group mean; yellow depicts consistent performance with the peer group and green indicates relative strength.

For detailed method of calculation, visit:

India Innovation Index: PDF Download

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