Whenever there has been a boom in global business, the world has turned to India for its cheap labour. When the wars of the late 19th and early 20th century created a surge in demand for cotton and jute products, India's textile industry came into being. Once again, when the 90s brought the infotech boom-between the 50s and the late 80s, India had isolated itself from the global economy-software companies made a killing.

In the creative and networked economy of the 21st century, cheap and skilled labour will count, but not enough to make the quantum leap that Indian needs to. Sure, as global corporations shrink they will outsource more and more of their low-end work to English-speaking, tech-savvy and cheap labour in India. But should India content itself with being the back office to global economy? I don't think so. Greater value will accrue only when India makes its leap from labour to intellect. We already have tremendous intellectual capabilities. but the challenge now is for India as a whole to build, shape, and market this advantage to the world.

As a first step, we need to recognise the need to differentiate ourselves from the rest of the world. Next, the government and business must create a stable and conducive environment that will reward and retain intellectual capital within India. In addition, we need to examine all industry sectors and identify niches where intellectual prowess could play a differentiating role.

Software is one sector that immediately comes to mind. Indian companies till now competed largely on cost and were merely building computing skill sets. For India to move beyond its 2 per cent share of the world software market, it will have to grow out of this mode and start developing licensable components and products, thereby moving away from a volume-dependent economy to a value-capturing one. Other areas where India could establish its dominance are engineering design and pharmaceuticals.

In the semiconductor space, for instance, India has a particularly lucrative opportunity in developing hardware-based solutions such as configurable chips, which require not just domain knowledge but also conceptual and creative skills. Similarly, the cad/cam and PDM's (Product Data Management) is a growing $10 billion market that India can tap.

The opportunity in pharmaceuticals can be best illustrated by the success of Dr Reddy's Laboratories (DRL). In less than two decades, the company has transformed itself from a small bulk-drug manufacturer to a fully integrated, original drug research company. By capitalising India's intellectual capital in pharma, DRL has significantly added to its shareholder wealth.

With a listing on the New York Stock Exchange, Dr Reddy's Laboratories has also measured up to global benchmarks of performance and valuation. It has been able to convert its intellectual property in terms of new drugs/novel delivery mechanisms into commercial value.

For India to build and sustain such an advantage, there has to be a proactive and collaborative effort from all stakeholders, viz., the government, the capital providers and the entrepreneurs. In the past, the government encourage enterpreneurial talent via fiscal incentives. It must now create the frameworks required to boost investments in knowledge sectors. One such framework must be for patent protection. That apart, the government should act as a link between Indian businesses and the rest of the world.

Equally importantly, the government should devise powerful incentives for capital providers and entrepreneurs alike for taking disproportionate risks. Capital providers, on their part, should take and encourage others to take more risks and channelise new funds to more value-added businesses. Entrepreneurs have to live up to their commitment of building world-class organisations.

For decades, India has been a repository of intellectual as well as physical resources, capable of generating value. It is time that we transformed ourselves to extract and capture value from these resources, instead of delivering resources that generate value for someone else.