India: Impact Of Patent Law On Economic Growth Of India: An Analysis

Last Updated: 18 July 2019
Article by Mohammad Suleman Palwala


Protection of intellectual property is playing a very important role in India. In the past two or three decades, a number of changes have been made to IP policy and regulation in India to increase the protection of intellectual property i.e. patent, trademark, copyright, design and geographical indication. India signed the TRIPS agreement in the year 1994 which came into effect from 1st January, 1995. In India, pharmaceutical patents were not granted prior to 1995, which changed after the TRIPS agreement came into effect and brought about the amendment of 1995 in the Patent Act, 1970. Section-5 of the Patent Act, 1970 which stated that patent is granted only for methods or processes and not for products was repealed after the amendment of 2005 and hence, today, patent is not only granted for methods or processes but also for pharmaceutical products which has had a very huge impact on the growth of the economy. A patent is one of the most effective of the intellectual properties for achieving economic development. The number of Indian patent applications filed in recent days has increased as compared to previous years and as a result, have led to the growth in economy. At present the well-established multinational companies in India has clearly proven the effect of intellectual property for the growth of economy in the world.

Earlier Patent Law:

Earlier multinational companies were not interested in taking up research and development as process in India due to a lot of problems, mainly relating to the implementation of IP laws and the risk of infringement at a preliminary stage. The first Patent Law of India came into being in 1856 which was subsequently repealed by the Act of 1857 and the same was enacted without the approval of the British Crown. Fresh legislation for patent law as Act XV of 1859 was introduced by the British Crown in 1859 which was based on the United Kingdom Act of 1852. In 1911 "The Indian Patents and Designs Act" came which replaced all the previous Acts and the Act brought patent administration under the management of Controller of Patents for the first time.After the Independence new patent law was made i.e. Patent Act, 1970 which came into force in 1972 because it was felt that the previous Act i.e. The Indian Patent and Designs Act, 1911 was not fulfilling its objective.

Patent Law after TRIPS Agreement:

In 1994 India signed the TRIPS agreement and hence Patent Laws of India were further amended according to the TRIPS agreement. Earlier patent was granted only for method or process in India which was amended in compliance with the TRIPS agreement in the year 2005. After that patents are not just granted for method or process but also for products. Advantage of this amendment is taken by various companies and individuals.The number of Indian patent applications has increased after this amendment. Recently, various national and multinational companies started their research and development process and investing in India as the implementation of IP laws in India are better, as compared to earlier patent system in India and various provisions relating to infringement of patent law is defined in Patent Act, 1970.










No. of patent application filed in India









A survey was conducted on the filing of patent application in India from the year 1999 to 2017. The survey clearly shows a rise in the number of patent application from year to year after the signing of the TRIPS agreement by India and also shows a very high rise in the number of patent application after the years 2004-2005 as section-5 of patent act, 1970 was repealed in the year 2005.

Impact of Patent on Economic Growth of India:

The Patent system in India indirectly affects the economic growth of India. Now that India has proper laws in place for the protection of intellectual property and their implementation is good enough to place trust on the same, a number of multinational companies have started their research and development process in India which has indirectly increased the economic growth of the country with theincrease in payment of taxes and providing employment to the people of India. Ranbaxy is a multinational company founded in 1961 wherein 1,700 people were employed in 2005 and in the year 2012,the number of employees increased to 10,983. It is observed that the high rise in the number of employees indirectly increases the economic development of India. Dr. Reddy is another Indian multinational company founded in 1984 and 7,525 people were employed in 2006 and in the year of 2018, the number of employees increased to 23,524 as it can be clearly seen that more than 200% growth in the number of employees in a company was made possible in 12 years which resulted in increase in the economic growth of the country. The total revenue generated by intellectual property offices of India was Rs. 608.31 crore in the year 2016-17 while total expenditure was only Rs. 129.8 crore. Total revenue generated by patent office was Rs. 410.03 crore and the remaining were generated by other intellectual property like Trademark, Geographical Indication, Design and Copyright.

Pharmaceutical companies of India are the third largest in the world owing to the production of generic drugs at very cheap rates and exporting these drug to many countries like Africa, Latin America and other Asian countries because the cost of production in India is very low as compared to USA and Europe. According to the report of WIPO (World Intellectual Property Organization) pharmaceutical patent application is the second largest subject matter in India and this was jumped after the year 2005 when India enacted the law that allowed product patents. Pharmaceutical industry of India has grown from 6 billion US Dollar in 2005 to 30 billion US dollar in 2015 and it is expected to go up to 55 billion US Dollar by 2020.


Indian Patent Law was amended in compliance with the TRIPS agreement after India became a signatory to the TRIPS agreement. As a result, many Multinational Companies started investing in India. MNCs also started their Research & Development process in India which has indirectly increased the economic growth of India and has provided employment to the people of India. At present India needs to invite more Multinational Companies for investing and starting their Research & Development process in India. This way, the economy of India will increase. Pharmaceutical Industry of India has grown from 6 billion US Dollar to 30 billion US dollaroverlast ten years, this is because many Pharmaceutical Multinational Companies have invested and started their research and development process in India after the year 2005.





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