Despite recent productivity gains, India still lags behind in terms of output, with a low agriculture productivity indicating the need for further rural innovations, the report said.
The report also highlighted several challenges, including labour laws, lower rate of urbanisation considering the years of schooling, and technical and vocational enrolment of students in secondary school.
It stressed on the need to have larger productivity gains in the agricultural sector.
Overall, India's solid pool of skilled, English-speaking graduates would aid in expansion of the country's services sector, said the report.
ADB also highlighted "considerable barriers to doing business and high tariffs impeding trade" in India in another study on knowledge-based economy.
"The limited trade diversification in terms of both a narrow export basket and geographic trade partners has constrained progress in international markets," said ADB in the study "Innovative Asia: Advancing the Knowledge-based Economy".
India has built pockets of knowledge-based growth, but have not yet translated this into a broader economic model, said the report.
Meanwhile, the CPI ranked Japan and South Korea most efficient Asia Pacific countries at turning creative inputs into tangible innovations.
Myanmar, Pakistan and Cambodia were rated as the least efficient innovators.
"As countries seek to innovate to avoid middle-income traps, all governments, especially those with limited resources, need to be sure that their investments boost both efficiency and productivity, benefiting their economies and people, and move to a knowledge-based economy," said Bindu N Lohani, vice president for Knowledge Management and Sustainable Development at ADB.

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