All talk of raising the GDP growth rate in India will be so much hot air if the level of research and development (R&D) in terms of quality of performance and investment do not measure up to the exacting demands of knowledge economy. The percentage of 10-12 being talked about is itself totally inadequate in view of certain factors casting their ominous shadows.

There is, first, the burgeoning population which is feared to touch 120 billion or more in the next decade, if the present state of seeming official indifference to its adverse implications continues. It is going to throw into utter disarray all priorities and predictions relating to provision of basic amenities and daily necessities, leave alone availability and affordability of goods and services to meet the clamour of a free-spending consumerist society.

Second, the demand for natural resources is going to lead to an unsustainable exploitation of more and more of less and less, with the distinct prospect of rapid depletion by the end of century staring India in the face.

Next, the higher the growth rate, the greater the strain it imposes on processes of production, maintenance of supply chains, marketing and after-sales services, transport and real estate. The offshoots may ricochet on the primary sector of agriculture and food and nutrition security.

FRIGHTENING DIMENSIONS

Most importantly, economic growth is impossible to conceive without energy. It is best here to bear in mind certain axioms that inescapably apply to energy management: All estimates of demand invariably prove to be underestimates, and all estimates of supply based on assumptions of increase in installed capacity turn out to be overestimates.

If India is to keep pace with, if not be abreast of, the scenario, in all its frightening dimensions, it should put in the best efforts it can in the field of R&D, as that is the only sure way of maximising its potential for creativity and innovation.

In the light of the relentless competition that it is bound to encounter from technologically-advanced countries, its so-called comparative advantages will come to nothing, and it will soon fall by the wayside, unless it enters the domain of high-end technology, instead of merely being content with imitative or extrapolative pursuits. There is even a danger that the hopes built round its putative status as an economic power will come crashing.

All economic players, including the Government, therefore, need to take note of some interesting trends and warning signs already brought out in studies by reputed consultancy firms such as Deloitte and McKinsey.

For instance, out of a total global R&D spend of $1143 billion, the percentage claimed by the US is 33.6, Europe 24.5, and Japan and China 12.6 each, while India’s share is a meagre 2.1.

In India, Government sources pick up 75-80 per cent of the R&D expenditure, and only 20-25 per cent spent by private sector and a mere three per cent by universities. Whereas the break-up of percentages for OECD countries is 69 by private enterprises, 18 by universities, 10 by government agencies and three by non-profit bodies. FDI in India’s R&D was only $0.5 billion in each of 2010 and 2011.

As a share of GDP also, India figures at the bottom with 0.9 per cent, which is proposed to be raised to an unmentionable 1.2 per cent by 2012, as against at least four per cent if a growth of 10-12 per cent is to be achieved.

AT THE BOTTOM

This is despite India having gone all out, as the Deloitte report points out, to make the tax regime attractive for R&D outlays in the form of super deductions for expenditure incurred and allocations made, Customs duty waivers and various State government incentives.

The rates of super deductions go up to 200 per cent in India, being comparable with those across the globe and on par with countries such as Singapore, Malaysia and Hungary.

The avenues for innovation are vast, possibilities virtually endless and the areas waiting for development practically untouched. To cite a few: Energy, consumer electronics, pharmaceuticals, food processing, post-harvest technologies, bio-technology, pharmaceuticals, automotive parts and assembly, information technology, software and

IT-enabled services, transportation, you name it.

It is time the Government set up a high-powered Commission to recommend measures to accelerate R&D in India to touch the required level by 2020.

(This article was published on November 18, 2012)
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