Innovation stands as the cornerstone for attracting investments and creating high-quality jobs. Increased R&D spend can spur productivity and efficiency, boosting economic growth ultimately.

India more than doubled its R&D spend to ₹1,27,000 crore in 2021 from ₹60,000 crore in 2011, but as a percentage of GDP it has come down to 0.64 from 0.76 during the period. Clearly, R&D spend has not grown commensurately with GDP growth. Going by 2021 DST data, the R&D spend is driven mainly by the Central Government, at 43.7 per cent, followed by the private sector, at 36.4 per cent. In countries like Japan, the US and Korea, the R&D spend by businesses is around 70 per cent, and in most emerging countries it is more than 50 per cent. Obviously, the private sector in India needs to increase its share quickly.

If we look at the R&D spend by higher education institutions as a percentage of total country R&D spend, India’s spend is far lower than that of Australia (36 per cent), the UK (24 per cent), Canada (39 per cent) and the US (11 per cent). So, the spend by educational institutions also need to go up substantially to harness the key learnings in these institutions. One good example is development of India Stack for 5G technology, and the Maglev train design being done at IIT Madras. These efforts can help develop the technology within the country rather than rely on foreign firms.

Research publications

Coming to research publications, India contributed to nearly 6 per cent of all such publications in 2023 (3 per cent in 2016); China’s contribution was 22 per cent in 2023 (up from 10 per cent in 2016), followed by the EU (14 per cent) and the US (11 per cent).

As for manufacturing sector R&D spend, drugs and pharmaceuticals leads by some distance at 33.6 per cent, followed by textiles (13.7 per cent), defence (7.3 per cent), and biotechnology (4 per cent). In the services sector, the IT sector accounts for only 10 per cent of the total R&D spend and transportation (7.7 per cent). The DRDO accounts for about 30 per cent of the Centre’s R&D spend, followed by space, at about 18 per cent.

The government created a ₹50,000-crore fund in 2021 for the National Research Foundation (NRF) under the office of Principal Scientific Advisor. NRF is intended to catalyse and channelise interdisciplinary research. While the initiative is laudatory, the fund should be considered only as seed money. The NRF definitely needs more funds with clear goals and outcomes. The augmentation effort will need private sector participation. Augmentation can also happen via public funds lying unutilised in different schemes. For example, the Universal Service Obligation Fund has around ₹77,000 crore. Only 5 per cent, that is ₹3,850 crore, of that is to be spent on telecom R&D via the Telecom Technology Development Fund scheme. The USOF has now been rechristened Digital Bharat Nidhi, with the intent to support R&D in telecom services, and related technologies and products.

The reliance on government funding, coupled with a comparatively low contribution from the private sector and educational institutions, underscores the need for a more balanced and robust approach to R&D investment. R&D tax debits for private sector should of course be with adequate guardrails and adequate cost-benefit analysis. All efforts must be with the objective of fostering innovation and achieving atmanirbharta in key technological domains.

Kumar is Partner, and Chopra is Manager, Deloitte India