Addressing India's R&D Investment Challenges

India’s Research and Development (R&D) Investment: Challenges and the Way Forward

Research and Development (R&D) is the backbone of innovation, economic growth, and technological self-reliance. However, India’s Gross Expenditure on R&D (GERD) as a share of GDP has stagnated around 0.7% for nearly three decades — far below the OECD average (2.7%), South Korea (4.9%), Japan (3.4%), and China (2.8%). This persistent underinvestment poses a challenge to India’s goal of achieving Atmanirbhar Bharat and global scientific competitiveness.

Current Scenario

• Public dominance: Around 58–60% of India’s GERD comes from government sectors such as defence, space, and atomic energy.
• University sector: Despite having over 1,100 universities and 48,000 colleges, higher education contributes only 7% of GERD, even though it produces over half of India’s scientific papers.
• Private sector: Public companies contribute just 4%, and large private firms invest minimally — Infosys (~1%), Wipro (0.65%), L&T (0.13%), Vedanta (0.02%), and Reliance (0.6%) of turnover.
• Global comparison: In advanced economies, private sector investment in R&D ranges between 1.5–3% of GDP, whereas in India, it remains below 0.3%.

Government Efforts

Successive governments have aimed to raise R&D spending to 2% of GDP, aligning research priorities with the goal of technological sovereignty. Major initiatives include:

• National Missions in critical sectors — Artificial Intelligence, Green Hydrogen, Semiconductors, Electric Mobility, Quantum Computing, Biopharma, and Ocean Research.
• Anusandhan National Research Foundation (NRF): Designed to expand private participation, with 70% of its ₹1.4 lakh crore budget expected from private investors.
• Research and Development Innovation Scheme and Vigyan Bhara for capacity building and innovation promotion.
• Integration with PLI Schemes: Linking R&D to Production-Linked Incentive programmes and structural reforms aligned with Atmanirbhar S&T policies.

Challenges in R&D Investment

• Low private sector participation: Only 2% of listed Indian firms qualify as R&D-intensive, much lower than global peers.
• Limited academic research funding: Universities contribute significantly to research output but receive minimal funding support.
• Over-concentration in strategic sectors: About 60% of public R&D spending is directed toward defence, space, and atomic energy, leaving limited funding for civilian innovation.
• Weak innovation culture: Poor collaboration between academia, industry, and government reduces innovation transfer and commercialization.
• Policy gaps: Lack of effective verification and monitoring for tax incentives claimed under in-house R&D.
• Limited coordination: Institutions such as CSIR have insufficient engagement with regional MSMEs for technology diffusion.
• Dependence on public funding: Several new missions depend on private sector participation, which may not materialize as planned.

Way Forward

• Strengthen private sector role: Introduce fiscal incentives, competitive grants, and recognition mechanisms for industrial R&D.
• Expand university-industry collaboration: Increase research grants to universities and develop innovation clusters linked to local industries.
• Reform CSIR and create regional hubs: Establish regional R&D centres to work closely with MSMEs and support technology diffusion.
• Institutionalise accountability: Strengthen monitoring of R&D tax incentives and measure outcomes through periodic audits.
• Adopt global best practices: Emulate South Korea’s innovation ecosystem that integrates academia, industry, and government partnerships.
• Enhance public spending: Gradually raise government R&D expenditure to 1.5–2% of GDP within the next three years to crowd-in private investment.
• Encourage frontier research: Promote national missions in AI, quantum computing, semiconductors, and biopharma with defined milestones and deliverables.

Conclusion

India’s aspiration to become a global innovation hub and achieve strategic autonomy depends on transforming its R&D ecosystem. While public investment provides a strong base, the future lies in private sector engagement, academic collaboration, and policy accountability. Raising R&D expenditure to 2% of GDP and ensuring a balanced public-private contribution will not only enhance economic resilience but also secure India’s technological future in a rapidly evolving global landscape.

Question for Practice

Q: Why is India’s investment in Research and Development (R&D) low? Suggest measures to boost private sector participation and strengthen the R&D ecosystem.