Daniel Slotta
Research expert covering Greater China
Research and development (R&D) in India
From pioneering vaccines for new diseases, the race to the moon, finding solutions for digitalization, or transitioning to zero emissions, the global research and development (R&D) sector seeks answers to the biggest questions faced by humanity. Amidst the big spending race on R&D globally, the world’s fifth largest economy, India’s, R&D expenditure is less than one percent of its GDP compared to the world average. However, the country does well in the middle-income economy bracket. India has steadily climbed the Global Innovation Index (GII) from 81st in 2015 to 40th in 2023. As an increasing number of multinational companies (MNCs) set up their R&D centers in India, the question arises: why is there a lack of funding for the sector?
But what about the R&D funding in the corporate sector? The private sector accounted for merely 36 percent of gross expenditure on R&D (GERD) in India. As per policy research, regulatory ambiguity or the lack of a strict patent system protecting innovation discourages firms from investing in R&D.
Home to prestigious institutions like IITs (Indian Institute of Technology), the country struggles to retain talent faced with high emigration. India registers a higher number of foreign patent applications than domestic ones. Expert analysis suggests that countries with higher spending on R&D have a low share of foreign patents. Collaboration between academia and industry in India is also limited. Experts consider public-private partnerships key to bridging the gap between research and commercialization.
India is one of the top exporters of IT products. Once renowned for being an outsourcing country, Indian cities such as Bengaluru and Hyderabad are turning into veritable tech centers. Many multinationals are setting up what is known as Global Capability Centres (GCCs)- a term for in-house tech arms of MNCs specific to India- with an increasing focus on R&D. This leads to increased local value addition.
With the growing relevance of software in industries from automotive and medical devices, to aviation and semiconductors, India has the potential to become the R&D capital of the world in the coming decades. A lucrative tech talent pool and a low demand-supply gap are expected to play a key role in achieving that goal. R&D, especially in an emerging economy like India, has the potential to not only optimize businesses but impact large sections of society.
Roadblocks for R&D: Investment and other challenges
R&D expenditure in India is mostly spurred on by the public sector, contrary to the trend in global R&D leaders such as the U.S. Germany and South Korea. India’s Union Budget for the financial year 2024 allocated one trillion Indian rupees for research and innovation in emerging fields. Loan guarantee programs hope to lower financial risks linked to high-cost innovation projects.But what about the R&D funding in the corporate sector? The private sector accounted for merely 36 percent of gross expenditure on R&D (GERD) in India. As per policy research, regulatory ambiguity or the lack of a strict patent system protecting innovation discourages firms from investing in R&D.
Home to prestigious institutions like IITs (Indian Institute of Technology), the country struggles to retain talent faced with high emigration. India registers a higher number of foreign patent applications than domestic ones. Expert analysis suggests that countries with higher spending on R&D have a low share of foreign patents. Collaboration between academia and industry in India is also limited. Experts consider public-private partnerships key to bridging the gap between research and commercialization.
Outsourcing to developing: Driving India’s R&D growth
Despite challenges, India is one of the world’s leading pharmaceutical industries by volume, and the country is expected to grow the fastest in the sector until 2030. The pharmaceuticals industry performs best within India across metrics such as R&D intensity, the proportion of PhD employees, and patents filed. Following closely, software is the sector that fares well across R&D metrics and is expected to drive R&D growth.India is one of the top exporters of IT products. Once renowned for being an outsourcing country, Indian cities such as Bengaluru and Hyderabad are turning into veritable tech centers. Many multinationals are setting up what is known as Global Capability Centres (GCCs)- a term for in-house tech arms of MNCs specific to India- with an increasing focus on R&D. This leads to increased local value addition.
With the growing relevance of software in industries from automotive and medical devices, to aviation and semiconductors, India has the potential to become the R&D capital of the world in the coming decades. A lucrative tech talent pool and a low demand-supply gap are expected to play a key role in achieving that goal. R&D, especially in an emerging economy like India, has the potential to not only optimize businesses but impact large sections of society.
