As an emerging economy, it is therefore crucial for India to prioritize increased investment in R&D while simultaneously establishing a sustainable funding framework
Research and Development (R&D) constitutes an integral component in a country’s economic growth, allowing businesses to innovate and drive competitiveness across different sectors. A strong R&D landscape allows countries to nurture the growth of domestic players while also playing a crucial role in providing them with a competitive edge over their international counterparts. Countries can assert their presence and excel in critical areas such as information technology, healthcare, energy, agriculture, defence capability, and more.
Over the years, India has recognised the need for a strong R&D ecosystem and has consequently made substantial efforts to foster it further. From 2007-08 to 2017-18, India’s investment in the R&D sector almost tripled from ₹39,437.77 crore to ₹1,13,825.03 crore. The increased focus on R&D in turn led to better ROI in terms of driving new technological processes, addressing societal challenges, increasing global collaboration in academia, and creating employment. For example, the Indian government’s Startup India Initiative along with the corresponding schemes, including Fund of Funds for Startups (FFS), and the Startup India Seed Fund Scheme, have helped in facilitating a supportive ecosystem for the growth of the startups. The significant public investment in terms of funding and regulatory support has contributed to India’s emergence as a startup hub in the global ecosystem. A startup has a much higher success rate in India than in any other country.
Despite India’s impressive accomplishments in the startup ecosystem, there is still a lot of space for growth and improvement in R&D expenditure, particularly compared to its international competitors. Gross domestic expenditure on R&D (GERD) can serve as a reliable indicator to gauge a country’s investment in R&D relative to its GDP. According to the most recent estimates available from 2018, India’s GERD as a percentage of GDP stood at 0.65%. However, this figure falls significantly behind other countries such as Brazil (1.16%), China (2.14%), the USA (2.83%), Germany (3.13%), and Japan (3.28%).
Although, in the past, India has introduced ambitious initiatives to improve its R&D expenditure, the impact of these initiatives has often been limited. One such initiative is the proposal to establish the National Research Foundation (NRF). NRF, inspired by the US National Science Foundation, seeks to resolve one of the biggest constraints facing the scientific community in terms of funding for their research. The NRF seeks to provide a platform for seeding, nurturing, and advancing R&D activities. During the span of five years, from 2023-24 to 2027-28, a total of Rs 50 billion will be allocated under NRF, wherein the Government of India will contribute to the amount of Rs 14,000 billion.
Though ambitious, the NRF may face obstacles due to a limited fund corpus. The proposed amount of funding might potentially impose constraints on financial resources, thereby impeding the NRF’s capacity to effectively support and foster research activities on a large scale. Insufficient funding can result in a lack of resources, restricted research opportunities, and challenges in attracting and retaining top talent.
Another example of a well-intended policy step that can help the growth of India’s research capacities is the One Nation One Subscription (ONOS) introduced under the Draft Science, Technology and Innovation Policy (STIP), 2020. Under ONOS, the government will centrally negotiate with publishers on subscriptions to make high-quality research publications available across government higher education and research institutions. This initiative should be applauded for its vision, as it recognises that information resources are a critical part of the national research infrastructure, and that access should be widened. The move has the potential to make the research landscape in India more inclusive, leading to dividends for the Indian economy and the scientific community. However, widening information access to the extent envisaged is likely to require substantial additional financial investment by the government.
Progressive policies pertaining to research and development that are constrained by financial limitations can have significant implications for R&D activities within a country. Such challenges can impede innovation, deter investments, and hinder the overall progress of R&D initiatives. While sharing the financial burden with the concerned private players may be considered, the excessive burden on them can result in delays in implementation, increased costs of compliance, and reduced incentives for businesses thus discouraging them from pursuing innovative projects. As an emerging economy, it is therefore crucial for India to prioritize increased investment in R&D while simultaneously establishing a sustainable funding framework.
Authors: Kazim Rizvi, Founding Director and Bhoomika Agarwal, Research Associate, The Dialogue
