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India’s R&D Estimates Are An Incomplete Picture


As per the latest Research and Development Statistics, published by the Department of Science and Technology (DST) in 2020, the R&D spending in 2017-18 by foreign MNCs in India is only 10% of what U.S. firms have reported to have spent in India on R&D.


GS II- Polity and Governance

GS III: Indian Economy and issues relating to Planning, Mobilization of Resources; Government Budgeting; Science and Technology- Developments and their Applications and Effects in Everyday Life

Dimensions of the Article:

  1. India’s R&D Expenditure
  2. India’s GERD data are an underestimate
  3. Challenges in the current system
  4. Factors that make the official R&D estimates grossly inadequate
  5. Figures: R&D funding in India
  6. Way Forward

India’s R&D Expenditure:

  • India’s research and development (R&D) expenditure GDP ratio of 0.7%, which is very low compared to major economies.
  • It is found to be much lower than the world average that stands at 1.8%.
  • Low investment by the corporate sector in R&D is one of the main reason.
  • In leading economies, the corporate sector accounts for about two-thirds of gross domestic expenditure on R&D (GERD), its share in India is just 37%.

India’s GERD data are an underestimate:

  • As per the data published in 2022 by the National Science Foundation (NSF) of the United States on Foreign R&D by U.S. based multinational corporations (MNCs) shows a spend of ₹649.7 billion on R&D in India in 2018, which increased to ₹690.2 billion in the following year.
  • However, the latest report published by the Department of Science and Technology (DST) in 2020, has provided an estimate of ₹60.9 billion R&D spending in 201718 by foreign MNCs.
  • This is only about 10% of what U.S. firms have reported to have spent in India on R&D.

Challenges in the current system:

  1. The National Science and Technology Management Information System (NSTMIS) of the DST is the agency that compiles GERD statistics in India.
  2. Collection of data from government sector, the higher education sector and public sector enterprises is easier.
  3. However, the challenge lies in collecting data from the private corporate sector.

Factors that make the official R&D estimates grossly inadequate:

  1. Method used for identification of R&D performing firms:
    • The NSTIMS relies on the Department of Scientific and Industrial Research (DSIR) list of recognised R&D units and the Prowess database of the Centre For Monitoring Indian Economy Pvt. Ltd. for this purpose.
    • This does not cover all the R&D performing firms.
    • The DSIR not have many of the actual R&D performers for two reasons: firms which consider government incentives as not attractive enough or that are sensitive about sharing critical information with the DSIR may not be inclined to register themselves with the DSIR.
    • Second, it may be difficult for R&D firms in services such as software and R&D services to meet the requirement of having separate infrastructure for R&D to distinguish it from their usual business.
    • In fact, many of the R&D performing enterprises in new technology areas may come under the services category.
    • As per the recent study that looked at 298 firms receiving foreign investment for R&D purposes, found that only 11% had been registered with DSIR. The Prowess database, on the other hand, covers only 3.5% of the currently active registered enterprises in India.
    • A quick search in both the DSIR directory of recognised R&D units (2021) and Prowess shows that some of the leading Indian enterprises in new technology areas and foreign R&D centres are not covered.
  2. NSTMIS Survey-the key source of R&D statistics of India.:
    • The data is collected from secondary sources such as annual reports and Prowess for the firms that do not respond to the survey. This method will work only if firms disclose their R&D spending.
    • Few firms may not feel the compulsion of disclosing accurate data to the Indian regulatory authorities as they do have patents granted in India

Figures: R&D funding in India

  • This year’s budget for the Ministry of Science and Technology is 16,361 crore, a 15% increase over the previous projection.
  • The Department of Science and Technology (DST), which received $7,931.05 crore, received the majority of the increase.
  • The Department of Biotechnology received 2,683.86 crore, while the Department of Scientific and Industrial Research received 5,746.51 crore (DSIR).
  • Significantly higher raises than in previous years were given to the National Research Foundation and the Deep Ocean mission, indicating that they are the Center’s current priorities.

Way Forward:

  • As an immediate measure, the NSTMIS should use the patents granted data, both in India and the U.S., in addition to its current method to identify R&D performing enterprises.
  • In the long term, the strategy of surveys conducted should not be confined to the responses to the surveys. Instead, annual R&D estimates can be prepared from mandatory disclosures that the enterprises are required to make to the MCA.
  • As a step to ensure compliance and proper reporting, technologies can be used like in the case of revamped income-tax return forms where various sections are interlinked.
  • Additionally, proper disclosure of information to regulatory agencies, including R&D spending data, should be made an essential component of the environmental, social and governance (ESG) ranking of enterprises.

-Source: The Hindu

May 2024