Recently, the Government of India presented the Interim Budget in the Parliament for the year 2024-25.
GS Paper-3: 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:
- Budget: Allocation of funds for R&D
- Present state of India’s R&D expenditure
- Concerns with the Research & Development in India
- Private investment in R&D
- Way forward
Budget: Allocation of funds for R&D:
- In 2024 Interim Budget, the government underscored its focus on fostering entrepreneurship and innovation.
- The Finance Minister announced the establishment of a ~1 trillion corpus to incentivise innovation and research in sunrise sectors.
- It aims to provide financing and refinancing for long tenures with low or zero interest rates.
- This will in turn enable the private sector to scale up research and innovation, especially the startups.
Present state of India’s R&D expenditure:
- India’s per capita R&D expenditure is one of the lowest in the world.
- Gross expenditure on R&D as a percentage of gross domestic product (GDP) is far lower than the world average.
- It is at a meagre 0.64 per cent for India in 2020-21, which if much lower than world average of 2.71 per cent.
- As per the recent data, the top two software firms in the country invested only 1.4 per cent and 0.5 per cent of sales in R&D, respectively.
- The figures are in sharp contrast with the investments made by the IT Software firms in in countries like the US, China, Japan, and Germany.
- It ranged between 6.5 per cent and 21 per cent.
- According to the World Intellectual Property Organization’s global innovation index, India retains its 40th rank in 2023.
- The data shows India’s inability to scale up its efforts in research and innovation.
Reasons for low R&D allocation by the government:
- Low R&D by India has dragged down the overall share of expenditure on research in India’s GDP.
- Lack of Private Investment:
- Low investment by the private sector leaves most of the pressure on the government, which has other pressing concerns to address.
- However, fear of imitation by smaller firms discourages large private-sector firms from increasing their R&D spending.
- It is no surprise that the country cannot boast too many global firms in contemporary times
Concerns with the Research & Development in India
- There were several references in the Budget Speech to funding for dedicated centres for excellence in “Artificial intelligence” research, initiatives to scale up technology to produce laboratory-made diamonds, and a centre for research on sickle cell anaemia. However, there was less focus on basic research.
- Despite the fact that all of these initiatives could be distributed among several government departments, none of the budgetary allocations indicate a significant expansion of basic research.
- Technology cannot advance if basic science is not supported.
- Low Research and Development Allocation
- In general, developed and technologically advanced nations invest more than 2% of their GDP in R&D.
- The World Bank claims that the allocation is insignificant in comparison to Korea’s allocation of 4.8% of GDP to science and technology.
- Spending in the US is 3.45% and in China is 2.4%, respectively.
- Despite being one of the top producers of scientific literature worldwide, India’s share of global innovation continues to be around 0.7% (according to the Global Innovation Index 2022).
- As a result, just like previous administrations, this one has failed to push the proportion of GDP spent on research and development above 1%.
- Limited Absorptive Capacity of Scientific Institutions o While lack of funding is not the only obstacle to research and development in India, the absence of significant departmental raises demonstrates that the country’s scientific institutions have a low capacity for absorption.
- Unnecessary delay o Research scholars’ continued inability to receive promised funds on time and their ongoing struggle to obtain the high-quality equipment they need to conduct their work are two major challenges.
- Lack of Interest in Research and Development o According to the All India Survey of Higher Education (AISHE) report, less than 0.5% of Indian students pursue a PhD or a degree of a comparable level.
- In terms of researchers per lakh of the population, the country currently lags far behind China, the US, and other much smaller countries like Israel.
Private investment in R&D:
- For India to move up in the global supply chain, it is important for the private sector to step up its efforts in R&D and improving innovation output.
- A few global companies are developing R&D capacity in India. For instance, GE Healthcare opened its first 5G innovation lab in Bengaluru in 2022. The same year, another health care firm opened its first surgical robotics centre in the Asia-Pacific region in Gurugram.
- These global capability centres will increase overall R&D activity.
- Though this is a significant development, the research and innovation breakthroughs in most cases belong to overseas firms.
- The new funds allocated must focus to help small new-age firms as large corporations in India are not short of cash.
- The government must work with the private sector to address their needs and concerns to boost higher research activities.
- It should improve its focus on Developing intellectual property rights regime and Resolving uncertainty around data protection
- The establishment of the National Research Foundation will be a significant step towards achieving the goal. The Government must ensure its smooth functioning without Bureaucratic interference, as it can affect its operations and outcomes.
- The establishment of scientific infrastructure and the allocation of a sizeable portion of the funds are necessary.
- Today’s world is mainly driven by technology. Hence, both the Government and the firms must improve its focus on innovation to prosper.