Private Investment could Catalyze India to a Global R&D Powerhouse

08 Aug 2019

There is little doubt that India has the potential to become a global Research & Development (R&D) powerhouse. The Indian Government has been taking some proactive steps to make India a leading R&D hub in Asia. Its latest initiatives under Make in India, Start-up India and Digital India will give Indian R&D further impetus.

However, there are quite a few challenges that will have to be surmounted. Though India’s Gross Expenditure on R&D (GERD) has tripled in the last decade, R&D spend in the last two decades has been stagnant at roughly 0.7% of its GDP, far lower than USA, China, Israel and Korea and the global average of 1.97%.  Another concern has been the lack of private sector investment in R&D.

Presently, the Government, PSUs and institutes of higher learning (all non-private) fund 62% of Indian R&D with agencies like Defence Research and Development Organisation (DRDO), Indian Space Research Organisation (ISRO), Indian Council of Agricultural Research (ICAR), Department of Atomic Energy, Department of Science & Technology (DST) and Council of Scientific and Industrial Research (CSIR) being the lead players.  

According to the World Intellectual Property Organization (WIPO), India is the seventh largest patent filing office in the world. This not only underlines India’s potential, but also gives rise to hopes and aspirations of how R&D will propel economic sustainability.

Quite a few favourable factors in the Indian economy encourage private sector R&D investments. Its aspiring middle class provides a large market for a host of products fuelled by innovations and research. Its large English speaking, technically qualified human resource makes R&D execution plans easier. The Government too is committed to support R&D through various policy, regulatory and tax incentives.

 For India to emerge as a global R&D hub, the following challenges need to be addressed:

Private sector R&D investments have to be encouraged.
The Government should consider providing grants to the industry to the tune of 50% of the project cost for critical technology areas.
The present weak link between universities and industry needs to be strengthened.
Higher education curriculum needs to be focussed on changing times.
Applied research should be prioritized for higher industrial relevance.
Venture capital (VC) and private equity (PE) funding needs to shift focus to genetics, new molecules and clinical research.
Establish a strong Intellectual Property Rights (IPR) regime, structurally strong and easy to enforce.

There is a need to provide enough incentives to the private sector for further investment in R&D. These could include financial support like tax credit, deductions from income, exemptions and tax holidays besides accelerated tax depreciation rates. The “patent box” policy has also been gaining popularity amongst the private sector. Offering concessional tax rates to income from patents encourages local innovations and home-grown R&D.

The time is ripe for India to adopt a pragmatic and focussed R&D and innovation policy to overcome the prevalent challenges and build on its strengths. The private sector will not only bring investments to the table but also aid networking with other nations, strong in R&D. Leveraging its strengths amidst the right R&D ecosystem will enable India to emerge as a major R&D hub, not only in Asia, but also globally.

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