R&D: Why the private sector falls behind

Protected markets and strong growth expectations reduce the incentive for greater R&D

- LAVEESH BHANDARI

There is a general agreement in India, almost a consensus, that the country needs to undertake greater research & development (R&D) to progress faster and more effectively. While this is the objective, most also agree that India's expenditure on R&D is quite low. The oft-repeated statistic (sourced from the World Bank, which aggregates national data) shows that compared to countries such as Taiwan (3.6 per cent), South Korea (4.8 per cent), China (2.4 per cent), and even Brazil (1.2 per cent), India's spend on R&D as a share of gross domestic product (GDP) is barely 0.65 per cent.

Of course, it is true that countries with higher per capita incomes do tend to spend more on R&D. India has a lower per capita income than all of these countries, so if we judge India's R&D performance by its income class, it may not fare that badly. Given its low income level, therefore, a case can be made that India's current spending on R&D is somewhere in the vicinity of the global average for its income level and size.

But that is obviously not good enough. The effort India needs to put into R&D needs to be gauged not from where it is, but where it aspires to be. If incomes need to quadruple over the next two-three decades while simultaneously addressing the inclusion and sustainability challenges, innovation will clearly need to play a key role.

With that in mind, the government has been attempting to increase expenditures on R&D, and its share of total R&D spending in India has consistently risen since the early 2010s. Currently, it accounts for over 60 per cent of the total R&D expenditure in India.