The Innovation Fund announced in the interim budget could be a potential game-changer for the innovation ecosystem in India. Such enablers are critical, as only 4.3% of private sector firms in India spend on research and development (R&D), which is low compared to the world average of 14% (World Bank data).
Financing has been a key barrier for innovation in the country. Nearly 40% of firms surveyed by the United Nations Industrial Development Organization and India's department of science and technology reported lack of credit as a domestic barrier for innovation. It also identified this as a particularly acute challenge in sectors such as machinery and equipment, chemical and chemical products, rubber and plastic products, among others. So, an innovation fund that offers long-term loans at low or nil interest rates could narrow funding gaps.
The government's corpus of 1 trillion promises a significant boost. The scope and detailed objectives of the fund are yet to be announced. To maximize its impact, it will be crucial to align the fund's focus with the country's current priorities and goals.
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