R&D: The Missing Pillar in India’s Global Ambition
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SEPTEMBER 2024
The research and development (R&D) topic in India is critical, and there is a growing consensus across the country that increased investment is essential.
However, India is significantly lagging behind global leaders in this area.
According to World Bank data and other national sources, India’s investment in R&D stands at just 0.65% of GDP, far below countries like South Korea (4.8%) and Taiwan (3.6%). This gap poses a serious risk to India’s future.
For a country aspiring to become “Self-reliant” as envisioned by leaders like Pandit Nehru and rebranded as “Atmanirbhar” by Prime Minister Modi, new approach is required.
Ideally, India’s development hinges on its ability to translate aspirations into reality through robust R&D. With a large, educated, and talented youth population, the country has the potential to lead in global innovation.
However, it continues to fall short; this trend will likely persist without significant changes.
The lack of investment in R&D is one of the biggest challenges facing India today.
There are several reasons for this, starting with the economic priorities set since the liberalisation 1991.
Since then, the focus has primarily been on GDP growth, often at the expense of long-term investments in areas like R&D.
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With a large, educated, and talented youth population, the country has the potential to lead in global innovation
Relying on GDP as the primary metric of national success neglects critical economic activities, such as R&D, which require long-term capital investment and entail certain risks.
Many Indian companies remain reluctant to invest heavily in innovation, as the focus is often on immediate profitability.
For instance, the IT sector has significantly contributed to India’s GDP growth by providing outsourcing solutions, but it has historically underinvested in proprietary technologies compared to global giants like Microsoft or Google.
South Korea, by contrast, has pursued a long-term industrial strategy, which has resulted in companies like Samsung becoming global leaders in semiconductors and electronics through substantial R&D investments.
Another factor is the lack of strategic initiatives prioritising indigenous R&D.
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The lack of investment in R&D is one of the biggest challenges facing India today
Once, the label “Made in India” carried symbolic national pride, but this has eroded over time, mainly as China has dominated global manufacturing.
Today, even high-tech manufacturing powerhouses such as Germany, Switzerland, and Sweden rely heavily on Chinese components, reducing the perceived need for Indian firms to innovate.
India’s reliance on imports, especially from China, is stark.
India, the world’s largest user of mobile phones, imports 88% of the components required for mobile phone production, primarily from China.
This dependency highlights the country’s inadequate investment in high-tech R&D.
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Once, the label “Made in India” carried symbolic national pride, but this has eroded over time...
The government’s “Make in India” initiative, aimed at boosting manufacturing, often positions India as an outsourced hub for foreign companies rather than fostering true innovation.
Foreign corporations provide intellectual property, design specifications, and manufacturing protocols, while Indian firms handle the manufacturing for domestic consumption or export.
While this model stimulates economic activity and creates jobs, it does little to advance homegrown R&D or innovation.
In sectors like automotive manufacturing, companies such as Maruti-Suzuki and Hyundai rely heavily on foreign direct investment, but groundbreaking innovation is often lacking.
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India’s reliance on imports, especially from China, is stark
For example, Hyundai’s R&D centre in Hyderabad primarily focuses on local market adaptations rather than developing cutting-edge technologies for global markets.
R&D efforts in India are primarily concentrated in a few key sectors—defence, space, agriculture, and nuclear research. Consequently, government funding is directed mainly to these areas.
The Indian Space Research Organization (ISRO), for instance, operates exclusively as an R&D entity, with its budget focused on advanced space technology.
ISRO’s achievements, such as Mangalyaan and Chandrayaan, demonstrate the potential of focused R&D, but this success is not mirrored across other industries.
India’s pharmaceutical industry, for example, is the largest producer of generic drugs globally, yet it spends far less on R&D than global competitors.
Sun Pharma, the country’s largest drug maker, allocates just 7.3% of its revenue to R&D, while Pfizer invests 15%.
This disparity is driven by the pressure to achieve quick financial returns, which pushes Indian firms to prioritise short-term gains over long-term innovation.
India’s over-reliance on China for electronics and other components continues to challenge the growth of its local industries. Indian companies struggle to compete with China’s cost efficiencies and technological advancements.
Furthermore, India’s price-sensitive market makes it difficult for firms to prioritise R&D.
Though promising, the rise of the startup culture in India often revolves around recycling business models from the West rather than focusing on original innovation.
As a result, Indian unicorns are predominantly concentrated in the e-commerce sector, missing opportunities for groundbreaking advancements in fields such as material science, engineering, and pharmaceuticals.
Ironically, despite India’s vast talent pool, many of the world’s leading tech companies—including Nvidia, AMD, Qualcomm, and Google—have established R&D centres in India.
These centres leverage Indian talent to further global corporate objectives rather than address India’s domestic challenges.
While these R&D centres highlight India’s potential, the innovation they produce is often directed toward multinational firms’ strategic goals.
India currently files about 61,000 patent applications annually, compared to China’s 1.5 million and the United States’ 600,000.
The cost and complexity of filing patents in India are prohibitive, and this is an area where government intervention is necessary to support local firms.
In conclusion, India stands at a crossroads. The current level of investment in R&D is inadequate to meet the challenges and opportunities of the future.
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...India’s price-sensitive market makes it difficult for firms to prioritise R&D
As global supply chains look to diversify away from China, India has a unique opportunity to position itself as a leader in innovation.
The hopes of millions rest on the Indian government’s ability to foster an environment that promotes creativity, innovation, and breakthrough technologies.
A policy shift is essential.
Corporate strategies must be redefined, and societal attitudes toward R&D must evolve.
India must invest in its collective genius and seize this moment in economic history to shape a future of brilliance.
With the right vision, India can shine brightly on the global stage for future generations.
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