15 March 2024 – The Hindu

Reviving R&D Funding in India

• The scientific and research community are excited about the Rs 1 lakh crore corpus that was announced in the interim Budget for 2024–25 to support the nation’s research and innovation ecosystem. The current prime minister decided to rename the motto from “Jai Jawan Jai Kisan” to “Jai Jawan, Jai Kisan, Jai Vigyan” to “Jai Jawan, Jai Kisan, Jai Vigyan, Jai Anusandhan” in an effort to strengthen the basis of innovation and research for development.

What Are the Various Benefits of Research and Development Funding in India?

Leader in Generating Scholarly Talent:

• India is becoming a major producer of academic talent, even though the country dedicates a relatively smaller portion of its GDP to research and development. India is third in the world in terms of PhD production, with an impressive 40,813 produced annually, after the US and China. This accomplishment demonstrates India’s dedication to promoting intellectual capital and making a substantial contribution to international research projects.
• Furthermore, India continues to produce a significant amount of research, coming in third place worldwide in 2022 with over 3,00,000 publications, demonstrating the country’s strong research environment and dedication to expanding knowledge in a variety of sectors.

Excellent Results in Patent Awards:

• India has also performed admirably in terms of patent grants; in 2022, it was ranked sixth in the world with 30,490 patents awarded. Even while this number is smaller than in the US and China, it nevertheless highlights how India’s innovation landscape is changing and how much room there is for the country to expand in terms of intellectual property production.

A Focus on Independent R&D Facilities and Labs:

• The government provides a large amount of cash for research and development, much of which is allocated to government-run, independent research laboratories. These labs are essential for advancing technology development and research with strategic ramifications.
• The Department of Science and Technology’s R&D statistics (2022-23) show that India invested a total of USD17.2 billion in R&D in 2020–21. Of this total, the government receives USD 9.4 billion (54%), which is mostly used by four important scientific agencies:
• The Department of Atomic Energy (11.4%), the Indian Council of Agricultural Research (ICAR) (12.4%), the Department of Space (18.4%), and the Defence Research and Development Organisation (DRDO) (30.7%).

Provisions in the 2024–25 Interim Budget:

• An interest-free loan of fifty years to establish a corpus of Rs. one lakh crore will enable long-term financing or refinancing with extended tenors and low or no interest rates. Another plan to accelerate ‘atmanirbharta’ and enhance deep-tech capabilities for defence is being discussed.

What Are the Various Issues With Indian R&D Funding?

Low GDP-Percentage R&D Investment:

• India’s Gross Expenditure on Research and Development (GERD) increased from Rs 6,01,968 million in 2010–11 to Rs 12,73,810 million in 2020–21, indicating a major increase in the country’s R&D spending.
• However, India lags behind significant developed and rising economies like China (2.4%), Germany (3.1%), South Korea (4.8%), and the United States (3.5%) with R&D investment as a percentage of GDP lying at 0.64%.

Decrease in Private Sector Contribution:

• In India, the public sector (4.4%), state governments (6.7%), higher education institutions (HEIs) (8.8%), and the central government (43.7%) are the main drivers of GERD, with the private sector accounting for just 36.4% of the total in 2020–21.
• Although there is a lack of coordination between government agencies and a need for stronger political will to prioritise R&D expenses, the reasons for the drop in R&D spending despite the government’s awareness of the need to increase it are unclear.

The role of the private sector in developed economies:

• Private industry contribution is lower than that of many other economies. Indian firms account for over USD 6.2 billion, or 37% of the nation’s gross domestic product (GERD). This is in contrast to the global trend, which has businesses contributing over 65% of R&D.
• Driven by market pressures and profit objectives, the private sector provides a substantial share (>70%) of R&D funding in leading innovative economies like the U.S., China, Japan, South Korea, and others. The actual R&D operations are carried out in Higher Educational Institutions (HEIs).

Inadequate Use of Allotted Funds:

• While the DST spent only 61% of its projected budget on Centrally Sponsored Schemes (CSSs)/Projects in 2022–2023, the Department of Biotechnology (DBT) spent only 72% of it. Sixty-nine percent of the CSS allocation went to the Department of Scientific and Industrial Research (DSIR), which gets the lowest funding.
• Similar to the under-allocation, the reasons for under-utilisation are unclear and could point to time-consuming bureaucratic procedures for approving payments, an inability to assess projects or provide clear utilisation certificates, an inability of the Ministry of Finance to prioritise funding for science, or insufficient planning or implementation of the Ministry of Science and Technology’s requested funds.

State Governments’ Insufficient Fund Allocation:

• The State governments’ spending on research and development was covered in a portion of the RBI report, State Finances: A Study of Budgets of 2023–2024. Only 10 of the 36 States and Union Territories were included in the study, suggesting that most States do not prioritise research. With the exception of Rajasthan, most States spent relatively little on research each year (around 0.09% of the GSDP on average).

What Are the Different Steps Required in India to Improve R&D Funding?

Promoting Private Sector Partnerships:

• Although the R&D ecosystem in India has certain benefits in terms of efficiency, it would gain more from the involvement of private companies and more industry-academia collaboration, which would facilitate knowledge transfer and stimulate innovation.
• A national aim for some time has been to increase gross expenditure on research and development (GERD) to 2% of GDP, according to the 2013 Science, Technology, and Innovation Policy. This was reaffirmed in the chapter on science and technology transformation of the 2017–2018 Economic Survey.
• Investor confidence will be bolstered by incentives for private investment, such as the easing of restrictions on foreign direct investments (FDIs), tax breaks, and well-defined product regulatory roadmaps.

Raising R&D Spending as a Share of GDP:

• It is impossible to exaggerate the role that research and innovation play in fostering technical improvement, global competitiveness, and economic prosperity. To completely understand the impact, though, one must evaluate India’s present R&D financing environment and the products that come from it.
• R&D expenditures in Organisation for Economic Co-operation and Development (OECD) member countries averaged 2.7% of GDP in 2021. The US and the UK. have dedicated over 2% of their GDPs to research and development during the last ten years.
• Therefore, for science to have a significant impact on development, many experts have recommended for India to dedicate at least 1%, but ideally 3%, of its GDP to research and development (R&D) annually till 2047.

Providing for HEIs’ Expanded Role in India:

• HEIs in India provide 8.8% (USD 1.5 billion) of the total R&D investment, which is a relatively small amount. Acknowledging that there is no one-size-fits-all answer for the complicated problem of raising industry commitment to R&D is crucial. To overcome the obstacles and realise the full potential of R&D for India’s economic growth and competitiveness through HEIs, a multifaceted strategy involving a wide range of stakeholders is required.

Closing the Distance Between India’s Aspirations and Reality in Manufacturing:

• India’s ambitions in technology and manufacturing depend on a radical change in the country’s R&D environment. To bridge the current divide, two approaches are needed: bolstering university research infrastructure and promoting commercial sector participation.
• Proposals like the National Deep Tech Startup Policy (NDTSP) demonstrate a strong commitment to innovation and technical advancement. The private sector’s participation in India’s R&D ecosystem may be encouraged by this approach.
• Even though Deep Tech was created with a great deal of time and technological uncertainty, investing in intellectual property protection and overcoming technical barriers can open up new industries.
• The government’s commitment to using innovation and research as the cornerstone of development is demonstrated by the recent enactment of the Anusandhan National Research Foundation (ANRF) Act, 2023.
• This legislative action will support scientific research across the country. The Act intends to foster a strong research culture inside HEIs while bridging India’s ongoing R&D investment gap.
• While this programme seems promising, it still needs to overcome obstacles including maintaining global standards, promoting interdisciplinary cooperation, and guaranteeing fair fund distribution.

Enforcing Appropriate Use of Allotted Funds:

• While appeals for more financing from both public and private sources are valid, the Union Ministry of Science and Technology has continuously underutilised its budget. As a result, improving budget utilisation is also necessary to influence scientific achievements.
• Preventing underspending and underutilization of money designated for research and development is a clear priority. This calls for the governmental prioritising of R&D spending and the acknowledgement of this as a vital component of India’s growth trajectory.
• Ultimately, India requires the bureaucratic ability to assess scientific projects and oversee their utilisation following allotment. India needs to develop this capability in order to become a science power by 2047.

Setting Spending Priorities Through State Governments:

• Increases in public sector R&D spending are particularly necessary at the state level, if only to raise the standard of research facilities at state universities, which are linked to the flexibility of researchers to focus on more locally relevant issues.
• Additionally, spending must rise to the point that, with the right regulations in place, it removes the ongoing barrier preventing research from moving from the lab bench to the manufacturing floor. Without this flow, innovation will be limited to low-quality breakthroughs and have little value.
• With the aim of promoting increased private sector involvement and offering strategic advice for research, innovation, and entrepreneurship, government initiatives are set to boost R&D investment in India. Even if India’s R&D sector is expanding significantly, it is nevertheless concerning that the country invests a little portion of its GDP in R&D when compared to other developed nations. Along with the NDTSP and ANRF Act of 2023, the interim budget for 2024–2025 underlines India’s commitment to supporting private sector-led research and innovation, especially in emerging industries.