Budget 2024: India’s scientific advisor to PM holds stakeholder discussions to boost R&D spend by private sector

R&D leads to growth and, therefore, it becomes important that these expenses are treated properly from an investment analysis perspective.

With Budget 2024 around the corner, the government is brainstorming on ways to boost spending on innovation by the private sector, which is at levels far behind the global average investment on research and development (R&D) in the top 10 economies, sources said.

The government believes that the private sector needs to step up on R&D and much work is needed towards it, as the Centre continues with a disproportionate amount of heavy-lifting. The private sector contributes 37 percent of the gross expenditure on innovation compared to an average 68 percent in the top 10 economies globally.

“The principal scientific advisor to the prime minister Ajay Kumar Sood has chaired stakeholder discussions on this. The government wants to look at ways to increase investment on innovation by the private sector. The discussions are being spearheaded by the Ministry of Science and Technology,” a person aware of the development told Moneycontrol.

The government has expanded the scope of corporate social responsibility to R&D but the country currently does not have any dedicated research mandate for corporations.

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Though in 2023 India retained 40th rank out of 132 economies in the Global Innovation Index rankings published by the World Intellectual Property Organisation, there is a need  to produce more patents and original research in many sectors, including advanced materials innovation.

It is inarguable that R&D leads to growth and, therefore, it becomes important that these expenses are treated properly from an investment analysis perspective.

The Big 5 Big tech companies—Amazon, Alphabet, Apple, Meta and Microsoft -- collectively spend about $200 billion every year on R&D. In 2021-2022, Amazon’s expenditure on R&D was over $73 billion. Globally, the big pharmaceutical companies spend 20 percent of their revenue on R&D. The innovation spend is currently dominated by the US.

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The government believes that India needs manufacturing but also needs the R&D to own the technologies. The thinking is that then the income will spread through the economy. Mere factories without intellectual properties will have limited benefit on the economy.

NITI Aayog vice-chairman Suman Bery earlier this year had said that for India to transit from the middle-income trap, the private sector needs to enhance its contribution to R&D through its own investments as the onus is on them to pave the way towards a sustainable growth trajectory.

Finance Minister Nirmala Sitharaman has earlier said that the focus of the government is on four Is—infrastructure, investment, innovation and inclusiveness—to make India a developed nation by 2047.