Economic Survey calls out lack of R&D investment by the private sector

The Survey noted that the private sector contributes around 36% of the total R&D in India

Investment in research and development (R&D) in India is growing, but it sill remains a small fraction of India's overall Gross Domestic Product (GDP), said the Economic Survey on January 31, highlighting the need for private sector to contribute more to the R&D pie, in line with advanced economies.

"The gross expenditure on research & development (GERD) in India has increased from
approximately Rs 60,196 crore in FY11 to about Rs 1,27,381 crore in FY21. However, this
is 0.64% of the GDP, which is insufficient and remains low compared to many
countries that have forged ahead in R&D," said the Economic Survey, adding that R&D funding in India is primarily through the government.

The survey noted that in countries like the United States, China, Japan, and South Korea, private enterprises routinely contribute more than 70% of the total national R&D spend. In China, the survey said, the R&D spend has reached 2.1% of the GDP, with private sector complementing the majority of the funding by the government.

The survey noted that private sector investment in innovation is low, and only concentrated in certain sectors. Citing data from the Department of Science and Technology, the survey showed that only around 36% of R&D is funded by the private sector, with various forms of government-led investment leading the way.

"In India, not only is the industrial R&D low, but it is also sectorally concentrated. Drugs and pharmaceuticals led the way, followed by information technology, transportation, defence, and biotechnology. Public sector R&D is primarily driven by the defence industry, followed by the fuels and metallurgical sectors," the survey noted.

The survey said India's R&D focus has been on basic research, rather than applied research, which lacks the practical applications needed to attract private investment.

"To bridge this gap, we need to foster industry-academia collaboration, enhance private-sector participation, and prioritise applied research. And the private sector needs to respond to the R&D challenge wholeheartedly".