India’s R&D estimates are an incomplete picture

Contact Counsellor

Last Updated25/02/2023

India’s research and development (R&D) expenditure-GDP ratio of 0.7% is very low when compared to major economies and is much below the world average of 1.8%.

Low investment in R&D by the corporate sector.
Corporate sector accounts for about two-thirds of gross domestic expenditure on R&D (GERD) in leading economies, its share in India is just 37%.
The National Science Foundation (NSF) of the United States shows a spend of $9.5 billion on R&D in India in 2018, which increased to $9.8 billion in the following year.
The latest Research and Development Statistics, by the Department of Science and Technology (DST) in 2020, has provided an estimate of R&D spending in 2017-18 by foreign MNCs, which is only about 10% of what U.S. firms have reported to have spent in India on R&D.

The National Science and Technology Management Information System (NSTMIS) of the DST is the agency that compiles GERD statistics in India.
It is easier to gather the information on R&D by the government sector, the higher education sector and public sector enterprises.
The challenge lies in collecting data from the private corporate sector.
There are two key factors that make the official R&D estimates grossly inadequate.
The method used for identification of R&D performing firms does not capture all the R&D performing firms.
The NSTIMS relies on the Department of Scientific and Industrial Research (DSIR) list of recognised R&D units and the Prowess database of the Centre For Monitoring Indian Economy (CMIE) Pvt. Ltd. for this purpose.

The DSIR list may not have many of the actual R&D performers for two reasons:
- Firms which consider government incentives as not attractive enough or that are sensitive about sharing critical information with the DSIR may not be inclined to register themselves with the DSIR.
- It may be difficult for R&D firms in services such as software and R&D services to meet the requirement of having separate infrastructure for R&D to distinguish it from their usual business.
- Many of the R&D performing enterprises in new technology areas may come under the services category.

Transforming India’s R&D statistics to truly reflect the R&D ecosystem calls for short-term and medium-term measures.
In the short term, the NSTMIS should use the patents granted data, both in India and the U.S., in addition to its current method to identify R&D performing enterprises.
While surveys can collect much more information related to innovation activities, R&D statistics should not be confined to the responses to the surveys.
In order to ensure compliance and proper reporting, technologies can be used like in the case of revamped income-tax return forms where various sections are interlinked.
Additionally, proper disclosure of information to regulatory agencies, including R&D spending data, should be made an essential component of the environmental, social and governance (ESG) ranking of enterprises.

Unlocking the R&D potential of India is one of the key drivers of our goal to become a $5 trillion economy by 2025.