India’s R&D crisis is a product of the business class’s lack of ambition

Sanjeev Sanyal, a member of Prime Minister Narendra Modi’s Economic Advisory Council, recently pointed out the disparity in research and development (R&D) intensity between Indian and international companies, with Indian companies investing much less.

Sanyal argued that despite India’s impressive economic growth, which is on track to become the world’s third-largest economy, ambition in the business sector remains insufficient.

Although Sanyal regularly criticizes the inefficiencies of Indian state institutions, in this case he focused primarily on the shortcomings of the private sector.

“A lot of groundbreaking R&D is indeed being done in India — but not by Indian companies, but by the Global Capability Centres (GCCs) of foreign companies. In other words, Indian engineers and researchers are capable of doing wonders while living in India. Part of the problem is the lack of ambition of the Indian corporate world,” he noted.

This criticism of the Indian private sector’s R&D performance is not new.

A recent analysis by the Foundation for Advancing Science and Technology (FAST) found that global R&D intensity is 2.8 times higher than that of Indian companies.

R&D intensity measures the ratio of a firm’s R&D investments to its revenues. This ratio reflects the percentage of revenues that are reinvested in research and development.

The Economic Survey presented in Parliament earlier this year raised similar concerns and highlighted the stark contrast between Indian and global R&D efforts.

Despite remarkable progress in Indian research and development (witness the significant increase in patents from less than 25,000 in FY2020 to nearly 100,000 in FY24), a significant gap still exists compared to leading global economies.

According to the World Intellectual Property Organization (WIPO), India achieved the highest growth (31.6 percent) in patent applications in 2022, reflecting the changing innovation landscape and the potential for further growth in the intellectual property space.

Moreover, India’s position on the Global Innovation Index has improved significantly, from 81st in 2015 to 40th in 2023.

This progress is further underscored by India’s rise to 9th place in the 2023 Nature Index, overtaking countries such as Australia and Switzerland.

The increase in India’s share of high-quality research articles – up 44 percent from 2019 to 2023 – also points to a positive trend.

Despite these achievements, however, India’s R&D investment as a percentage of GDP remains low, at just 0.64 percent. This figure lags significantly behind China (2.41 percent), the United States (3.47 percent) and Israel (5.71 percent).

Moreover, the private sector’s contribution to R&D in India is limited. It accounts for only 36.4 percent of the country’s gross domestic expenditure on R&D (GERD), compared to China (77 percent) and the United States (75 percent).

This clearly shows that even with India’s strides in innovation, the private sector’s chronic lack of ambition is blocking real progress. Indian companies, experts say, need to face a hard truth: their lack of commitment to R&D is not only hampering the country’s global position, it is also undermining their own long-term competitiveness.