STATUS OF R&D EXPENDITURE IN INDIA

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Context

• While the pivotal role of science in fostering sustainable development is widely acknowledged, it is imperative to underscore the critical importance of ensuring sustainable and consistent funding for science to effectively drive India's transformative journey.

Details

• The theme designated for National Science Day in 2024, observed annually on February 28 in India, is "Science for Sustainable Development."

Importance of Sustainable Funding

• Key Driver of Development: Science and technological advancements are essential for India's journey towards becoming a developed country by 2047, as they drive sustainable economic growth and development.
• Global Commitments: India's commitments under the Paris Agreement and participation in global forums for sustainable development underscore the importance of sustainable funding for science and technology.
• Critical for Innovation: Sustainable funding is crucial for fostering innovation, as it provides the necessary resources for research and development activities to thrive.

Current Status of R&D Spending in India

• Low Expenditure: India's R&D expenditure has dropped to 0.64% of GDP from 0.8% in 2008-2009 and 0.7% in 2017-2018, indicating inadequate funding for science and technology.
• Global Comparison: Most developed countries spend between 2% and 4% of their GDP on R&D, highlighting India's significantly lower investment in research and development.
• In 2021, member-countries of the Organisation for Economic Co-operation and Development (OECD) on average spent 2.7% of their GDP on R&D.
• The U.S. and the U.K. have consistently spent more than 2% of their GDPs on R&D for the past decade.
• Many experts have called for India to spend at least 1%, but ideally 3%, of its GDP every year until 2047 on R&D for science to have a meaningful impact on development.
• Ministry of Science and Technology: Despite calls to increase R&D spending, the ministry has consistently under-utilized its budget, indicating inefficiencies in fund allocation and utilization.
• The 2013 Science, Technology, and Innovation Policy noted that “Increasing Gross Expenditure on R&D (GERD) to 2% GDP has been a national goal for some time”.
• The 2017-2018 Economic Survey reiterated this in its chapter on science and technology transformation.
• Total Expenditure: India's R&D spending in 2020-21 amounted to ₹1.27 lakh crore.
• Sector-wise Distribution: Private sector contributed 36.4% to the Gross Expenditure on R&D (GERD), while the central government, state governments, higher education, and public sector industry contributed 43.7%, 6.7%, 8.8%, and 4.4% respectively.

Private Sector Contribution to R&D

• Current Scenario: Private sector contributes 36.4% of the Gross Expenditure on R&D (GERD), indicating a significant reliance on public funding for research and development activities.
• Global Trends: In economically developed countries, private sector investment accounts for a major share of R&D expenditure, highlighting the need for increased private sector participation in India.
• Challenges: Hesitancy of private sector funding may stem from poor capacity to evaluate R&D, ambiguous regulatory frameworks, and concerns about intellectual property rights theft.

Models of R&D in Other Countries

• United States:
  • Focuses on fundamental research to drive technological growth, as advocated by Vannevar Bush's model.
• Japan and South Korea:
  • Adopted a "techno-nationalist" approach, emphasizing collaboration among universities, research institutes, companies, and governments to foster technological advancement.
• Germany, South Korea, and the United States:
  • Exhibit high private sector contributions to R&D, indicating a strong private-sector-led R&D model.

Importance of Increasing Public Sector R&D

• Improving Research Quality:
  • Enhances research facilities in state universities, enabling researchers to address locally relevant problems effectively.
• Bridging Lab to Market:
  • Facilitates the transition of research from the laboratory to practical, market-ready applications, fostering innovation.
• Stewarding Long-term, Risk-laden Innovation:
  • Enables the state to manage long-term and risky innovations that may take decades to develop, fostering sustainable technological growth.

Challenges Hindering Private Sector Involvement

• Weak Patent System:
  • Historically unreliable in safeguarding commercial innovations, leading to fears of inadequate protection for intellectual property.
  • Risk of imitation by local competitors further disincentivizes investment in R&D.
• Lack of Talent:
  • India needs to develop higher education institutions to attract top talent and foster innovation comparable to the US and China.
• Suffocating Research Ecosystem:
  • Fiscal discipline efforts have suffocated research ecosystems at institutions like IISc, IITs, and IISERs.
• Challenges in Procuring Laboratory Equipment:
  • Bureaucratic red tape and delays hinder researchers in procuring necessary equipment.
• Capacity Issues in Patent Office:
  • Insufficient number of patent examiners and controllers in the Indian Patent Office compared to countries like China and the US.

Underutilization of R&D Budgets

• Lack of Effective Spending: Despite the expressed need for increased R&D investment, the effectiveness of allocated funds remains overlooked.
• Consistent Underutilization: The Union Ministry of Science and Technology consistently underutilizes its budget, leading to suboptimal science outcomes.
• Departmental Disparities: Discrepancies in budget utilization exist among departments:
  • Department of Biotechnology (DBT): Utilized 72% of its estimated budget allocation.
  • Department of Science and Technology (DST): Utilized only 61% of its allocation.
  • Department of Scientific and Industrial Research (DSIR): Utilized 69% of its allocation.

Causes of Underutilization

• Bureaucratic Processes: Tedious bureaucratic processes hinder timely approval and disbursement of funds, contributing to underutilization.
• Capacity Constraints: Lack of capacity within governmental agencies to evaluate projects, issue clear utilization certificates, and plan and implement funds.
• Prioritization Issues: Inadequate prioritization for science funding by the Ministry of Finance may lead to under-allocation of funds.
• Implementation Challenges: Inadequate planning or implementation strategies for requested funds by the Ministry of Science and Technology contribute to underutilization.

Impact and Solutions

• Impact of Underutilization: Persistent underutilization negatively impacts R&D outcomes and hinders India's overall progress in research and innovation.
• Capacity Building: Proper capacity building within governmental agencies is crucial to address issues of underutilization.
• Addressing Delays: Measures should be implemented to reduce delays in grant and salary disbursements to maintain researcher motivation and productivity.
• Streamlining Processes: Streamlining bureaucratic processes and enhancing evaluation capacity can improve the efficient allocation and utilization of R&D funds.
• Enhanced Coordination: Improved coordination between relevant ministries and departments can ensure optimal planning and utilization of R&D budgets, leading to better science outcomes.

R&D Funding Distribution in India (2020-2021)

• Private Sector:4%
• Union Government:7%
• State Governments:7%
• Higher Education:8%
• Public Sector Industry:4%

Discrepancy with Developed Countries

• Private Sector Dominance: In economically developed countries, the private sector contributes an average of 70% of R&D investment.
• Challenges Hindering Private Sector Funding in India:
  1. Poor Capacity for R&D Evaluation
  2. Ambiguous Regulatory Roadmaps
  3. Lack of Clear Exit Options for Investors
  4. Fears of Intellectual Property Rights Theft 

Delayed Implementation of Anusandhan National Research Foundation (ANRF)

• Purpose: Intended to address financial issues in R&D funding.
• Budget Allocation: ₹2,000 crore annual budget earmarked in the last budget.
• Revised Budget: Revised to ₹258 crore this year.
• Uncertainty: Strategies for raising the remaining ₹7,200 crore from the private sector have not been clarified yet.

Expedite Implementation of Anusandhan National Research Foundation (ANRF)

• Timely Implementation: Expedite the implementation of ANRF to address financial issues and streamline R&D funding mechanisms.
• Private Sector Engagement: Develop clear strategies to raise funds from the private sector for ANRF initiatives, and provide incentives for private sector participation.

Challenges with India's New R&D Fund

• Effective Allocation:
  • Ensuring strategic distribution of the ₹1 lakh crore fund among various sectors to maximize its impact.
• Meeting Diverse Demands:
  • Addressing demands from multiple domains like telecommunications, healthcare, finance, transport, and space flight, all competing for funding.
• Focus on 'Sunrise Sectors':
  • Balancing support for various fields within 'sunrise sectors', each requiring significant investment and resources.
• Sustainability Concerns:
  • Ensuring that funded innovations are not only technologically advanced but also environmentally sustainable.

Strategies to Improve R&D Spending

• Political Prioritization: Political prioritization of R&D spending is essential to recognize it as a core element of India's growth journey and ensure adequate funding allocation.
• Private Sector Engagement: Encouraging private sector participation through incentives such as relaxation of foreign direct investments, tax rebates, and clear regulatory roadmaps can boost investor confidence.
• Capacity Building: Strengthening bureaucratic capacity to evaluate science projects and monitor fund utilization is crucial for effective implementation of R&D initiatives.

Solutions to Enhance Private Sector Involvement

• Strengthening Patent System:
  • Improve reliability and efficiency of patent protection mechanisms to instill confidence in private firms.
• Investment in Education and Infrastructure:
  • Develop higher education institutions and research infrastructure to attract talent and facilitate advanced research.
• Promoting Academia-Industry Collaboration:
  • Encourage partnerships between academia and industry to foster innovation and streamline commercialization efforts.
• Talent Retention Strategies:
  • Implement initiatives to retain top talent within the country, such as offering competitive salaries and research opportunities.
• Streamlining Regulatory Processes:
  • Simplify bureaucratic procedures to facilitate funding procurement and research project implementation.
• Enhancing Funding Opportunities:
  • Increase both government and private sector funding for R&D, while offering incentives to encourage private investment.

Conclusion

Sustainable funding for science and technology is imperative for driving India's economic growth, fostering innovation, and achieving sustainable development goals. By prioritizing R&D spending, engaging the private sector, and enhancing bureaucratic capacity, India can position itself as a global leader in science and technology by 2047.