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With the pvt sector indifferent to R&D, India risks missing the deep-tech bus, or getting locked out

With the pvt sector indifferent to R&D, India risks missing the deep-tech bus, or getting locked out

Economic Times01-05-2025

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com .)
In the 2000s, China recognised that technological dependence was a strategic liability because it relied on US chips, Western operating systems and telecom infra. This triggered a strategy rooted in constructive paranoia, and the launch of mission-driven policies:This aimed to make China an 'innovation-oriented nation'.It targeted dominance in 10 hi-tech sectors.This programme was launched to reverse brain drain, and attract global researchers. It has received massive state support through guidance funds, industrial subsidies and tech-focused SOEs.China also doubled down on patenting, domestic standards and end-to-end industrial ecosystems, from semiconductors to green energy. R&D investment surged past 2.5% of GDP, with a rapidly rising share from the private sector. Today, China leads the world in AI patents, EV production, solar capacity and quantum publications.Meanwhile, India faces similar vulnerabilities China faced 25 years ago: imported chips, weak indigenous IP, low- tech exports and a fragmented research base. And the response has been uneven.GoI has launched Anusandhan National Research Foundation (ANRF), a ₹1 lakh cr R&D fund, expanded PLI schemes, and invested in semiconductors, space tech, clean energy and quantum. For the first time, the government is adopting a full-spectrum approach to funding research and innovation across all technology readiness levels (TRLs).While ANRF will focus on early-stage discovery (TRLs 1-3) and improve ease of doing science with DST, a soon-to-be-finalised ₹1 lakh cr R&D fund should drive private investment in mid-to-late-stage innovation (TRLs 4-9) through long-term, near-zero-interest loans. This fund shifts focus from grants to outcome-linked support for developing commercially viable tech. While the need for greater funding in basic research is acknowledged, GoI is laying the essential groundwork to build a self-sustaining R&D ecosystem.Yet, the private sector remains risk-averse, contributing barely a third of national R&D. India's R&D-to-GDP ratio remains stuck below 0.7%, with little traction in patenting or deep-tech commercialisation. The innovation pipeline is still thin.Ex-Intel CEO Andrew Grove made the line, 'Let's be paranoid' - with its philosophy of the importance of proactive preparedness for unexpected changes and strategic inflection points - famous. And, yet, even Intel wasn't paranoid enough. It missed the AI inflection point, and today Nvidia has overtaken it in valuation, strategic relevance and tech leadership.A similar inversion is unfolding between China and the US, driven by who innovates faster and scales deeper. Unfortunately, while GoI is paranoid, India's private sector isn't.In 2024, Foundation for Advancing Science & Technology (FAST) published a comparative study, 'State of Industry R&D in India', of 59 Indian and 60 global firms across six key sectors: pharma, software, defence, chemicals, automobiles, and energy. The study, conducted between FY16 and FY23, reveals a persistent input-output gap. Global firms, on average, reported 2.9x R&D intensity (spend as % of revenue), 3.7x share of PhD-qualified employees, and 2.9x R&D spending as share of profits than Indian firms.On output indicators, the disparity is starker. Global firms generated 13.1x patents and 1.3x scientific publications per billion dollars of revenue compared to their Indian counterparts.The European Commission recently released the EU Industrial R&D Investment Scoreboard 2024. It presents data on the top global 2,000 companies investing in R&D. They invested ₹1,257.7 bn in R&D in 2023. Indian firms accounted for ₹5.5 bn, or about 0.4%, of global industrial R&D investment, with only 15 companies featuring among the world's top 2,000 R&D spenders.This places India behind not only advanced economies like the US (₹531.8 bn, 681 firms) and China (₹215.8 bn, 524 firms), but also innovation-intensive small economies such as South Korea (₹42.5 bn, 40 firms), Taiwan (₹24.7 bn, 55 firms), and Ireland (₹10.4 bn, 24 firms).Sustained long-term economic growth is driven by investments in knowledge and innovation. India's failure to internalise this principle within its industrial ecosystem suggests presence of constraints: low absorptive capacity, weak industry-academia linkages, and limited interest from the private sector in high-risk R&D.Persistent underrepresentation of Indian firms in global innovation rankings reflects a missing industrial policy focus on Schumpeterian creative destruction, without which India risks being confined to low-value segments of GVCs.In Liu Cixin's 2008 science fiction novel, The Three-Body Problem, the world gets paralysed by the sudden collapse of scientific progress. Stagnation is the real nightmare. It's not fiction any more. For India, the risk isn't that we fail. It's that we're too comfortable even to try. Innovation can't be outsourced.If there's a gap between what scientists are doing and what businesses need, then companies must invest in R&D, collaborate with academia, and shape research. If the private sector stays disengaged, we'll keep watching others lead. We just aren't paranoid enough.

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