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At 0.9% of revenues, firms spend dismal Rs 36,000 crore on R&D in FY20

Tata Motors was the largest spender on R&D in FY20 with investment of Rs 3,100 crore, which amounts to 7.10 per cent of its total revenue

Chitranjan Kumar | October 19, 2020 | Updated 19:58 IST
At 0.9% of revenues, firms spend dismal Rs 36,000 crore on R&D in FY20
Among sectors, automobile was largest spenders of R&D with Rs 11,100 crore

The spending on research and development (R&D), one of the key indicators of GDP growth, by the listed companies has remained low in the financial year ended March 2020, according to a latest report by brokerage ICICI Securities. As many as 409 listed companies spent Rs 36,000 crore on research and development in FY20, which amounts to mere 0.9 per cent of their revenues. 

As per the report, R&D expenditure in India has remained stable at around 0.7 per cent of Gross Domestic Product (GDP) since 2014. The spending, however, is lower as compared to other emerging economies, where it stands at around 1-1.5 per cent of GDP. Meanwhile, in developed economies like China, investment in R&D is over 2 per cent, which is much higher as compared to India.

The ICICI Securities report noted that India needs to increase fund outlay for R&D expenditure, especially from the private sector, to improve total factor productivity (TFP), a measure of economic efficiency. In a bid to achieve GDP growth of over 8 per cent, India needs to increase TFP to over 3 per cent, it said.

Tata Motors was the largest spender on R&D in FY20 with a total of Rs 3,100 crore, which amounts to 7.10 per cent of its total revenue. Another auto major, Mahindra & Mahindra, was second in the last fiscal with R&D spending of Rs 3,000 crore, or 6.5 per cent of its revenue.  Mukesh Ambani's  Reliance Industries was third in the list with R&D spending of Rs 2,500 crore, or 0.8 per cent of revenue, followed by drug maker Lupin at Rs 1,500 crore, or 13.90 per cent of revenue. State-owned Hindustan Aeronautics (HAL) spent Rs 1,200 crore on R&D, which amounts to 5.70 per cent of its revenue.

In terms of highest R&D spending ratio to revenue, Sun Pharma Advanced Research Company (SPARC) topped with 587 per cent investment, followed by another drug maker Suven Life Sciences, which spent 304 per cent of its revenues on R&D in FY20.

Among sectors, automobile was largest spenders of R&D with Rs 11,100 crore, followed by the pharmaceutical sector with Rs 10,600 crore spending. Meanwhile, R&D spending of industrials and energy sector was at Rs 8,200 crore, while that of IT stood at Rs 2,300 crore.

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