‘This is inexcusable...’: Sanjeev Sanyal calls on private sector to bridge gap with global firms in R&D spending

Noted economist Sanjeev Sanyal has urged the private sector to increase spending on research and development closing the gap with their global peers and contribute to the country’s journey towards third largest economy. 

In a post on X (formally Twitter), Sanyal shared a chart showing the yawning gap in the R&D segment between Indian firms and global companies. 

“We are now a US$4 trillion economy - and soon to be third largest in the world. Our business sector needs to show the same level of ambition. I speak and write often about the inadequacies of the organs of the Indian State, but this one must be on the private sector. Some rules may need changing, but this is inexcusable,” the economist wrote. 

India’s R&D sector is steadily increasing its growth pace according to a recent ‘State of Industry R&D in India’ report by FAST India in collaboration with IIFL Securities. 

Despite challenges like the COVID-19 pandemic and changes in the R&D tax regime, Indian firms have performed ‘slightly better’ in R&D growth in sectors such as aerospace and defence, automobile and components, chemical and energy compared to global counterparts from FY16 to FY23. 

However, global firms outpace India in several aspects. According to the report, international companies showed nearly three times (2.9x) more R&D intensity and have a workforce with 3.7 times more PhD employees. They also hold a 13.1x patents and 1.3x publications per billion USD revenue compared to their Indian peers. 

Private sector contribution 

The Economic Survey 2023-24 pointed out that India’s R&D investment as a percentage of GDP stands at just 0.64 percent. This figure is notably lower compared to China (2.41 percent), the US (3.47 percent) and Israel (5.71 percent).  

Additionally, the private sector’s contribution to R&D in India is at 36.4 percent of the country’s gross expenditure on R&D (GERD) much lower than China and the US, which have contributions of 77 percent and 75 percent, respectively. 

The survey noted that while GERD in India has more than doubled from Rs 60,196.8 crore in FY11 to Rs 127,381 crore in FY21, the need for increased investment and private sector engagement remains pressing. 

Although India’s share of high-quality research articles increased by 44 percent over the past four years, it remains significantly lower than that of China and the US, each of which produces over 20,000 articles. On the human resources front, the total number of PhD enrollments in India rose to 2.13 lakh in FY22 from 1.17 lakh in FY15, indicating a growing focus on advanced research training. 

Challenges and Recommendations 

The Economic Survey underscored the need to strengthen the link between higher education, industry and research to better translate GERD into research output. It pointed out that institutions in India develop technologies, but their transformation from the lab to societal benefit is slow.

While India is seeing meaningful gains in R&D with notable improvements in patent filings and global rankings, addressing investment gaps and enhancing the commercialisation of research are crucial for achieving greater impact, the survey added. 

India has shown significant progress in research and development (R&D) according to the Economic Survey 2023-24. The country’s R&D sector has demonstrated impressive growth, with nearly one lakh patents granted in FY24, a substantial increase from under 25,000 patents in FY20.  

Citing data from the World Intellectual Property Organization (WIPO), the survey noted that India saw a 31.6 percent rise in patent filings in 2022. This growth underscores the evolving innovation landscape and potential for further expansion in intellectual property creation. 

This upward trend is also reflected in India's improved position on the Global Innovation Index (GII), where it advanced from 81st place in 2015 to 40th in 2023. Moreover, India climbed to the 9th rank in the Nature’s Index 2023, surpassing Australia and Switzerland, marking a significant achievement in high-quality research.