A Landmark Shift in Funding
The latest data from the Department of Science and Technology (DST) for 2023-24 marks a historic turning point for India. For the first time, the private sector has become the primary engine of research and development spending. According to figures presented
in Parliament, the private sector accounted for 51.8% of the country's total Gross Expenditure on Research and Development (GERD), while the government's share stood at 48.2%. This is a significant reversal from just a few years ago. In 2019-20, the government contributed over 66% of R&D funds, with private industry making up the remaining third. This rapid change signals that businesses are increasingly viewing innovation not as a luxury, but as a core component of their growth and competitiveness.
The Big Picture: Spending Rises, But Is It Enough?
In absolute terms, India's R&D expenditure has seen impressive growth, reaching a record ₹2.45 lakh crore in 2023-24. This figure has more than tripled over the last decade. As a percentage of GDP, the spending has inched up to 0.84%, a notable increase from 0.64% in 2020-21. However, this is where the context becomes critical. Despite the progress, India's R&D intensity remains well below its global peers and stated ambitions. Countries like China and the United States invest between 2.5% and 3.5% of their GDP in R&D, while innovation leaders like South Korea and Israel spend over 4%. NITI Aayog has repeatedly highlighted this gap, urging for investment to be raised to at least 2% of GDP to compete on the world stage.
Where the Money Goes: Public vs. Private Priorities
The data reveals a clear divergence in where public and private funds are directed. Government spending traditionally focuses on foundational research and strategic sectors essential for national security and public welfare. This includes areas like defence, space exploration, atomic energy, and fundamental scientific research in universities and national laboratories. The government also funds large-scale national initiatives like the National Quantum Mission and the India Semiconductor Mission to build long-term capabilities. In contrast, the private sector's investment is heavily concentrated in applied research with a clear path to commercialisation. The latest reports show that the transportation sector, particularly automotive, has become a massive driver of corporate R&D. It is followed by pharmaceuticals, biotechnology, and IT, sectors where innovation directly translates to market advantage. Interestingly, over 70% of business R&D expenditure comes from multinational corporations, highlighting their significant role in India's innovation ecosystem.
Explaining the Private Sector Surge
What is behind this sudden surge in private R&D spending? Experts suggest a combination of factors. One view is that a post-pandemic realisation of the importance of self-reliance and technological competitiveness has spurred companies to invest more. Another contributing factor may be a change in how R&D is measured and reported. Tighter regulatory norms and mandatory sustainability disclosures for large companies may now be capturing spending that was previously not accounted for, particularly within the Indian captive centres of multinational firms. The government has also been actively encouraging this shift. Initiatives like the ₹1 lakh crore Research, Development and Innovation (RDI) Fund, designed to provide low-interest loans for high-risk corporate research, and the establishment of the Anusandhan National Research Foundation (ANRF) are aimed at catalysing private investment.
The Road Ahead: Challenges and Opportunities
While the rise of private R&D is a positive development, significant challenges remain. The overall R&D investment as a share of the economy is still too low, and there is a recognized gap in translating early-stage research into market-ready products. The Economic Survey has pointed to a 'valley of death' where promising innovations falter due to a lack of support for prototyping, piloting, and scaling. Furthermore, India faces a shortage of skilled full-time researchers compared to other major economies. The path forward requires a more robust partnership between the public and private sectors. The government must continue to fund foundational science while creating policies that de-risk private investment in deep tech. For its part, the industry must move beyond relying on imported technology and embrace a culture of ground-up innovation. Achieving the national goal of becoming a global innovation hub depends on both sectors firing on all cylinders.
