• India’s R&D expenditure-GDP ratio of 0.7% is very low when compared to major economies and is much below the world average of 1.8%.
• The main reason is the low investment in R&D by the corporate sector.
• While the corporate sector accounts for about two-thirds of Gross Domestic Expenditure (GERD) on R&D in leading economies, its share in India is just 37%.
• There is evidence suggesting that India’s GERD data are an underestimate.
• A 2022 info of the National Science Foundation of US on Foreign R&D by U.S.-based multinational corporations shows a spend of $9.5 billion (₹649.7 billion) on R&D in India in 2018, which increased to $9.8 billion (₹690.2 billion) in the following year.
• There are MNCs from other leading countries also spending on R&D in India.
• Department of Science and Technology has published R&D Statistics in 2020 which provided an estimate of ₹60.9 billion R&D spending in 2017-18 by foreign MNCs, which is only about 10% of what U.S. firms have reported to have spent in India on R&D.

Issues with the current system

• The National Science and Technology Management Information System (NSTMIS) of the DST is the agency that compiles GERD statistics in India.
• It is easier to gather the information on R&D by the government sector, the higher education sector and public sector enterprises.
• The challenge lies in collecting data from the private corporate sector.
• There are two key factors that make the official R&D estimates grossly inadequate.
• The method used for identification of R&D performing firms does not capture all the R&D performing firms.
• For this purpose, The NSTIMS relies on the Department of Scientific and Industrial Research (DSIR) list of recognised R&D units and the Prowess database of the Centre for Monitoring Indian Economy Pvt. Ltd.
• The DSIR list may not have many of the actual R&D performers for two reasons:
• Firms which consider government incentives as not attractive enough or that are sensitive about sharing critical information with the DSIR may not be inclined to register themselves with the DSIR.
• It may be difficult for R&D firms in services such as software and R&D services to meet the requirement of having separate infrastructure for R&D to distinguish it from their usual business.
• Many of the R&D performing enterprises in new technology areas may come under the services category.
• The Institute for Studies in Industrial Development has performed a study that looked at 298 firms receiving foreign investment (2004-16) for R&D purposes, found that only 11% had been registered with DSIR.
• The Prowess database covers only 3.5% of the currently active registered enterprises in India.
• A quick search in both the DSIR directory of recognised R&D units (2021) and Prowess shows that some of the leading Indian enterprises in new technology areas and foreign R&D centres are not covered.
• For example, SigTuple Technologies, which is a leading start-up in India focusing on artificial intelligence-based HealthTech and has filed 19 patents as in 2021, is unlisted in both databases.
• Recently, two survey conducted by the NSTMIS is the key source of R&D statistics of India.
• For those firms which do not respond to the survey, the data is collected from secondary sources such as annual reports and Prowess.
• This method will work only if firms disclose their R&D spending.
• A review of the documents submitted to the Ministry of Corporate Affairs (MCA) by some R&D-oriented firms shows that there are firms which do not report any spending on R&D in spite of their declarations that suggest that they are engaged in activities of technology development, adoption and adaptation.
• Some of the firms which do not report spending on R&D do have patents granted in India, or their personnel are mentioned as innovators in patents granted by the U.S. Patent and Trademark Office.
• They may not feel the compulsion of disclosing accurate data to the Indian regulatory authorities.

Suggestion to improve in current system

• Transforming India’s R&D statistics to truly reflect the R&D ecosystem calls for short-term and medium-term measures.
• In the short term, the NSTMIS should use the patents granted data, both in India and the U.S., in addition to its current method to identify R&D performing enterprises.
• While surveys can collect much more information related to innovation activities, R&D statistics should not be confined to the responses to the surveys.
• Instead, annual R&D estimates can be prepared from mandatory disclosures that the enterprises are required to make to the MCA.
• In order to ensure compliance and proper reporting, technologies can be used like in the case of revamped income-tax return forms where various sections are interlinked.
• Proper disclosure of information to regulatory agencies, including R&D spending data, should be made an essential component of the environmental, social and governance (ESG) ranking of enterprises.

R&D is a critical component in strengthening the productivity and economic growth of a nation. The Centre needs to cover the current deficit in R&D and cater to the present and future needs by committing to raise the spending on R&D to 1 per cent of the GDP. To increase India’s R&D statistics the NSTMIS should use the patents granted data. To create proper report and ensure compliance of R&D technologies can be used in which information is interlinked. Government should encourage people and investors to invest in R&D because it will help government and private sector in retaining this talent in the country.