Has India's pursuit of innovation received its greatest shot of adrenaline thanks to the government's Rs 1 lakh crore Research, Development and Innovation (RDI) fund unveiled last week?
The New Indian Express hauled in the data for interrogation only to learn that this isn't a fresh allocation. In fact, some of the sums are being spent or may have already been spent. The official release itself indicates as much.
Moreover, of the Rs 1 lakh crore, it explicitly mentions how Rs 50,000 crore will be mobilized, but remains zip-lipped about the remaining Rs 50,000 crore.
Of the Rs 50,000 crore, Rs 14,000 crore will come from the central government, and the rest is expected from non-governmental sources such as industry, philanthropists and through multiple streams, including the Anusandhan National Research Foundation (ANRF) Fund, Innovation Fund, Science and Engineering Research Fund, and Special Purpose Funds.
And here's the smoking gun. The proposed Rs 50,000 crore will be mobilized during 2023-28. It means the amount includes allocations that were made in the previous budgets, and chances are, some of it may have already been spent.
That's because the official release itself lists out a series of national missions in emerging and high-impact sectors where it intends to strengthen indigenous R&D capabilities. Take for instance, the National Quantum Mission focusing on strengthening quantum research infrastructure to develop quantum computers, secure communication systems, and advanced materials. But the mission was originally approved by the Cabinet in April, 2023 with an allocation of Rs 6,004 crore spread between FY24 and FY31.
Likewise, the National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS) was approved way back in December 2018, and implemented by the Department of Science and Technology with a total outlay of Rs 3,660 crore, some of which remains unspent.
Similarly, the Deep Ocean Mission, launched in September 2021 by the Ministry of Earth Sciences to explore and utilise ocean resources, has an investment allocation of Rs 4,077 crore spread over five years. What's unclear is whether the first phase (2021-2024) allocations of Rs 2,823 crore were fully disbursed.
The latest RDI fund emphasizes Artificial Intelligence (AI) as a national priority. Interestingly, the government allocated Rs 10,000 crore in Budget 2024 over five years for the IndiaAI programme besides launching the National AI Portal, National AI Mission, and NITI Aayog’s AIForAll strategy with sectoral focus on health, agriculture, education, smart cities, and mobility.
Then there's the India Semiconductor Mission established in 2021, which was backed by a Rs 76,000 crore Production Linked Incentive scheme. Of this, Rs 65,000 crore has already been committed, which means the remaining amount may have been included as part of the Rs 1 lakh crore fund.
Finally, the RDI scheme itself isn't new. It was first approved by the Cabinet in July and aims to stir the pot of private sector-driven R&D ecosystem, address limitations in critical areas for indigenous development, and simultaneously reduce import dependency.
More than its investment muscle, the scheme is noteworthy for its change in flavour. In a first, the government via RDI will provide long-term financing at low or nil interest rates to spur private sector investment in R&D. As Prime Minister Narendra Modi noted during its launch, "For the first time, capital is also being made available for high-risk and high-impact projects."
Financing can take the shape of equity infusion in startups, or cover up to 50% of assessed project cost for transformative RDI projects. Interestingly, the fund with its 50-year tenor and concessional capital flow through ANRF aspires to change the economics of deep-tech innovation or transform sectors such as semiconductors, quantum technologies, and space tech.
Above all, one distinctive feature of the RDI Scheme is that it takes a departure from the age-old practice of issuing grants, fellowships and short-term loans and assumes the role of a savvy investor to catalyse innovation. Such a move is highly needed to help the nation tide over the middle-income trap, which the World Bank warns India is currently in.
In short, the government will don the role of a sovereign venture capitalist, courting risk in lieu of profits and untold success.
For a country with one of the lowest spends on R&D, this is good news. Until recently, India's expenditure on R&D has been woefully inadequate. Per estimates, India spends just about 0.8% of GDP on R&D, or just about $7 billion every year as against the US' $625 billion and China's $335 billion. Within this, about 44% comes from the central government, 7% from states, and 9% from higher education, while the industry contributes 36%, which is far below the global average of 70%.
This despite the fact that India has an enviable talent pool. We rank third globally in science and engineering PhDs, after the US and China, while the number of patents filed in India shot up nearly three times from Rs 24,326 in FY21 to Rs 68,176 in FY25, underscoring a major surge in domestic innovation.
The good news though is that India’s gross expenditure on R&D is on the rise and has more than doubled in the last ten years from Rs 60,197 crore in FY11 to Rs 1,27,381 crore in FY21. But it needs to improve further in order to leap from the services sector to an innovation-driven economy.
Currently, the services sector contributes around 55% of India's GDP, while the manufacturing sector has been stuck at 15-17% for decades. In contrast, advanced nations like the US, and Germany have a thriving manufacturing sector that accounts for about 25% of their GDPs.
