Hike in R&D Spends: Good News, Or Too Little, Too Late?

R&D has always been the lifeblood of any technology revolution. And no revolution or evolution ever happens by accident, only by design and planning. Look at the United States, Japan, South Korea, Germany and China. They have sweated investments into invention-led growth, be it infotech, defence, manufacturing, pharma and healthcare, artificial intelligence, even human discipline and evolvement.

Look at the ubiquitous, innocuous devices used every day for data storage. It began with IBM which gave us the floppy disk in the 1970s (storage capacity 1.44 MB). Sony went a step further with the CD (compact disc, storage 700 MB), followed by pen drives (storage 1GB and more). Today, we have micro-SD cards the size of a fingernail, with storage capacities in excess of 1 TB (terabyte) of data.

Again, this was no accident, but a result of aggressive R&D investments and decades of innovation, even ruthless creativity. It involved sleepless nights in spotless testing labs and dust-free shopfloors. While there are no official figures or credible estimates on the funding that went into the creation of these devices, experts and conservative logic put the figure in many, many billions of dollars.

Not Just Home Deliveries, Amazon Leads in R&D Too

To put global R&D in perspective, let’s take a gander at the monies ploughed in by some nations and companies to create the proverbial rainbow that leads to the pot of gold. 

World home-delivery leader Amazon spent the most on R&D in FY22, spending US $73 billion, says Statista. Meta, Alphabet, Apple and Huawei made up the top five companies globally by way of R&D spending in that year. In nation-led rankings, the US led R&D expenditure globally with annual spends of US $760 billion, China being second with US $620 billion.

In terms of R&D spends sliced by an ‘industry sectors’ knife, the highest share was in the hardware technology producing industry, accounting for 23 per cent of global R&D expenditure in FY22. The healthcare sector and software producers followed in second place, with 21 per cent each. In total, global R&D spending was estimated at US$ 2.5 trillion.

Another way to slice the global R&D cake is to look at the share of gross domestic product (GDP) in our quest for a smarter tomorrow. According to UNESCO Institute of Statistics, Israel led in R&D spends with 6 per cent of GDP, followed by South Korea (5 per cent), the US and Japan (3.4 per cent each) and China (2.68 per cent). India was lower on this list, with 0.6 per cent of GDP spent on R&D initiatives.

Historically, India Has Been Tight-fisted On R&D

Given this context, it is paradoxical that as the world ushers in industrial revolutions, India remains preoccupied with piecemeal innovations and basic efficiency upgrades. Most of India’s R&D spend comes from the government itself, nearly 56 per cent, while in US and China, private corporations have always shouldered the lion’s share of R&D investments and become world-beaters.

It was perhaps this imbalance and over-expectation from the government that led Commerce Minister Piyush Goyal to get blunt with India’s start-up community recently. “Many start-ups are focusing on low-calorie ice-creams. Not enough are working on semiconductors or quantum computing,” he said. While cited by many as abrasive, Goyal’s criticism may have had a deeper, wake-up intent.

But R&D needs more than intent – it needs infrastructure, capital, policy support and risk-taking. It is also true that red tape and regulatory delays have hindered India’s growth.

“India needs to move from a ‘jugaad’ (temporary hacks) culture to genuine innovation,” Dr Raghunath Mashelkar, former head of the Council of Scientific and Industrial Research (CSIR), said. “That means not just access to funds, but freedom–to experiment, to fail, to dream.”

Other entrepreneurs agree that a long-term dream is critical. “India needs a 25-year vision, not five-year allocations,” says Dr Kiran Mazumdar-Shaw, Chairperson, Biocon. “Biotech, AI and clean energy are not overnight outcomes. You need patient capital and an educated, research-oriented workforce.”

A crucial aspect is to overhaul India’s education system. As Prof Anil Gupta, founder of the Honey Bee Network, says: “Our schools teach answers, not questions. Until we flip that, we will always be behind.” An AI-based framework under ‘One Nation One Education’ may help educational advances, experts feel, especially as Prime Minister Narendra Modi has been personally backing such a move.

How Did China Get Its Head Start Over India?

China’s rise in global industry has been nothing short of fantastic. From a low-cost manufacturer in the 1980s and 1990s, it is now the world’s leading producer of solar panels, a visionary in 5G and AI, and a disruptive player in EVs and semiconductors. Just as an example, Chinese technology firm Huawei alone spends US$ 20 billion annually on R&D, well ahead of India’s entire national R&D budget.

Compared to this, India’s top IT companies like TCS or Infosys, whose R&D budgets are in the hundreds of millions of dollars, spend mostly on improving client offerings, not futuristic innovations.

And that is an oxymoron, because India has ample brainpower. From Sundar Pichai to Satya Nadella, Indian-origin minds are steering the world’s largest corporations. The irony is that these minds are sitting in foreign lands, their vision being utilised overseas. That begs a moot question – if such talent were provided homegrown platforms, could India indeed create its own Apple, Google or BYD?

The planned hike in R&D spending is a step forward, but even after this, India’s total R&D expenditure will be under 1 per cent of GDP. Also, a lion’s share of this will likely be used for defence and space research, not civilian technologies or private innovation. Dr Vijay Chandru, co-founder of Strand Life Sciences, says, “You can't build a Silicon Valley by only funding ISRO.”

India is at a crossroads; an R&D revisit is being made, but catching up requires more than money. India needs to catalyse its own ‘innovation culture’. Done right, it can move India from being the back-office to being a brain, globally. It will take time and patience. If impetus is lost mid-way, Rs 1.25 lakh crore may become just another line item in an official document.

(The writer is a veteran journalist and communications specialist.)