By 2030, India is projected to overtake Japan and Germany and emerge as the world’s third-largest economy with innovation being a key driver of this economic growth. With its diverse talent pool, burgeoning economy, demographic dividend, and rich cultural heritage, India can become a global R&D powerhouse if the power of innovation is harnessed.

India’s standing as the world’s fifth-largest economy is undeniably impressive, but India’s R&D spending in 2020- 21 at 0.64 per cent of GDP lags far behind nations like China (2.4 per cent), Israel (5.44 per cent), and Korea (4.81 per cent), as per the World Bank.

However, due to the government initiatives, India has moved up to 40th rank in 2022 on the Global Innovation Index, from the 81st rank in 2015. The government initiatives include the National Initiative for Developing and Harnessing Innovations (NIDHI), Atal Innovation Mission (AIM), MeitY Start-up Hub (MSH) and Uchchatar Avishkar Yojana of Ministry of Science and Technology.

Of late, to foster digital innovation and startup growth, India and France are pursuing ambitious bilateral cooperation on advanced digital technologies. Furthermore, the introduction of the National Research Foundation has the potential to dramatically alter the contours of our knowledge economy. Atal Tinkering Labs and Atal Incubation Centres are providing opportunities for young students and aspiring entrepreneurs.

Challenges ahead

Despite government efforts, there are still challenges ahead. Although R&D expenditure in India is low, the funds allotted for R&D are underutilised.

India faces R&D challenges due to inadequate private sector investment and a lack of medium-sized enterprises. Large companies have resources but are sector-focused and bureaucratic, while small ones lack financial capacity. This hinders private sector contributions to R&D and innovation.

Furthermore, Indian research is mostly skewed towards basic research and lacks application-oriented R&D critical for the development of new products and technologies. Besides, frontline technologies developed by CSIR, DRDO, BARC, ICMR, ICAR, and ISRO are less used because the rate of transfer of these technologies to industry is low.

Primarily, innovation can be bolstered through the establishment of more cluster-based R&D centres offering supportive measures and competitive intelligence. What’s more, to build a fortune, funds are of the essence. However, financing innovation is proving to be a challenge due to banks’ reluctance to lend to new businesses. Therefore, it becomes paramount for the government to prioritise augmenting funds for start-ups through venture capital and seed capital by providing tax breaks, reducing capital gains tax, etc.

Funding routes

Furthermore, funding mechanisms must be developed to pilot the technologies developed in academic/research institutes. There’s also a need to attract more FDI apart from providing capital, technology, and management experience, it can also help to develop STI human resources through joint training and skill-building programmes. PLI schemes have yielded some results. To cultivate innovation, these schemes should be supplemented with Research-Linked Incentives as they would reward R&D and stimulate more companies to open R&D centres.

India must address research publication shortfalls, reverse brain drain, attract top talent, and enforce intellectual property rights to foster innovation. To reverse brain drain, offer incentives for Indian talent to return by providing incentives for Indian nationals to return via. sabbaticals, fellowships, or other opportunities. It is time India leveraged its potential by creating a conducive ecosystem. Our collective prosperity is contingent on this.

Sahoo is Senior Lead; Monika is Assistant Director, NITI Aayog. Views expressed are personal.