To become the third-largest economy in terms of GDP at current dollar rates, India needs to significantly ramp up investment in R&D, driven by the business sector, according to the Economic Survey.
India is currently the fifth-largest economy and lags behind most other large economies on most indicators of innovation.
“R&D investment is a key input in innovation,” the Survey said. “India needs greater thrust on innovation to catapult itself to a higher growth trajectory and become the third-largest economy in GDP current US$ in the near future,” it said, adding that mere reliance on ‘Jugaad innovation’ risks missing the crucial opportunity to innovate.
India’s gross domestic expenditure on R&D (GERD), which is currently the lowest amongst other large economies at about 0.65% of GDP, needs to go up to at least the average level of GERD in other top ten economies of more than 2%.
The survey attributed India’s low GERD mainly to the disproportionately lower contribution from the business sector.
The business sector in India, it said, contributed much less to gross expenditure on R&D (about 37%) compared with businesses in each of the top ten economies (68% on average).
“This is despite the fact that tax incentives for R&D were more liberal in India when compared to those in the top ten economies. The government does a disproportionate amount of heavy-lifting on R&D by contributing 56% of the gross expenditure on R&D, which is three times the average contributed by governments in the top ten economies.”
