Boosting R&D Could Significantly Expand India's Manufacturing Sector
Boosting India's manufacturing share through increased R&D expenditure is a pivotal strategy suggested by experts like Krunal Modi at CareEdge Ratings. With current spending at 0.64 percent of GDP, matching it with Asia's leading spenders could elevate the sector to 18 percent of GDP by 2035, bolstering innovation and international competitiveness.
Highlights
- •Increase in India's R&D expenditure
- •Matching Asian peers like China and South Korea
- •NITI Aayog's proposed 'ease of doing R&D' framework
- •Boost manufacturing share to 18 percent by 2035
In an era where global competition is intensifying, a significant increase in India's research and development (R&D) expenditure could transform the manufacturing sector. According to Krunal Modi, Director at CareEdge Ratings, if India's gross R&D expenditure increases from 0.64 percent of GDP to at least 2 percent, similar to that of its Asian peers, this might help boost the manufacturing share in GDP to 18 percent by 2035.
India's current R&D spending is substantially lower than many key competitors such as China (around 2.5 percent), South Korea (4.5-5 percent), and Japan (around 3 percent). China, for instance, boasts a robust manufacturing share in GDP standing at approximately 25 percent. Bangladesh and Vietnam also have higher manufacturing shares due to strong export-led growth supported by relatively lower R&D intensity.
With the goal of increasing India's own R&D expenditure to 2 percent of GDP, NITI Aayog has suggested a series of steps. These involve fostering stronger collaboration between academia and industry, creating dedicated institutions for critical sectors, and offering talent retention mechanisms. Key industries requiring investment include biotechnology, solar manufacturing, EV batteries, hydrogen cells, precision engineering, electronic components, and rare earth materials.
Why is India Lagging in R&D?
The main challenge lies in the proportion of private sector participation, which stands at around 30 percent compared to the global average of nearly 70 percent. Indian businesses often shy away from long-term investments due to their inherent uncertainties and delays. Additionally, brain drain remains a significant issue as compensation abroad is often significantly higher.
To address these challenges, policy frameworks are being proposed by NITI Aayog. This includes an 'ease of doing R&D' framework that seeks to streamline approvals, patents, and compliance processes, thereby encouraging private sector participation.
