New Delhi: Research and development (R&D) in Indian companies is significantly lower compared to their global counterparts and is primarily limited to tier-one companies. However, it has been growing at 1.2 times the rate of global firms, a new report has found.
An analysis by the Foundation for Advancing Science and Technology (FAST) — a non-profit institution working to build capacity and advance policy solutions — showed that global R&D intensity was 2.8 times that of Indian firms. The analysis studied the performance of 59 Indian and 60 international companies between 2016 and 2023.
R&D intensity for a firm is calculated by taking the ratio of its R&D investment to its revenue — the percentage of revenue that is reinvested in R&D. R&D intensity and expenditure are the two key indicators used to monitor how resources are channelled to science and technology globally.
While the performance of top Indian firms was slightly better, the R&D intensity, even in their case, was still only 35 percent of that of global firms.
The report pointed out that Indian firms lagged in employing domain experts. In global companies, the proportion of employees with a PhD was 3.7 times that of Indian companies.
Their share in patents and publications is also a significant 13.1 times and 1.3 times higher than that of the Indian firms. “The report’s findings will go a long way to help the industry benchmark their R&D activities and be instructive for course correction. While the Indian industry has made great strides, it needs to invest more in R&D to go up the global value chain,” said Varun Aggarwal, co-founder, FAST India.
Sector-wise findings
There is, however, some good news. R&D in Indian companies grew at a satisfactory rate compared to their previous numbers and also to that of their global counterparts.
The R&D intensity growth of Indian firms in the analysed period (2016-2023) was 1.2 times more compared to global firms.
It was also seen that out of the six industry sectors that were studied — aerospace and defence; automobile and components; chemicals; energy; pharmaceuticals, biotechnology and life sciences; and software and services — top Indian automobile and pharmaceutical companies performed the best in R&D.
These sectors were also the most competitive in R&D intensity compared to global benchmarks.
Surprisingly, software and energy-related companies, which have attracted the highest government investments over the past few years, fared the poorest in this area.
A 2020 Invest India report, ‘The Case of Foreign Direct Investment in Research and Development in India’, also showcased a similar trend. The report highlighted that only 26 Indian companies featured in the list of the top 2,500 R&D spenders in the world. Nineteen of the 26 firms featured in the list were from the pharmaceutical, automobile, and software sectors.
Vijay Raghavan, former principal scientific advisor to the Indian government, said the findings underscored the need for Indian firms to better their performance in both R&D input and output to perform competitively in the global market. However, he also said that compared to their own previous performance, there was improvement.
“Despite facing challenges such as the COVID-19 pandemic and changes in the R&D tax regime, Indian firms have shown slightly higher R&D growth, albeit from a much lower baseline, compared to global firms. They have also scored well in R&D disclosures to the public,” Raghavan said.
Government data also points to a positive trend. A report released by the Department of Science and Technology showed that the country’s gross expenditure on R&D (GERD) has been consistently increasing over the years and has more than doubled from Rs 60,196.75 crore in 2010-11 to Rs 127,380.96 crore in 2020-21.
(Edited by Tikli Basu)
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