Budget 2024: Government Seeks Greater Private Sector Participation In Research And Innovation

Number eight in the Narendra Modi government's list of nine priorities is "innovation, research, and development".

In her budget speech, Finance Minister Nirmala Sitharaman said the government will operationalise the Anusandhan National Research Fund for basic research and prototype development.

The government will also set up a mechanism for spurring private sector-driven research and innovation on a commercial scale with a financing pool of Rs 1 lakh crore, in line with the announcement in the interim budget presented earlier this year.

Further, keeping with its goal of expanding the Indian space economy by five times in the next 10 years, a venture capital (VC) fund of Rs 1,000 crore will be set up, the Finance Minister said.

The Background

The Economic Survey, released on 22 July, noted that the private sector’s contribution to research and development (R&D) remained low at 36.4 per cent of the country’s gross expenditure on R&D (GERD).

The private sector share is significantly lower than in China, at 77 per cent, and the United States (US), at 75 per cent.

Similarly, India fares poorly in comparison to China, the US, and even Israel in R&D investment as a percentage of gross domestic product (GDP).

While India's share is 0.64 per cent in this measure, China, the US, and Israel register significantly higher shares of 2.41 per cent, 3.47 per cent, and 5.71 per cent respectively.

"To better translate GERD to research output, the link between higher education, industry and research must be strengthened," the survey recommended.

India launched the Anusandhan National Research Foundation last year.

The foundation, which came into effect in February, is meant to act as an apex body whose aim is to strengthen and promote India's R&D ecosystem.

The research funding organisation has a corpus of Rs 50,000 crore at the outset, with nearly Rs 36,000 crore projected to come from the private sector.

Now, the Anusandhan National Research Fund will provide further fillip to fundamental scientific R&D.

In the interim budget presented earlier this year, the government announced a corpus of Rs 1 lakh crore for research and innovation in the country, adopting the slogan "Jai Jawan, Jai Kisan, Jai Vigyan, Jai Anusandhan".

As for the Indian space economy, its current size is estimated to be around $8.4 billion, which is around 2-3 per cent of the global space economy.

The government believes that the Indian space economy can grow to $44 billion by 2033. However, private sector participation will be key to getting anywhere close to that figure.

Going forward, the private sector is expected to increasingly handle a lot of the manufacturing and service solutions with respect to satellites, launch vehicles, and ground systems.

"The expansion of India’s space economy is set to impact various sectors, from satellite-based services in agriculture and disaster management to advanced communication systems and space exploration missions. This growth is poised to drive innovation across multiple industries and unlock the full potential of our space ecosystem," said Anil Prakash, Director General, SIA-India, a not-for-profit space sector association.

"We previously advocated for increased financial incentives to support the burgeoning space startups in the country. The announcement of a Rs 1,000 crore VC fund is a step forward, addressing the funding challenges faced by these nascent ventures in this capital-intensive domain," said Lt Gen A K Bhatt (Retired), Director General, Indian Space Association (ISpA).

India's R&D March

In a span of four years, the number of patent grants has quadrupled in India. Nearly 1 lakh patents were granted in fiscal year 2024 (FY24), compared to less than 25,000 patent grants in FY20, as noted in the 2024 survey. India also registered the highest growth in patent filings, at 31.6 per cent, in 2022.

The country has also moved up the Global Innovation Index significantly, from 81st place in 2015 to 40th in 2023.

India's GERD, too, has more than doubled over a decade, from Rs 60,196.8 crore in FY11 to Rs 127,381 crore in FY21.

Besides, India’s share of high-quality research articles (measured in terms of absolute numbers and not percentages) has gone up 44 per cent in the past four years, from 1,039.7 in 2019 to 1,494.7 in 2023.

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