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Indian Research and Development Industry: an overview

September, 2013


India was ranked seventh globally in terms of research and development (R&D) investments in 2012 and is expected to retain the position, with R&D investments expected to increase to US$ 45.2 billion in 2013 from US$ 38 billion in 2011.

India companies occupied the topmost position globally in terms of growth in R&D investments. In terms of their absolute annual R&D investments, 14 Indian companies made it to the list of top 1,500 entities worldwide, as per a study by the European Commission.

Moreso, India has been ranked as the world's sixth most "innovative" country in multinational conglomerate GE's Annual Global Innovation Barometer. India is increasingly seen as a product development destination and firms are now offshoring complete product responsibility. In addition, India has become one of the most preferred location for engineering offshoring and is estimated to receive work related to R&D of product engineering (expected to be outsourced to India) worth US$ 42 billion by 2020.

Indian R&D Sector and Global Impact

The Indian and Australian scientists jointly aim to launch innovative research projects, under the Australia-India Strategic Research Fund (AISRF) which has received Rs 28.1 crore (US$ 4.53 million) from the Government of Australia. The Government of India will fund the Indian teams' participation. Indo-Australian scientists will undertake an in-depth study using robotic tools to assess the changing features of the Indian Ocean.

UK Trade & Investment (UKTI) and the Association of Biotech Led Enterprises (ABLE) signed a memorandum of understanding (MoU) to encourage and develop collaborative opportunities between Indian life sciences organisations and the UK. The 12-member UK delegation comprises prominent members from universities, healthcare companies, cancer research organisations and healthcare providers.

The services sector which includes R&D, testing and analysis besides other related segments attracted foreign direct investments (FDI) worth US$ 38,255.23 million between April 2000 to July 2013, an increase of 19.10 per cent to the total FDI inflows in terms of US$, according to the data published by Department of Industrial Policy and Promotion (DIPP). Also, the cumulative overseas direct investments in the sector increased to US$ 146 billion in FY13 from US$ 125 billion in FY12.

Key Developments and Investments

Some of the key developments in the sector are:

  • India launched its advanced multi-band communication satellite GSAT-7 from Kourou, French Guiana in the early hours of August 30, 2013, which has been successfully placed in the Geosynchronous Orbit with an altitude of about 36,000 km above Earth's surface on September 3, 2013
  • Raman Research Institute (RRI) has helped in building the Murchison Widefield Array (MWA), a radio telescope in the Australian Outback, to explore the formation of early stars and galaxies almost 13 billion years ago
  • The Ministry of Science and Technology, Government of India, and RIKEN, Japan's largest research organisation have signed memorandums of understanding (MoUs) to launch joint research programs in the fields of biology, life sciences and material sciences. The cooperation will facilitate exchange and foster collaborations between Japan and India
  • The Government of India has called upon agrochemicals industry to invest in research and development (R&D) and innovations in agrochemicals sector. One of the emerging areas for R&D is green agrochemicals and the Indian industry is ideal for the development of eco-friendly green agrochemicals

Some of the major investments:

  • Hero MotoCorp has commenced the setting up of a R&D centre at Kukas, Rajasthan, with an investment of Rs 450 crore (US$ 72.58 million). The centre will play a key role in the company's future product development
  • Jaguar Land Rover has been chosen to lead a £16.3 million (US$ 26.1 million) 'Evoque_e' collaborative research project to develop new hybrid and battery electric vehicle (BEV) technology. The company will contribute £4 million (US$ 6.41 million) to the project and will lead a consortium of 12 selected partners - eight from industry and three universities. The R&D programme is for the next-generation hybrid and battery-electric power train technologies based on the Range Rover Evoque platform
  • Maruti Suzuki India Ltd (MSIL) is working at making an operational integrated research & development (R&D) centre in Rohtak. The test tracks at the new facility would be longer and considerably enhanced in technical capabilities than the ones at the Suzuki Motor Corp (SMC) facility in Japan. The Rohtak test tracks would be the first of its kind for any automobile manufacturer in India
  • The Indian Institute of Management (IIM) Calcutta has forayed into business incubation by launching an incubation centre with a focus on social entrepreneurship

Government Initiatives

The Government plans to increase the research and development (R&D) budget to up to two per cent of the gross domestic product (GDP) during the 12th Five Year Plan (2012-17), from the current level of about 0.9 per cent, as per Mr S Jaipal Reddy, Union Minister for Science and Technology, Government of India. The Government has also introduced several new schemes with public-private partnerships (PPP) to increase spending on R&D.

The Government of India further plans to involve the private sector in R&D mainly for sectors like vaccines, drugs and pharmaceuticals, supercomputing, solar energy and electronic hardware. The Government offers 200 per cent deduction for capital and revenue expenditure incurred by manufacturing companies with in-house R&D, besides Income tax exemption of 125 per cent to 175 per cent on donations made to universities, colleges and other scientific associations.

Innovation capacity is the driving force behind the country's growth and competitiveness. A strong interaction between R&D activities and business fosters the dynamics of innovation generation. India plans to set up a dedicated Rs 5,000 crore (US$ 806.45 million) fund - India Inclusive Innovation Fund – to boost scientific innovations that can improve the life of the common man. The Union Government will initially contribute Rs 100 crore (US$ 16.13 million) to this fund, said Mr P Chidambaram, the Finance Minister, Government of India.

Under the Union Budget 2013-14, a sum of Rs 4,727 crore (US$ 762.42 million) for medical education, training and research has been allocated. In addition, Rs 3,415 crore (US$ 550.81 million) for agricultural research and Rs 200 crore (US$ 32.26 million) will be set apart to fund organisations that will scale up Science and Technology (S&T) innovations.

Mr Pranab Mukherjee, the President of India, inaugurated the new laboratory at Indian Institute of Petroleum, Mohkampur, Dehradun and addressed the scientists of Council of Scientific and Industrial Research – Indian Institute of Petroleum (CSIR-IIP) on August 26, 2013.

Furthermore, the Union Cabinet approved the proposal for setting up of an autonomous "National Institute of Solar Energy" (NISE) to assist the Ministry and function as the apex national centre for research and technology development and related activities in the area of solar energy technologies in the country.

Road Ahead

Innovation capacity is the driving force behind the country's growth and competitiveness. A strong interaction between R&D activities and business fosters the dynamics of innovation generation. India with its highly beneficial workforce, strong engineering talent and a partner-friendly government is focussing on research based innovation and implementation of quality new ideas for growth and progress. To drive sustained innovation, it is important to initiate the spirit of innovation and foster an innovation life cycle.

Innovation and R&D are becoming the focus of India's growth story. The need of the hour remains in thinking out of the box and work in new ways with new partners to harness emerging and potential markets. Indian organisations can benefit from adopting an open innovation philosophy. India as a market remain important, and the competitiveness of Indian companies in global markets have made them valued partners and specialised global, independent technology suppliers.

Exchange Rate Used: INR 1 = US$ 0.01611 as on September 19, 2013

References: Media Reports, Press Information Bureau (PIB), Innovation Council of India, Union Budget 2013-14, Department of Electronics and Information Technology (DeitY), Department of Industrial Policy and Promotion (DIPP)