Economic Survey: India needs to up its gross expenditure on R&D from 0.7% to 2% of GDP

The Economic Survey 2020-21 released on Friday took note of the fact that India made it to the coveted list of top 50 innovative countries for the first time in 2020, ranking 48th among 131 countries in the Global Innovation Index (GII). It further pointed out that there is a need for more push towards innovation and the need for the business sector’s contribution to gross domestic expenditure on R&D.

According to the GII, India ranks 45th and 57th on the innovation output and innovation input sub-indices respectively. “Along with three other economies – Vietnam, Republic of Moldova and Kenya, India has the rare distinction of being an innovation achiever for ten consecutive years,” the survey read.

The index also pointed out that the country appears to be underperforming in innovation with respect to the size of its GDP. The survey called it as a warning against being complacent.

Coming to the expenditure on R&D, the survey stated that while India’s Gross Expenditure on Research and Development (GERD) is in line with expectation for its level of development, there is room for improvement. For instance, the business sector’s contribution to the GERD is adequate with respect to the GDP. “However, the business sector’s GERD in USA, China, Japan and Germany is much higher as expected for their level of development. Higher education sector in Canada and Germany also has a larger GERD than their level of development,” the survey read.

Similarly, while the government’s contribution is 56 per cent to the GERD, this proportion is less than 20 per cent than the top ten economies.

Presenting a solution, the survey mentioned that ‘India is able to effectively translate investments in innovation inputs to produce a higher level of innovation outputs.’ This means that India can gain a lot more from its investments into innovation than many other countries.

It called for greater thrust on innovation aiming for a higher growth trajectory and envisages to become the third largest economy in GDP current US$ in the near future.

“This requires boosting gross expenditure on R&D from 0.7 per cent of GDP currently, to at least the average level of GERD in other top ten economies (GDP current US$) of over two per cent. It also involves significantly scaling up R&D personnel and researchers in the country, especially in the private sector,” the survey read.

It also emphasized on the business sector to significantly ramp up its gross expenditure on R&D and move its contribution to GERD from 37 per cent to close to 68 per cent, which is the average business contribution in GERD of other top ten economies.

The survey mentioned that the tax incentive structure introduced earlier to boost R&D did not generate the expected level of private participation in GERD in India.

“India must focus on improving its performance on institutions and business sophistication innovation inputs. These are expected to result in higher improvement in innovation output,” it read.

It also said that the share of Indian residents’ total patents filed in the country stands at 36 per cent. Whereas, the average in other largest economies stands at 62 per cent. “Resident share in patent applications must rise for India to become an innovative nation,” it read.

Economic Survey: India needs to up its gross expenditure on R&D from 0.7% to 2% of GDP Economic Survey: India needs to up its gross expenditure on R&D from 0.7% to 2% of GDP Reviewed by TechCO on 1/30/2021 Rating: 5

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