Context:
The article presents the evidence suggesting that India’s GERD data are an underestimate.
More on News:
- India’s research and development (R&D) expenditure to GDP ratio of 0.7% is very low when compared to major economies and is much below the world average of 1.8%.
- The main reason is the low investment in R&D by the corporate sector.
- While the corporate sector accounts for about two thirds of gross domestic expenditure on R&D (GERD) in leading economies, its share in India is just 37%.
Underestimation of R&D expenditure
- A 2022 infobrief of the National Science Foundation (NSF) of the United States on Foreign R&D by U.S.based multinational corporations (MNCs) shows a spend of $9.5 billion (₹649.7 billion) on R&D in India in 2018, which increased to $9.8 billion (₹690.2 billion) in the following year.
- There are MNCs from other leading countries also spending on R&D in India.
- But the latest Research and Development Statistics, published by the Department of Science and Technology (DST) in 2020, has provided an estimate of ₹60.9 billion R&D spending in 2017-18 by foreign MNCs, which is only about 10% of what U.S. firms have reported to have spent in India on R&D.
Issues with the current system
- The National Science and Technology Management Information System (NSTMIS) of the DST is the agency that compiles GERD statistics in India.
- Inadequacy of Official R&D Estimates in India: Factors that make the official R&D estimates grossly inadequate:
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- The method used for identification of R&D performing firms does not capture all the R&D performing firms.
- The NSTIMS relies on the Department of Scientific and Industrial Research (DSIR) list of recognised R&D units and the Prowess database of the Centre For Monitoring Indian Economy Pvt. Ltd. for this purpose.
- The DSIR list may not have many of the actual R&D performers for two reasons:
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- Firms which consider government incentives as not attractive enough
- Firms that are sensitive about sharing critical information with the DSIR may not be inclined to register themselves with the DSIR.
- It may be difficult for R&D firms in services such as software and R&D services to meet the requirement of having separate infrastructure for R&D to distinguish it from their usual business. In fact, many of the R&D performing enterprises in new technology areas may come under the services category.
- A study at the Institute for Studies in Industrial Development that looked at 298 firms receiving foreign investment (2004-16) for R&D purposes, found that only 11% had been registered with DSIR.
- Low Coverage of DSIR and Prowess Databases: The Prowess database covers only 3.5% of the currently active registered enterprises in India.
- A quick search in both the DSIR directory of recognised R&D units (2021) and Prowess shows that some of the leading Indian enterprises in new technology areas and foreign R&D centres are not covered.
- A review of the documents submitted to the Ministry of Corporate Affairs (MCA) by some R&D oriented firms shows that there are firms which do not report any spending on R&D in spite of their declarations that suggest that they are engaged in activities of technology development, adoption and adaptation.
- Underreporting of R&D Expenditure by Some Firms: Some of the firms which do not report spending on R&D do have patents granted in India, or their personnel are mentioned as innovators in patents granted by the U.S. Patent and Trademark Office.
- They may not feel the compulsion of disclosing accurate data to the Indian regulatory authorities.
What needs to be done?
- Transforming India’s R&D statistics to truly reflect the R&D ecosystem calls for short term and medium term measures.
- Short Term Measures:
- The NSTMIS should use the patents granted data, both in India and the U.S., in addition to its current method to identify R&D performing enterprises.
- R&D statistics should not be confined to the responses to the surveys.
- Annual R&D estimates can be prepared from mandatory disclosures that the enterprises are required to make to the MCA.
- In order to ensure compliance and proper reporting, technologies can be used like in the case of revamped income tax return forms where various sections are interlinked.
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- Additionally, proper disclosure of information to regulatory agencies, including R&D spending data, should be made an essential component of the environmental, social and governance (ESG) ranking of enterprises.
News Source: The Hindu
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