To enhance private sector research and development in India, the Union Budget has earmarked ₹20,000 crore (almost triple the usual amount) for the Ministry of Science and Technology (MoST) to support “research, development, and innovation.”
Key Budget Announcements
- ₹20,000 Crore Allocation for Small Modular Reactors Development: The Union Budget has allocated ₹20,000 crore for the development of small modular reactors, with a target of establishing 5 reactors by 2033.
- Research, Development & Innovation Fund: A new fund dedicated to Research, Development, and Innovation has been announced under the Department of Science and Technology (DST).
- DST’s Total Allocation: The total allocation for the DST has been increased to ₹28,000 crore, which is three times the allocation from last year and seven times the actual expenditure in 2023-24.
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Small Modular Reactors (SMRs)
Small Modular Reactors are small nuclear reactors that offer a power output of 30-300 MWe per unit. They harness nuclear fission to generate heat to produce energy.
SMRs have the potential to provide a reliable and low-carbon source of electricity, complementing renewable energy sources.
Why is it Called Modular?: All the systems and assembled factory products are sent and transported on the site. |
Current R&D Landscape
- Private Sector Contribution: The private sector contributes only 36% of the total R&D spending in India, which is significantly lower compared to countries like China, the USA, and South Korea, where private sector contributions account for 50-60%.
- Overall R&D Spending: India’s overall R&D spending as a percentage of GDP stood at 0.64% in 2020, the lowest level since 1995.
- Government R&D Expenditure: In the last five years, business enterprises have accounted for 40% of the R&D expenditure and the rest has been from the government.
- R&D Allocation Comparison (2020-21)
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- Public Sector: 0.30% of sales turnover
- Private Sector: 1.46% of sales turnover
Focus Areas and Strengths
- Technology Sectors: India’s strengths lie in various technology sectors such as fuel, metallurgy, pharmaceuticals, textiles, IT, and biotechnology.
- Ambitious Missions: India has launched ambitious missions like the National Quantum Mission (NQM) and the IndiaAI Mission, focusing on cutting-edge technologies.
- Start-ups and Sunrise Sectors: The government aims to support start-ups and sunrise sectors, which are still in the early stages but hold high potential for future growth. These sectors are expected to benefit from the new R&D initiatives.
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Key Challenges
- Low Private Sector Participation: Historically, India’s R&D sector has been dominated by the government, with limited private sector involvement.
- Inadequate Private Investment in Research: There is a significant gap in private investment in research and development, which limits the scope of innovation and progress.
- Meagre Returns from Core R&D: Returns on investment in core R&D are often minimal, which discourages further investment from both the public and private sectors.
- Limited Intellectual Property Generation: The generation of intellectual property (IP) remains low, which limits India’s competitiveness in global markets.
- Infrastructure Gaps: Foundational infrastructure for R&D is lacking in India, with key building blocks such as chipsets, semiconductor fabs, and a skilled engineering workforce being insufficient. The lack of a robust innovation ecosystem further exacerbates these gaps.
Concerns
- Absorption Capacity for Massive Investments: There are concerns about whether India can effectively absorb the large investments allocated for R&D, considering the existing infrastructure limitations.
- Unclear Access Mechanism for the Private Sector: The government has not yet clarified how the private sector will access the new funds allocated for R&D.
- Undefined Tangible Public Benefits: The potential public benefits from the R&D investments are still unclear, and the government has not outlined how these investments will lead to tangible outcomes for society.
- Structural Bottlenecks: There are several structural bottlenecks within the R&D ecosystem, which could hinder the effectiveness of the planned investments.
- Inadequate Supporting Infrastructure: The absence of a supportive infrastructure further limits the effectiveness of R&D efforts in India.
Way Forward
- Need for a Clear Roadmap: It is crucial for the government to create a clear roadmap that outlines how the private sector can access R&D funds. Transparency and clarity will be key to encouraging private sector participation.
- Focus Areas for Improvement: To ensure the successful implementation of the R&D budget, the following focus areas should be prioritized:
- Strengthening Foundational Infrastructure: India must address the gaps in foundational infrastructure to effectively utilize the allocated budget.
- Incentivizing Private Innovation: Measures should be taken to incentivize private sector investment in innovation and research.
- Ensuring Long-term Industry Engagement: Long-term engagement with industries is necessary to maintain momentum and ensure sustainable development.
- Sustainable Development Approach: A sustainable development approach should be embedded in all R&D initiatives, ensuring that research leads to practical, long-term outcomes for society.
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Conclusion
By addressing these challenges and focusing on key strengths, India can maximize the potential of its R&D investments and create a thriving innovation ecosystem.
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February 10, 2025
