‘India’s GERD data may be underestimated’ | Photo Credit: Getty Images
India’s research and development (R&D) expenditure-GDP ratio of 0.7% is very low compared to major economies and much lower than 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 nearly two-thirds of gross domestic expenditure on R&D (GERD) in major economies, its share in India is just 37%. However, there is evidence that GERD data from India are underestimated.
United States National Science Foundation (NSF) 2022 information on overseas R&D by US-based multinational corporations (MNCs) shows R&D spending in India at $9.5 billion (₹649.7 billion) in 2018, rising to $9.8 billion . (₹690.2 billion) in the following year. MNCs from other major countries are 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 provided an estimate of ₹60.9 billion R&D spending by foreign multinationals in 2017-18, which is only about 10% of that of US firms. has reported spending on R&D in India.
current system issues
The National Science and Technology Management Information System (NSTMIS) of DST is the agency that compiles GERD statistics in India. It is easy to collect information on R&D by government sector, higher education sector and public sector enterprises. The challenge lies in collecting data from the private corporate sector. There are two major factors that make the official R&D estimates grossly inadequate.
The method used to identify R&D performing firms does not cover all R&D performing firms. NSTIMS relies on the list of recognized R&D units of the Department of Scientific and Industrial Research (DSIR) and the skill database of the Center for Monitoring Indian Economy Pvt. Ltd. for this purpose. There may not be many genuine R&D performers on the DSIR list for two reasons: Companies that do not find government incentives attractive enough or that are sensitive to sharing critical information with DSIR may be reluctant to register themselves with DSIR. Can’t be. Second, it may be difficult for R&D firms to meet the requirement of having separate infrastructure for R&D in services such as software and R&D services to separate it from their normal business. In fact, many R&D enterprises performing in new technology areas may fall under the service category.
A study by the Institute for Studies in Industrial Development, which looked at 298 firms that received foreign investment (2004–16) for R&D purposes, found that only 11% were registered with the DSIR. The skills database, on the other hand, covers only 3.5% of the currently active registered enterprises in India. A quick search in the DSIR Directory of both Accredited R&D Units (2021) and Skills reveals that some major Indian enterprises in new technology areas and overseas R&D centers have been excluded. For example, SigTuple Technologies, a leading start-up in India focusing on artificial intelligence-based healthtech and has filed 19 patents till 2021, is not listed in both the databases.
Two, the survey conducted by NSTMIS is the main source of R&D statistics for India. For firms that do not respond to the survey, data is collected from secondary sources such as annual reports and skills. This method will work only if companies disclose their R&D expenditure. A review of documents submitted by some R&D-oriented firms to the Ministry of Corporate Affairs (MCA) reveals that there are firms that do not report any expenditure on R&D despite their declarations that they are involved in technology development. engaged in activities. , adoption and adaptation. Interestingly, some companies that do not report spending on R&D have patents granted in India, or have their personnel mentioned as innovators in patents granted by the US Patent and Trademark Office . They may not feel compelled to disclose accurate data to Indian regulatory authorities.
what should be done
Transforming India’s R&D statistics to truly reflect the R&D ecosystem calls for short- and medium-term measures. In the short term, NSTMIS should use patent data provided in both India and the US, in addition to its current method of identifying enterprises performing R&D.
While surveys can collect much information related to innovation activities, R&D data should not be limited to responses to surveys. Instead, annual R&D estimates can be prepared from the mandatory disclosures that enterprises are required to make to the MCA. To ensure compliance and proper reporting, the technologies can be used in the case of new income tax return forms, where various sections are interlinked. Additionally, proper disclosure of information to regulatory agencies, including R&D expenditure data, should be made a mandatory component of the environmental, social and governance (ESG) ranking of enterprises.
Regi K. Joseph is Associate Professor at the Institute for Studies in Industrial Development (ISID), New Delhi