Indian firms outpace global giants in R&D growth: Report

The Foundation for Advancing Science and Technology (FAST India) has released a comprehensive report on the state of Industry R&D in India, in collaboration with IIFL Securities. The State of Industry R&D in India report provides a comparison of Indian and global firms, highlighting areas where Indian firms excel and where they need to improve.

This report compares the R&D activities of Indian firms with their global counterparts across six key sectors: Pharmaceuticals and Biotechnology, Automobiles and Components, Chemicals, Energy, Aerospace and Defence, and Software and Technology.

From FY2016 to FY2023, Indian firms have shown 1.2 times more growth in R&D than global firms. Despite challenges posed by the COVID-19 pandemic and changes in R&D tax policies, Indian firms have maintained robust R&D growth.

Global firms have higher R&D intensity (2.9 times that of Indian firms) and a greater proportion of PhD employees (3.7 times more) compared to Indian firms. Global firms lead significantly in output parameters, generating 13.1 times more patents and 1.3 times more publications per billion USD revenue than Indian firms. However, Indian firms excel in R&D-related disclosures in their annual reports, scoring an average of 6.2 out of 10 compared to the global average of 3.7.

The Pharmaceuticals sector performs best among Indian firms in both R&D intensity and the proportion of PhD employees, while also ranking high in patents by revenue. Global firms in the Automobiles and Defence sectors have a stark advantage, with significantly higher patents by revenue compared to their Indian counterparts.

Indian software firms show better output performance (publications by revenue and patents by revenue) compared to input parameters (R&D intensity and percentage of PhD employees). Indian firms need to increase their investments in R&D to move up the global value chain.

Currently, India's R&D expenditure is 0.7 per cent of GDP, with the government contributing 0.6 per cent and the private sector only 0.1 per cent. The report suggests that enhancing industry R&D through supportive policies like tax incentives and encouraging private sector involvement is crucial.

States play a pivotal role in derisking industrial R&D and encouraging sustainable technological advancements.

By investing more in R&D and leveraging supportive policies, Indian firms can enhance their global competitiveness and contribute more significantly to technological innovation.