Research needs more funds, less red tape
LAST week, the government approved a new Research, Development and Innovation (RDI) scheme with a corpus of Rs 1 lakh crore to boost private sector investment in innovation and commercial R&D in deep tech areas like artificial intelligence (AI). The fund will be meant for long-term financing or refinancing at low interest rates. The finance will be in the form of growth and risk capital for private companies willing to scale up R&D and technology development in strategic areas to serve the national objective of self-reliance. Projects that show a high ‘Technology Readiness Level’ will be funded, besides those involving the acquisition of technologies of critical or strategic importance.
The need for a new fund was felt because of the poor share of the private sector in R&D for a long time, and overall low investment in R&D. A globally accepted parameter of national commitment to research and innovation is the gross expenditure on R&D or GERD. India’s GERD has been abysmally low at 0.64 per cent. The figure has been stagnating and, in fact, has shown a decline from 0.66 per cent in 2019-20. However, it is a matter of consolation that the R&D kitty is going up in absolute terms with the rise in GDP.
Globally, India fares poorly in R&D expenditure. The US leads global R&D spending with nearly $784 billion in 2023, followed by China at $723 billion. Japan is a distant third ($184 billion), followed by Germany ($132 billion), South Korea ($121 billion), the UK ($88 billion) and India ($71 billion), according to data compiled by the World Intellectual Property Organisation.
It has been seen that the private sector drives the R&D expenditure in countries with high figures, including China. In India, however, GERD is mainly driven by the government sector, with the private sector contributing only 36.4 per cent of the total R&D expenditure.
This is not the first time that an initiative has been announced to de-risk private sector investment in high-technology areas. In fact, two poster success stories of the globalisation era – the software revolution and the biotechnology revolution — were seed-funded through state-led schemes. The innovative idea of a Software Technology Park (STP) provided the much-needed help to entrepreneurial software firms in the form of shared satellite data-link facilities, affordable office space and massive tax breaks. Many of these entrepreneurial firms are today’s multi-billion-dollar behemoths and have diversified into outsourced R&D and product development. The software sector’s contribution to India’s GDP is about 8 per cent.
In the same way, the first two biotechnology and vaccine companies — Shanta Biotechnics and Bharat Biotech — were generously funded by the Technology Development Board (TDB) established in the Department of Science and Technology (DST). They, in turn, flourished and made Hyderabad India’s vaccine capital. The TDB’s contribution to the vaccine industry has been tremendous — the quantum of grants given to private companies has been to the tune of Rs 100 crore in some cases. Later, the Department of Scientific and Industrial Research launched the New Millennium Indian Technology Leadership Initiative, and the Department of Biotechnology came up with the Biotechnology Industry Research Assistance Council.
It would be wise to build upon the experience gained so far in getting the private sector interested in R&D, and avoid the pitfalls of such schemes. First and foremost, the private sector is always wary of red tape in the execution of such schemes. Therefore, the governance of any such scheme should be nimble. The STP scheme resulted in the exponential growth of the software sector because software parks were governed autonomously and had the participation of the private sector in their administration. The TDB, too, has a lean structure.
In comparison, the new RDI scheme appears to be a governance nightmare. At the top will be the Governing Board of the Anusandhan National Research Foundation (ANRF), chaired by the Prime Minister, to provide ‘strategic direction’ to the scheme. The Executive Council of the ANRF will approve the guidelines and recommend the scope and type of projects to be funded. Then there will be an Empowered Group of Secretaries chaired by the Cabinet Secretary to decide sectors and types of projects, and conduct performance review. At the bottom of this bureaucratic pyramid would be the DST to implement the scheme. Funding will flow through a two-tiered structure — a Special Purpose Fund (SPF) within the ANRF and several second-level fund managers.
Such a long red tape apart, the RDI amounts to massive duplication of efforts. It is puzzling that the RDI has been formulated when there is a very similar initiative already in place — Deep Tech Fund of Funds with a promised Rs 10,000 crore. The fund is supposed to invest in early development stages of businesses in high-risk fields like AI, biotechnology and quantum computing with a view to achieving self-reliance.
Perhaps aware of this overlap, the government has decided to allow the RDI to contribute money to the Deep Tech Fund of Funds. If one fund funds another, what purpose will it serve? It is also unclear how the RDI scheme will interface with other schemes — National Quantum Mission, AI Mission, National BioPharma Mission, National Green Hydrogen Mission, etc., all aimed at boosting technology development in emerging areas.
If we want the private sector to take up technology development, there is no running away from the basic tenet of collaboration with academia. Research institutions are hubs of fundamental and applied research. Collaborating with them can provide companies early access to breakthrough ideas and technologies as well as a steady pool of trained researchers, engineers and PhD holders who understand emerging technologies. By collaborating from the research stage, companies can shorten the product development cycles. For this, we need to boost research in academia to make it attractive for industry collaboration and joint product development. This is how countries leading in AI, quantum technology, advanced materials, etc. have done it.
Dinesh C Sharma is science commentator.
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