by Sri Varshith Kumar Reddy E
India’s Research and Development spending stagnates despite economic growth, with weak private investment and shallow innovation systems, raising concerns about its ability to build sustainable knowledge capacity and achieve great power status.
India’s Gross Expenditure on Research and Development has remained fixed at 0.64 per cent of GDP, a figure unchanged across two decades, as confirmed by the Economic Survey 2025-26. From Rs 60,196.75 crore in 2010-11, R&D spending reached Rs 1,27,380.96 crore in 2020-21 and approximately Rs 6.3 lakh crore in 2024–25.
Across the same period, nominal GDP expanded from Rs 77.84 lakh crore to an estimated Rs 324.11 lakh crore by 2024-25, a 4.1-fold increase. R&D as a share of national income stagnated or slightly declined while the economy scaled dramatically. The ratio moving sideways while the economy expanded is a statistical detail with civilisational consequences: India is growing faster than it is learning.
The comparison with peers is structurally diagnostic, worth sitting with rather than moving past quickly. South Korea now devotes 4.91 per cent of GDP to R&D, the United States 3.48 per cent, and China 2.43 per cent. The global average stands at 1.79 per cent. India, at 0.64 per cent, occupies a different epistemic category altogether, and that distance resists explanation through fiscal constraint alone. India has found resources for capital expenditure scaled from a pre-pandemic average of 2.7 per cent to 4 per cent of GDP, and for production-linked incentive schemes across multiple sectors. Underinvestment in research is a hierarchy of choices, and hierarchies are expressive documents.
The Private Sector Silence
The composition of India’s R&D spending sharpens the concern considerably. According to the CTIER Innovation Report released in August 2025, India’s total industrial R&D expenditure in FY2023 stood at USD 7.4 billion, a figure that took over a decade to double from USD 3.7 billion in FY2011, and one that remains less than a fifth of what Alphabet, as a single firm, spent on R&D in the same year. The government sector accounts for roughly 60 per cent of all research expenditure, a structure that places India at odds with the United States and China, where private enterprise finances over 70 per cent of national research.
What makes the findings particularly pointed is the observation about profitability. In seven of India’s top ten industrial R&D sectors, leading Indian firms recorded higher profit as a percentage of sales than their global peers, while simultaneously spending far less on research. In automobiles and parts, Indian firms invested just 30.8 per cent of profits in R&D against approximately 85 per cent for top global firms; in software and computer services, that figure was 3.6 per cent for Indian firms compared to 49 per cent globally. This is not a story about firms lacking resources. It is a story about firms choosing not to deploy those resources in knowledge creation, because the incentive architecture has never made that choice compelling.
Numbers Without Depth
India filed 1,10,375 patent applications in FY2024-25, a 19.75 per cent increase over the previous year, with domestic applicants now accounting for 61.79 per cent of total filings. India also ranks third globally in volume of research publications. On paper, this is the vocabulary of an innovation surge. The harder question concerns what these filings represent in economic terms.
Analysis of 84 top Indian R&D firms found that patents granted abroad to Indian firms across key sectors such as pharmaceuticals, software, and chemicals actually outnumbered patents granted domestically, suggesting that much of India’s international IP activity is concentrated in MNC R&D centres rather than in indigenously driven research. There is, the report notes, a limited understanding in the Indian industry about intellectual property as an instrument of revenue generation and competitive positioning. Meanwhile, Technology Transfer Offices, the institutional mechanism through which academic research moves into commercial application, remain absent from most universities and public research institutions. When a patent system operates without a commercialisation infrastructure, filings document intellectual activity rather than drive industrial transformation.
The Innovation Index
India’s ascent in the Global Innovation Index from 81st in 2015 to 38th in 2025 is a genuine achievement, placing the country first among lower-middle-income economies and first within Central and Southern Asia. The more revealing detail is that this marks the 15th consecutive year India has outperformed its expected innovation capacity relative to its income level. A country that routinely exceeds its structural expectations is performing admirably within constraints; expanding those constraints is a separate and more demanding undertaking.
India’s GII strengths cluster in Knowledge and Technology Outputs, ranked 22nd globally. Its weaknesses persist in Business Sophistication at 64th, Infrastructure at 61st, and Institutions at 58th. These are precisely the foundations upon which durable innovation capacity is built, and they trail India’s overall rank by a substantial margin. The index, in this reading, records India’s capacity to extract results from an under-resourced system, a form of institutional overachievement that has its own ceiling.
The Architecture of Underinvestment
Research investment requires a time horizon that democratic politics finds structurally scratchy. The returns to basic science or foundational technology materialise over decades, well beyond electoral cycles. Institutional mechanisms that might insulate long-term research funding from short-term political pressure, independent allocation bodies, peer-reviewed grant systems, and long-tenure academic contracts are either weakly constituted in India or subject to bureaucratic hierarchy. India’s industrial research is dominated by pharmaceuticals and automobiles, which together account for over 50 per cent of private R&D spending, while globally the software and computer services sector has surged to lead all others, with R&D expenditure rising from USD 86 billion in 2015 to USD 256 billion in 2022. India’s private research portfolio is concentrated in sectors with established commercial logic, and conspicuously absent from the frontier where tomorrow’s competition will be decided.
High-technology exports as a share of manufactured exports stood at 12.5 per cent in 2022, against approximately 20 per cent for both the United States and China. The university system, which in every developed innovation economy serves as the primary interface between science and industry, has been chronically underfunded and regulated to a degree that limits academic autonomy. The movement of ideas from foundational science through applied research to commercial product rarely forms organically in India, because the connective institutions that enable it have never been seriously built.
Policy and Its Limits
The Rs 1 lakh crore Research, Development and Innovation Scheme, approved by the Union Cabinet in July 2025 and operationalised in November, represents the most significant intervention in India’s research ecosystem in a generation. With Rs 20,000 crore allocated in FY2025–26, the scheme channels capital through a two-tiered structure, with the Anusandhan National Research Foundation as custodian, deploying loans at nil or low interest rates with a matching-contribution requirement from private applicants. The conceptual logic is sound: use public capital to de-risk private R&D where the commercial horizon is long and failure rates are high.
Indian firms must not just spend more on R&D but restructure the composition of that spending toward multidisciplinary teams capable of navigating blurring industry boundaries, AI-driven disruption, and sustainability transitions. Whether the RDI scheme’s financial mechanism can catalyse that deeper organisational shift within firms, or whether it will simply subsidise existing research patterns at a greater scale, is the question that no announcement can resolve in advance.
The Question That Remains
A deeper philosophical problem runs beneath all of this. India appears to be measuring its innovation ambition through filing counts, index positions, and startup valuations, forms of output that are visible and communicable. Innovation capacity is sturdier and more patient, built in laboratories that tolerate failure over sustained periods, in firms that regard proprietary knowledge as a competitive asset worth protecting, and in a state that treats knowledge creation as long-run national investment rather than a supplement to infrastructure spending.
Great powers are historically large intellectual economies, nations that have contributed disproportionately to the stock of global knowledge and drawn from that contribution both geopolitical and economic leverage in return. India’s claims to technological sovereignty, whether in semiconductors, artificial intelligence, or advanced materials, rest on a knowledge infrastructure that has been chronically underbuilt relative to those claims. Many of India’s large firms are profitable by international standards; they simply invest very little in R&D. At 0.64 per cent of GDP, India is funding the maintenance of an ambition. The honest question is no longer whether India can afford to invest seriously in research, but what it will cost to keep postponing that investment, and which generation will bear it.
(The author is a pracademic working on government policy and public institutions. Ideas are personal.)
