[Answered] The missing ingredient in India’s innovation story is not ambition. It is competition and better policy. Comment

Introduction

Economic Survey 2025-26 notes India’s GERD remains only 0.64% of GDP, with private firms contributing merely 36% of R&D spending despite rising corporate investments, revealing that innovation deficits stem more from weak competitive pressures than lack of ambition.

India’s Innovation Potential and Ambition Is Not the Constraint

1. India has emerged as the world’s 38th-ranked innovation ecosystem in the Global Innovation Index 2025, hosts nearly 2 lakh DPIIT-recognised startups, and is investing heavily in semiconductors, AI, green hydrogen, and space technologies.
2. Yet, innovation-led economies typically spend 2–5% of GDP on R&D, whereas India remains stuck at 0.64%, indicating a structural innovation gap.

Why Competition Remains the Missing Ingredient

1. Protectionist Comfort Reduces Innovation Incentives: Higher tariffs and Quality Control Orders often shield domestic firms from global competition. Firms can maintain profitability without investing in frontier technologies. Result: preference for assembly and adaptation over invention. Example: Import substitution without deep technology ownership.
2. Large Domestic Market Creates Complacency: India’s expanding consumer base ensures demand even for technologically average products. Boards prioritize capacity expansion over uncertain R&D investments. Example: Infrastructure and petrochemical investments vs limited proprietary technology creation.
3. Technology Adoption Over Technology Creation: Many industries rely on imported patents, licensing, and technology transfer. This generates manufacturing capability but not intellectual property leadership. Example: Electronics assembly ecosystem.
4. Weak Market Discipline: Globally, innovation flourishes when firms face existential competitive pressure. South Korean and Taiwanese firms upgraded because they competed internationally. Example: Samsung, TSMC transformation.

Policy Bottlenecks Hindering Innovation

1. Suboptimal R&D Investment: High cost of capital discourages long-gestation research and venture funding remains concentrated in digital services rather than deep-tech. Example: Hardware innovation gap.
2. Institutional Voids: India faces a “Valley of Death” situation between laboratory research and commercialization. Weak academia-industry collaboration slows technology transfer. Example: Patent-rich but product-poor ecosystem.
3. Permissionless vs. Permissive Frameworks: Lowest-cost (L1) tendering penalizes innovative products and public demand rarely rewards indigenous technological breakthroughs. Example: Government procurement bias.
4. Regulatory-Cholesterol: Policy unpredictability discourages long-term R&D commitments. Frequent tariff and compliance changes create investment uncertainty. Example: Manufacturing sector planning risks.
5. Human Capital: NITI Aayog-backed Ease of Doing Research survey found 76% researchers report limited industry support for R&D. Industry-academia talent mobility remains weak. Example: Research commercialization deficit.

Why Better Policy Is Equally Important

1. Budgetary Push: Government has operationalised the Anusandhan National Research Foundation (ANRF) and announced a ₹1 lakh crore Research, Development and Innovation Fund to crowd-in private investment.
2. Strategic Technology Missions: National Quantum Mission, IndiaAI Mission, Semiconductor Mission and Green Hydrogen Mission these initiatives create enabling conditions, but innovation ultimately depends on private-sector risk-taking.

Way Forward

1. Competition-Led Reforms: Time-bound tariff rationalisation. integration into global value chains and competitive export orientation.
2. Innovation Financing: ANRF-industry co-funding mechanisms with deep-tech venture capital ecosystem and patent commercialization funds.
3. Procurement Reforms: Shift from L1 to Value-Based Procurement and prefer indigenous intellectual property.
4. Research Ecosystem Reforms: Industry-linked PhDs, university technology transfer offices and research parks and innovation clusters.
5. Governance Reforms: Stable regulatory environment, faster IP approvals and simplified compliance framework.

Conclusion

As former President A.P.J. Abdul Kalam argued in India 2020, nations achieve technological sovereignty through innovation, not imitation. Competition-driven reforms and enabling policies must transform India from technology consumer to creator.