India’s R&D estimates are an incomplete picture

Source– The post is based on the article “India’s R&D estimates are an incomplete picture” published in The Hindu on 24th February 2023.

Syllabus: GS3- Science and Technology

Relevance: Issues related to R&D in India

News- India’s research and development expenditure ­GDP ratio of 0.7% is very low when compared to major economies. It is much below the world average of 1.8%.

What is the reason for low spending on R&D in India?

The main reason is the low investment in R&D by the corporate sector. While the corporate sector accounts for about two thirds of gross domestic expenditure on R&D in leading economies, its share in India is just 37%.

What are issues with GERD statistics in India?

Evidence suggests that India’s GERD data are an underestimate.

A 2022 report of the National Science Foundation of the United States on Foreign R&D by U.S.­based MNCs shows a spending of ₹649.7 on R&D in India in 2018.

But the DST has provided an estimate of ₹60.9 billion R&D spending in 2017­-18 by foreign MNCs. It is only about 10% of what U.S. firms have reported to have spent in India on R&D.

Why are GERD statistics underestimated in India?

The National Science and Technology Management Information System (NSTMIS) of the

DST is the agency that compiles GERD statistics in India.

It is easier to gather the information on R&D by the government sector, the higher education sector and public sector enterprises.

The challenge lies in collecting data from the private corporate sector. The method used for identification of R&D performing firms does not capture all the R&D performing firms.

The NSTIMS relies on the Department of Scientific and Industrial Research list of recognised R&D units and the database of the CMIE for this purpose.

The DSIR list may not have many of the actual R&D performers for two reasons:

1. Firms which consider government incentives as not attractive enough may register themselves with the DSIR.
2. It may be difficult for R&D firms in services such as software and R&D services to meet the requirement of having separate infrastructure for R&D to distinguish it from their usual business.

A study at the Institute for Studies in Industrial Development found that only 11% of firms receiving foreign investment for R&D purposes had been registered with DSIR. The CMIE database covers only 3.5% of the currently active registered enterprises in India.

The survey conducted by the NSTMIS is the key source of R&D statistics of India. For those firms which do not respond to the survey, the data is collected from secondary sources such

as annual reports and CMIE. This method will work only if firms disclose their R&D spending.

A review of the documents submitted to the Ministry of Corporate Affairs shows that there are firms which do not report any spending on R&D. But, their declarations suggest that they are engaged in activities of technology development.

What is the way forward to improve GERD statistics?

In the short term, NSTMIS should use the patents granted data, both in India and the U.S. in addition to its current method to identify R&D performing enterprises.

R&D statistics should not be confined to the responses to the surveys. Instead, annual R&D estimates can be prepared from mandatory disclosures by enterprises to MCA.

In order to ensure compliance and proper reporting, technologies can be used like in the case of revamped income tax return forms where various sections are interlinked.

Proper disclosure of information to regulatory agencies, including R&D spending data, should be made an essential component of the environmental, social and governance ranking of enterprises.