India’s R&D Funding and Private Sector Role- Explained Pointwise

India is at a crucial juncture in its research and innovation landscape. The government is actively shifting towards privatizing research funding to boost innovation and strategic autonomy. A significant step in this direction was announced in the Union Budget 2025-26, where Finance Minister Nirmala Sitharaman allocated ₹20,000 crore to the Department of Science and Technology (DST) to establish a private sector-driven research and development (R&D) fund. This move aims to enhance India’s research ecosystem by fostering innovation in emerging technologies, including artificial intelligence (AI), deep tech, and space technology.

What is the current state of R&D funding in India? How does the private sector drive research in other countries?

Global examples of private sector-driven research

1. France: Defense research is funded by the government but conducted in private defense firms.

2. USA: 80% of NASA’s budget is contracted out to private firms and universities. The Jet Propulsion Laboratory (JPL) at Caltech, a private university, has been funded by NASA since 1954.

3. China: The success of DeepSeek, a private AI initiative, highlights how private-sector innovation can drive national progress.

What are the key programs for funding private research in India and the recent budgetary announcements?

Key Programs supporting private research:

Recent budgetary announcements:

Why should public funds be used to support private research?

1. The private sector is the second-largest contributor to R&D funding in India.

2. Private universities lead in innovation, prototype development, and intellectual property (IP) generation, often outperforming central universities.

3. Collaborative R&D: Private institutions show stronger industry collaborations, leading to practical applications of research.

4. Global Rankings and Research Output: Stagnant research performance and funding stress upon the need of private players involvement.

• No Indian university ranks in the top 300 of the Times Higher Education Index; only two are in the top 400.
• India has 15 researchers per lakh population, compared to 111 in China and 825 in Israel.
• India contributes 4.8% of global scientific publications, a quarter of the output from China and the USA.

What are the benefits of shifting to private sector-led research?

1. Efficiency & Innovation – Private firms operate in a competitive market, which drives them to achieve more efficient and innovative R&D outcomes.

2. Economic Growth – Private sector research aligns better with market needs, leading to enhanced commercialization and job creation in research-intensive sectors.

3. Improved Education & Industry Collaboration – Stronger academia-industry partnerships foster better training opportunities for students and researchers, bridging the gap between education and industry.

4. Risk Diversification – Contracting research to multiple private firms reduces dependency on government-run laboratories, ensuring a more diverse and resilient research ecosystem.

5. Greater Societal Impact – Knowledge spillovers from private research can contribute to higher GDP growth, benefiting society as a whole.

What are the challenges in Implementation?

1. Low R&D Investment: India’s GERD remains around 0.7% of GDP, significantly below the 2% target.

2. Accountability Issues: Relying on the private sector for 72% of National Research Foundation (NRF) funding raises concerns about alignment with national priorities.

3. Limited knowledge dissemination: Expertise remains isolated within select institutions like ISRO, rather than widely distributed across academia and industry.

4. Bureaucratic hurdles: Complex layers of administrative clearance delay financial approvals and project execution.

5. Belief-Based Research Focus: Scientists express concerns over the government’s emphasis on panch-gavya and Indian Knowledge Systems, potentially diverting resources from evidence-based research.

What should be the way forward?

1. Increase Public Funding for R&D– India must increase public funding for R&D by raising GERD to at least 2% of GDP to remain competitive. Additionally, greater financial support should be provided to state and private universities to bridge research gaps.

2. Strengthening Legal & Financial Frameworks– Legal reforms should promote public-private partnerships (PPP) in research, with transparent mechanisms to ensure efficient fund allocation and utilization.

3. Enhancing Industry-Academia Collaboration- The government can incentivize private sector investments in research by offering tax benefits and grants while also establishing Centers of Excellence (CoEs) in emerging fields.

4. Improving Research Accountability & Performance Evaluation- Creating monitoring frameworks to track research outcomes and commercialization while encouraging global collaborations to improve research output.

5. Encouraging Entrepreneurship & Startups in Deep Tech- The government can provide grants and venture funding for startups in sectors like AI, biotechnology, and space technology. Additionally, expanding incubators and accelerators in universities and research institutions will further support innovation and entrepreneurship.

Conclusion

India’s transition towards funding private universities and firms for R&D is a pivotal step in fostering innovation and intellectual growth. This approach aligns with Prime Minister Narendra Modi’s vision of “Jai Jawan, Jai Kisan, Jai Vigyan, and Jai Anusandhan,” emphasizing the importance of scientific research in national development.