Indo-US: Take 2

Source: The post is based on the article “Indo-US: Take 2 – India’s economic size has come mostly through adding physical capital. Intellectual capital needs a big boost” published in The Times of India on 27^th June 2023.

Syllabus: GS 3 – Growth & Development, Science and Technology

Relevance: India’s position in R&D investments and measures needed to boost investments.

News: The current phase of India-US engagement highlights the exchange in high technology areas. This exchange has the potential to boost India’s progress in science and technology.

How can India-US engagement boost India’s progress in science and technology?

It can be done by promoting knowledge transfer between the two nations beyond the areas of engagement.

For example, when China’s Zhonguanccun Science Park was established, it created space for universities as well as high technology overseas and domestic firms. It was designed to help diffusion of knowledge to a wider range of firms.

India should also adopt a policy approach that fosters such ecosystems. Research and development (R&D) can play an important role in this process.

However, despite being the world’s fifth largest economy, India’s track record in R&D is unimpressive.

What is the current position of India in R&D?

As per the observations made by the Niti Aayog, India’s R&D spending is around 0.7% of GDP, while most technologically advanced nations allocate over 2% of GDP. For instance, in Israel, it’s almost 5% of GDP.

Further, data by the World Intellectual Property Organisation shows that India’s economic output is not based much on intellectual capital.

For instance, India ranked 25th in 2021 while South Korea, China and Japan took the top three spots. This poor performance was due to the relatively low R&D investments when compared to other market-based economies.

Moreover, despite the government currently accounting for 55% of the total R&D budget, the investment by the private sector has not yet increased.

Further, India ranks ninth globally in terms of patent applications, which is mostly contributed by IITs and CSIR. Therefore, the private sector’s investment in R&D is crucial for improving India’s position in R&D.

Note: The World Intellectual Property Organisation’s database ranks countries according to domestic patent applications for every $100 billion of GDP.

Must Read: Research and Development in India: Status, Challenges and Recommendations – Explained

What can be the course of action?

A measure of an economy’s competitiveness is also derived from its human capital. 

Since India has done well in surpassing most countries in economic size, it will be the intellectual capital that will be crucial in boosting per capita GDP further.

Hence, the government should encourage Indian corporations to increase their R&D spending while also acting as an enabler.