Transforming India’s R&D statistics

(MainsGS3:Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.)

Context:

• India’s research and development (R&D) expenditure-GDP ratio of 0.7% is very low when compared to major economies and is much below the world average of 1.8%. 

Misleading data:

• The main reason is the low investment in R&D by the corporate sector as the corporate sector accounts for about two-thirds of gross domestic expenditure on R&D (GERD) in leading economies, its share in India is just 37%.
• There is evidence, however, suggesting that India’s GERD data are an underestimate.
• A 2022 infobrief of the National Science Foundation (NSF) of the United States on Foreign R&D by U.S.-based multinational corporations (MNCs) show a spend of $9.5 billion (₹649.7 billion) on R&D in India in 2018, which increased to $9.8 billion (₹690.2 billion) in the following year. 
• But the latest Research and Development Statistics, published by the Department of Science and Technology (DST) in 2020, has provided an estimate of ₹60.9 billion R&D spending in 2017-18 by foreign MNCs, which is only about 10% of what U.S. firms have reported to have spent in India on R&D.

Issues with the current system:

• 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 but 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 (DSIR) list of recognised R&D units and the Prowess database of the Centre For Monitoring Indian Economy Pvt. Ltd. for this purpose. 
• The DSIR list may not have many of the actual R&D performers for two reasons: firms which consider government incentives as not attractive enough or that are sensitive about sharing critical information with the DSIR may not be inclined to register themselves with the DSIR. 
• Furher, 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. 
• In fact, many of the R&D performing enterprises in new technology areas may come under the services category.

Way forward:

• Transforming India’s R&D statistics to truly reflect the R&D ecosystem calls for short-term and medium-term measures. 
• In the short term, the 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.
• While surveys can collect much more information related to innovation activities, R&D statistics should not be confined to the responses to the surveys. 
• Instead, annual R&D estimates can be prepared from mandatory disclosures that the enterprises are required to make to the 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. 
• Additionally, proper disclosure of information to regulatory agencies, including R&D spending data, should be made an essential component of the environmental, social and governance (ESG) ranking of enterprises.