Increase India’s R&D Investment to at Least 2% of GDP

India has built substantial scientific and technological capability, but it still invests relatively little in research and development compared with other major economies.

India’s Gross Expenditure on Research and Development is about 0.64% of GDP. By comparison, R&D expenditure is approximately 3.48% of GDP in the United States, 2.43% in China and 4.91% in South Korea. This gap matters because sustained research investment is one of the foundations of technological innovation, productivity and long-term economic competitiveness.

The difference is also visible in patent creation. According to the World Intellectual Property Organization, applicants based in India filed about 76,400 patent applications worldwide in 2024, compared with approximately 503,000 from the United States and 1.8 million from China. India therefore generated only about 15% as many patent applications as the United States and about 4% as many as China.

However, an encouraging trend is emerging. India’s patent applications increased by approximately 19% in 2024—the sixth consecutive year of double-digit growth—one of the fastest growth rates among major patent-filing countries. This demonstrates that India’s innovation capacity is expanding, even from a much smaller base.

Patent numbers alone should not be treated as a measure of successful innovation. Patents vary considerably in technological and commercial value. The larger challenge is to expand India’s research base while ensuring that more discoveries and intellectual property progress into commercial technologies, products and companies.

Another structural weakness is the relatively limited role of industry in financing research. Businesses account for only about 41% of India’s R&D expenditure, compared with roughly three-quarters or more in the United States, China and South Korea. This leaves India’s research system unusually dependent on government funding and weakens the connection between scientific research and commercial innovation.

This matters because many of the technologies that will shape economic competitiveness and national security over the coming decades—including artificial intelligence, semiconductors, biotechnology, robotics, quantum technologies, advanced materials, clean energy and space technologies—require sustained investment over many years.

India therefore faces a two-part challenge: it needs to invest substantially more in research and development, and a much larger share of that growth needs to come from businesses and commercially oriented research.

The objective should not simply be to spend more money or produce more papers and patents. It should be to build an innovation system capable of converting:

Research → Intellectual Property → Technology → Products → Companies → Economic and Strategic Value.

India should set a national objective to progressively increase total public and private R&D expenditure to at least 2% of GDP within ten years.

The objective should not be achieved primarily by increasing government expenditure. India’s larger challenge is to create conditions that enable businesses to dramatically increase their investment in research and development.

Establish a Ten-Year R&D Investment Roadmap

India should establish measurable intermediate targets rather than announce a distant 2% aspiration.

Progress should be reviewed annually, separately tracking:

– total R&D expenditure as a percentage of GDP;
– government R&D expenditure;
– business R&D expenditure;
– university research expenditure;
– investment in strategic and emerging technologies; and
– R&D investment by Indian companies relative to global competitors.

If investment is not rising sufficiently, policy should be adjusted rather than allowing the target to remain aspirational.

Make Private Industry the Main Driver of Additional R&D

Government should create the conditions for business R&D to become the largest source of India’s additional research investment.

India’s recently launched ₹1 lakh crore Research, Development and Innovation Fund is an important step in this direction. The program is explicitly designed to catalyze private investment in areas including AI, quantum technologies, robotics, biotechnology, space, energy and other strategic technologies.

Rather than creating multiple overlapping schemes, India should build on this framework.

Public financing should increasingly be used to leverage additional private investment, particularly where technological risk, long development periods or uncertain early markets discourage companies from investing alone.

Government should not replace private R&D. It should help make ambitious private R&D possible.

Reward Additional R&D, Not Spending That Would Have Happened Anyway

Tax incentives, co-investment and concessional financing should be designed to encourage companies to increase their R&D investment.

Support should favor genuine research, engineering, experimentation, prototypes and intellectual-property creation rather than routine business expenditure being reclassified as R&D.

Where government provides substantial financial support, programs should establish measurable objectives for additional private investment, technological milestones and commercialization.

Concentrate Public Investment Where Markets Alone Will Underinvest

Government research funding remains essential in areas where commercial returns are distant or uncertain.

Public investment should remain strong in:

– fundamental scientific research;
– national-security technologies;
– public health;
– climate and energy technologies;
– strategic technologies with high dependence on foreign suppliers; and
– high-risk research with potentially transformative benefits.

Universities and public laboratories should have stable funding for fundamental research rather than being expected to demonstrate an immediate commercial return from every scientific project.

The objective should be a balanced system:

Government supports fundamental and strategic research. Industry increasingly finances commercially relevant R&D. Both collaborate where their capabilities overlap.

Strengthen Industry-University Research Partnerships

Companies should have stronger incentives to finance research inside Indian universities and research institutions.

Universities should be able to establish long-term research partnerships with industry, create shared laboratories, license intellectual property and allow researchers to participate appropriately in commercialization.

The goal should be to create a continuous pipeline:

Research → Discovery → Prototype → Commercialization → Company → Scale

Increasing R&D spending without improving this pathway would risk producing more research without producing proportionately more innovation.

Make R&D Investment Competitive

Government research funding should increasingly use transparent, competitive processes.

For major technological challenges, multiple universities, laboratories, startups and companies should be able to pursue competing approaches rather than assigning an entire technological problem to a single institution.

Funding should expand when teams meet clearly defined research or technology milestones and be reconsidered when programs repeatedly fail to demonstrate progress.

The objective is not merely to spend 2% of GDP. It is to generate more useful research and technological capability from that investment.

Publish a National R&D Scorecard

India should publish an annual R&D and innovation scorecard tracking not only expenditure but also outcomes such as:

– business share of national R&D;
– high-quality scientific research;
– patents and intellectual property;
– patents licensed commercially;
– university-industry research partnerships;
– technologies progressing from laboratory to commercial deployment;
– deep-technology companies created;
– private capital attracted;
– strategic technologies developed domestically; and
– technology-intensive exports.

The 2% target should therefore be accompanied by an equally important question:

What is India getting from the additional investment?

Countries that lead in science and technology generally invest substantially more in R&D than India, with businesses playing a much larger role.

South Korea provides one of the clearest examples. It invests close to 5% of GDP in R&D, among the highest levels in the world, with businesses responsible for most of that investment. Its experience demonstrates how sustained private and public investment in research can support technology-intensive industries and global competitiveness.

The United States provides another useful model. U.S. R&D expenditure is about 3.5% of GDP, compared with India’s approximately 0.64%, and businesses account for roughly three-quarters of U.S. R&D expenditure.

The strength of the U.S. system is not simply the amount spent. The federal government finances substantial fundamental and mission-oriented research through universities, national laboratories and agencies, while private companies invest heavily in developing and commercializing technologies. Universities, venture capital, startups and established companies help move discoveries from laboratories into commercial products.

This has helped create an ecosystem in which publicly supported research can become the foundation for new industries, while private capital takes many technologies through development and commercialization.

India does not need to copy either country. South Korea demonstrates the value of sustained high R&D intensity and strong business investment; the United States demonstrates how government research, universities, entrepreneurship and private-sector R&D can reinforce one another.

India should build its own model around the same underlying principles:

Government should fund fundamental and strategic research. Universities should generate knowledge and talent. Businesses should become the largest investors in commercial R&D. Entrepreneurs and capital markets should help turn discoveries into products and companies.

The ultimate objective is not simply to reach 2% of GDP.

It is to create an innovation system capable of turning research investment into technologies, companies, productivity and strategic capability.