India’s gross expenditure on research and development reached ₹2.45 lakh crore in 2023-24, with private investment now outpacing government funding. While this marks a significant shift, overall R&D intensity remains below 1% of GDP, lagging behind global peers like the US and China. Investors should monitor how this rise in private innovation spending impacts long-term competitiveness and profit margins in key sectors.
India has marked a structural shift in its research and development landscape, with gross expenditure on research and development (GERD) rising to ₹2.45 lakh crore in the 2023-24 fiscal year, up from ₹2.13 lakh crore in the previous year. Projections indicate this figure could climb further to approximately ₹3.13 lakh crore by 2025-26. More importantly, the composition of this spending has changed, as private sector research investment has, for the first time, exceeded government funding, reaching ₹1.27 lakh crore compared to the public sector’s ₹1.18 lakh crore.
While the absolute numbers show a clear upward trend, the relative impact of this spending—often measured as R&D intensity—remains a point of caution for long-term economic strategy. R&D intensity is defined as the total research expenditure calculated as a percentage of the country's GDP. In 2023-24, this ratio stood at 0.84%, up only marginally from 0.82% the previous year. This level of investment is significantly lower than major global economies, where R&D intensity often ranges between 2.5% and 4.5%, as seen in nations like South Korea, the United States, and China.
For investors, this data highlights two distinct trends. First, the increase in private sector investment signals that companies are prioritizing innovation to stay competitive, likely in sectors such as technology, pharmaceuticals, and manufacturing. This shift suggests that businesses are increasingly viewing research not just as a cost center, but as a driver for future growth and market share. However, the reliance on, and concentration of, government research spending remains high, with roughly 76% of public funding originating from just 12 central scientific agencies. The Defence Research and Development Organisation (DRDO), along with the space and atomic energy sectors, continue to account for the bulk of these resources.
Despite the positive trend in private participation, the country faces systemic hurdles. These include a complex regulatory environment, potential administrative delays, and a geographical concentration of research efforts that may not yet be broad-based. Furthermore, there is the risk that short-term financial pressure on corporations could cause them to slow down investment in projects with long gestation periods—those that take years to show financial results. The government has introduced initiatives like the Anusandhan National Research Foundation and a ₹1 lakh crore Research, Development and Innovation (RDI) Fund to address these gaps and encourage more sustainable, long-term innovation.
Moving forward, the effectiveness of this spending will depend on whether it leads to tangible productivity gains and technological breakthroughs. Investors tracking sectors heavily involved in research, such as semiconductors or advanced manufacturing, should look beyond immediate profit figures to assess how successfully these companies are scaling their research initiatives into commercial success.