India’s private sector must be incentivised to see value in invention

Among the most important pieces of legislation slated to be tabled in the current monsoon session of Parliament is the National Research Foundation (NRF) Bill, 2023. While a draft is not in the public domain, it envisages a new, centralised body to fund research, with a budget of ₹50,000 crore, over the next five years. The NRF draws on models such as the United States’s National Science Foundation whose nearly $8 billion budget is the major source of funding for college and university research, and the European Research Council, which funds basic and applied research. However, the NRF’s plan, going by public statements of administrators, is to draw the bulk of its budget — ₹36,000 crore — from the private sector. For many years, India’s spending on research has lagged between 0.6%-0.8% of GDP, or lower than the 1%-2% spent by countries with an economic base reliant on science and technology. In countries such as China, the U.S. and Israel, the private sector contributed nearly 70% of the research expenditure whereas in India, this was only about 36% of India’s total research expenditure — roughly ₹1.2 lakh crore — in 2019-20. Therefore, the Centre reasons, the way to galvanise university research in India would be to attract more private money. While that is a reasonable expectation, it is unclear how such a proposal can be executed. One of the suggestions is to have the funds private companies allot, as part of their annual corporate social responsibility (CSR) obligations, directed to the NRF. Data from the Ministry of Corporate Affairs show that during FY-2022, companies spent ₹14,588 crore as part of their CSR obligations. CSR trends suggest that nearly 70% of such funds were spent in education, health care, and sanitation projects. Moreover, many of the companies spend this on initiatives that are located within their own communities, with the government not having a say on how this must be spent. Whether the government can force, or offer tax benefits, to coax some of these funds into the NRF remains to be seen.

The relatively greater contribution of private sector research in many countries is because of sustained government support to universities and research institutions, that have then encouraged individuals to build companies, and institutions that saw value in investing in research and development. The challenge in India is not the absence of such companies but the fact that there are too few of them. Organisations such as the NRF should work to create conditions which incentivise the development of private sector organisations that see value in invention and developing proprietary technology. Philanthropy is unlikely to be the panacea.