Authors: Eugene Sebastian and Mohan Krishnamoorthy

Over the next decade India’s research and development (R&D) sector is expected to undergo major changes as the Indian government progressively reforms and scales up public investments into science and technology. India along with China is set to drive global R&D. According to latest data, global R&D spending is expected to grow by about 5.2% to more than $1.4 trillion in 2012. Most of the growth is being delivered by Asian economies, which are expected to grow by 9% compared to Europe’s 3.5% and North America’s 2.8%. India’s share of total global R&D spending is expected to increase from 2.6% in 2010 to 2.9% in 2012.

India’s R&D landscape is rapidly transforming. India already ranks as world’s leading exporter of information-technology services and ranks third after America and Japan in terms of the volume of pharmaceuticals it produces. India’s growing share of R&D spend and its transforming landscape is largely driven by a four major influencers: increase in R&D expenditure; improving research performance; growth in R&D centres and university-industry linkages.

Rising expenditure

India’s expenditure on R&D is growing. According to recent OECD Science and Innovation report, India’s R&D expenditure grew by 8% a year in constant prices, rising from USD 13.8 billion to USD22.9 billion, a level similar to that of the Netherlands and Sweden. India’s government however remains the main R&D funder. Much of this funding is directed to Government research laboratories and the university R&D sector while Corporate India gets hungrier for technology that can be commercialized and exploited. Much of India’s technologies are still licensed from overseas while universities and government funded research labs used to be less concerned with commercialization and more focused on fundamental research.

Rising performance

A second influencer is Indian’s striking research performance over the last decade. In the past, science policy literature would refer to India as a ‘sleeping giant’. Over recent years however, India’s trajectory has dramatically changed with substantial growth in its scientific publications. The number of Thomson Reuters indexed papers having at least one author address in India has risen from 16,500 papers in 1998 to 30,000 in 2007. In fact, India’s rate of growth has outpaced developed countries such as Germany and France.

R&D Centres

A third major factor influencing India’s R&D performance is the dramatic growth in the number of multinational companies investing heavily in India’s research and development. Together with China, both countries are attracting a huge amount of new R&D investment. In the latest survey released by Battelle and R&D Magazine, China and India combined host 61% of U.S.’s offshore R&D operations. According to research firm Zinnov, 30 percent of the top 1,000 R&D spenders have a presence in India. There are, for instance, more than 5,000 pharmaceutical firms in India, employing about 340,000 people. The country accounts for around 25 per cent of the world’s generic drug production and has 25 per cent of the drug master files with the US Food and Drug Administration. India also has the highest number of FDA-approved production facilities in the world.

There are a number of key attractors for multinational firms. India’s has young, low cost and highly talented pool of workforce. India, for instance, adds 6000 PhDs, 200,000 engineers, 300,000 non-engineering postgraduates, and 2,100,000 other graduates to its workforce annually. The use of English in commercial dealings also creates a comfortable environment for foreign firms to set up their base in the country.

Growing University-Industry linkages 

Finally, India’s higher education institutions’ active linkage with industry is beginning to shape the country’s R&D landscape. India has highly acclaimed educational institutes such as the Indian Institutes of Technology (IITs), Indian Institute of Management (IIMs) and Indian Institute of Science (IISc). Most of these institutes conduct R&D in collaboration with central and state governments as well as industry players on a regular basis.

While linkages between academia and industry present a significant opportunity, especially with multinational companies marking their R&D presence in India, some analysts however argue that in reality these linkages are not as strong as they could be. Krishnan Rishikesha from the Indian Institute of Management Bangalore suggest that the culture of strong University – industry interaction is sadly lacking and is not as strong as it needs to be if India’s aspiration to be a world class research hub are to be realized. Moreover most of these engagements tend to be short-term and “project-based”.

India’s rapidly changing R&D sector will create new opportunities. India’s young demographic profile, its huge talent pool, its expanding science base and its growing attraction to foreign firms seeking to internationalise R&D will offer new points of connection in the Asian Century.

Professor Mohan Krishnamoorthy is Chief Executive Officer of the Indian Institute of Technology Bombay (IITB)-Monash Research Academy in Mumbai. Dr Eugene Sebastian is Director, Global Engagement at Monash University, Australia. This article is an excerpt from an IITB-Monash Research Academy Occasional Paper to be released in January 2013