Why India's falling GERD can be a matter of concern?

The core differentiator between a developed country and a developing country is often the effectiveness and efficacy of it's Research & Development practices. Historically speaking, R&D has been at the nucleus of any nation that has successfully transitioned from developing to developed. It was not USA that developed the first machines, but their ability to extract the most from the machines with their ground-breaking innovations paved their path to emerge as the world leader.

Currently, India is standing at crossroads and every decision the nation makes will be pivotal in determining whether we will become a case study of unprecedented burgeon or of uncapitalised opportunity.

India's Gross expenditure on R&D (GERD) as a % of GDP is a far outcry from what it should be and has been falling since 2009-10, which is both alarming and unpromising. Though, GERD has doubled from ?60,196 crore in FY11 to ? 127,381 crore in FY21, it is still nowhere near where it ideally should be.

In the Interim Budget for FY 24-25, government had allocated ?100,000 crore towards R&D, subdued by sectors like defence and infrastructure which were allocated about ?18 lac crores.

It has been a long-standing policy of the Ministry of Science & Technology to double the GERD every 5 years and maintain it at 2% of GDP. By all measures, this does not appear to be turning to fruition given the current modus operandi where R&D is often side-lined in the budget.

If we look at the the developed countries like USA & Germany, their GERD as % of GDP outshines India exponentially. R&D needs to be treated as an integral part of the budget allocation if India is to compete with these global leaders. Otherwise, the dream of Developed India 2050, will be a lost cause.

Traditionally, Public sector has been the major spender on R&D, but it has been on a declining trend since 2008-09 majorly due to:

• Inefficient utilization of funds due to bureaucracy - According to available information for FY23 the Department of Biotechnology (DBT) utilized only 72% of its allocated budget while the Department of Science and Technology (DST) utilized only 61% of its allocated budget, indicating a significant underutilization of funds.
• Low Budgetary allocation despite the government being conscious of the heightened importance of R&D
• Over prioritization of Infrastructure and Defence

Unlike Developed economies where Private sector drives R&D, the contribution of private sector is India has shown no growth and has remained stagnant, which is detrimental for the economy.

What's even more concerning is the amount of freebies being distributed by the State and the Central Governments to further their political agenda at the cost of the public exchequer. A complete misutilisation of money that could otherwise be constructively used to aid the nations growth. It is in no way an attempt to imply that these public welfare schemes are bad, but if the cost of schemes like Ladli Behna Yojna is the country's long term growth, it is too expensive.

The fact that the government has been very vocal about the importance of R&D in furthering India's story is a positive indicator and it would be interesting to it's allocation in the upcoming budget.

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