Budget 2023: The Innovation Route to Wealth : Daily Current Affairs

Date: 31/01/2023

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment. Government Budgeting.

Key Phrases: Budget, Research, Innovation, GDP, BRICS, Gross Expenditure On R&D (GERD), Investments, Brain Drain, Stagnant, Intellectual Property, Research Linked Incentive (RLI).


  • While much is being done by the government in enabling industry, academia, research laboratories and start-ups individually, much more can be achieved by creation of a National Research Quad (NRQ).
  • Budget Day could be an opportunity to announce the setting up of the NRQ headed by the Govt. and governed through an Advisory Council.

Key Highlights:

  • India’s spending on research and development (R&D) is among the lowest in the world, as per a study conducted by government think-tank NITI Aayog and Institute for Competitiveness.
    • R&D investment in India, in fact, has declined from 0.8% of the GDP in 2008–09 to 0.7% in 2017-18.
  • Data shows that India’s Gross Expenditure on R&D (GERD) is lower than the other BRICS nations. Brazil, Russia, China and South Africa spend around 1.2%, 1.1%, above 2% and 0.8% respectively. The world average is around 1.8%.
  • Developed countries the United States, Sweden, and Switzerland spend about 2.9%, 3.2% and 3.4%, respectively. Israel spends 4.5% of its GDP on R&D, the highest in the world.

India & Stagnant Research Performance:

  • India’s GERD at $43 per capita is one of the lowest in the world. India’s BRICS and ASEAN counterparts like Russia (285), Brazil (173), and Malaysia (293) fare much better.
    • Data shows only Mexico, $0.31had a lower share of GERD as a percentage of GDP.
  • Many companies, experts and even the RBI, over the years, have flagged the poor performance when it comes to R&D.
    • It has also been observed that there is a mismatch between what is taught at the university level and what is required at the industrial level
  • Data shows that countries that spend less on GERD fail to retain their human capital in the long run.
    • “Lower spending on R&D and less innovative opportunities may lead people to move from one region to another region - state/ country for better opportunity.
    • This phenomenon is known as brain drain and reduces the competitive edge of a state, further impacting the country’s overall economy.
  • Among the reasons cited for the low spending on R&D in developing countries like India is that investments in R&D take time to produce results.
    • Countries like India tend to have bigger issues like hunger, disease control, and raising the quality of life and authorities divert resources towards tackling them.
  • However, these pressing concerns shouldn’t be viewed as a hindrance, but rather an opportunity to widen the ambit of R&D.

The Way Ahead:

  • Budget Day could be an opportunity to announce the setting up of the NRQ headed by the Govt. and governed through an Advisory Council.
    • The target is to scale up the investment in national R&D from 0.7 per cent to 4 per cent of GDP by 2047 with an interim goal of 2.5 per cent by 2030 with industry contributing the majority.
  • Some suggestions to achieve this are:
    • Enhance spending on institutes of higher learning for cutting-edge research: Research students and professors must be provided with the requisite research facilities. Genuine failure must be permitted; even applauded. Only then, the best brains for research can be retained.
    • Enhance funding to ministries to set up incubators in institutes of higher learning: Various ministries especially the Ministry of Heavy Industry have already set up incubators and accelerators in several institutes of higher learning. The review and monitoring of these incubators and accelerators is done by independent expert committees, which must be encouraged further.
    • Setting up of an India Intellectual Property Think-Tank: The traditional knowledge of artisans’ handicrafts, indigo dyeing and other arts and crafts as well as of innovators in rural areas needs to be protected.
    • It would be appropriate that a mechanism be created to synergise the efforts and IP policies of various wings of publicly funded institutions.
    • Introduce an element of Research Linked Incentive (RLI): Just like the PLI scheme, it would be useful to introduce RLIs that would ensure industry innovates.


  • The Indian economy is set to achieve the $5 trillion GDP goal in the near term. The National Budget to be presented in a few days is crucial for ensuring the country’s inclusive and balanced growth.
  • The Prime Minister has emphasised Innovation, by adding ‘Jai Anusandhan’ to ‘Jai Jawan, Jai Kisan, Jai Vigyan’. How do we translate that vision into reality?
    • When innovation becomes part of the DNA of an economy, it has the capability to generate wealth on a sustainable basis. India must become that economy.
  • For India to be truly competitive and wealthy, Anusandhan is the vehicle on which it has to ride and the National Research Quad will have a vital role to play.

Source: Business Line

Mains Question:

Q. For India to achieve its goal of a $5 trillion economy, India’s GERD needs considerable improvement and needs to touch at least 2%. Suggest measures to achieve this target. (150 words)