Viksit Bharat demands an innovation revolution

Liberalisation of the Indian economy, 35 years back, was a forced choice. Is it high time that imagination was also liberalised, but voluntarily and not by force?

Once upon a time, India gave the world zero, plastic surgery, astronomy, Yoga, Ayurveda, and the list goes on. However, it is now a nation that consumes innovation far more than it creates. While celebrating start-ups, unicorns, and IPOs, we have mastered the art of innovating peripherally but importing the crux.

The numbers do not lie. India spends only around 0.7 per cent of its GDP on Research and Development (R&D), a number that has remained almost the same over time, whereas developed nations like Israel and South Korea spend over 5 per cent. Even the USA and China spend over 3 per cent on R&D. This is becoming a structural handicap. While calling ourselves a knowledge economy, we are barely investing in knowledge.

Patents per million of population remain minuscule, while India produces millions of engineers every year. We are the software capital of the world but import hardware, chips, medical devices, etc. We host GCCs and global R&D hubs, but often for global headquarters rather than for indigenous innovation.

India’s R&D debate is based on a dangerous notion that innovation is the responsibility of the government alone. In developed economies across the globe, such as the USA, Japan, Germany, and China, R&D financing by the business sector exceeds 60 per cent. However, in India, the government is often seen as the main culprit if R&D is not taking off.

In crucial sectors such as defence, nuclear energy, space, DPI, and critical minerals, heavy government R&D spending is understandable. Recent measures under PM Modi, such as the establishment of ANRF and the RDI Fund, reflect the government’s seriousness towards R&D. However, innovation is never only a state subject; it is primarily market-led.

Neither the smartphone was invented by any ministry, nor was the semiconductor revolution driven by subsidies alone. Even AI was not born inside government labs. Across the developed world, private capital bears risks that public finance cannot justify to voters.

And here lies India’s paradox: Corporate India is cash-rich but research-poor. India Inc. sits on unprecedented cash reserves but has a limited appetite for long-term risk. Share buy-backs, dividends, real-estate expansion, and financial investments often take priority over deep research.

Why? Because innovation in India is structurally irrational. Not intellectually irrational, but economically irrational, as innovation requires three things: risk, time, and freedom. India’s regulatory culture taxes all three, while companies face compliance burdens, slow approvals, policy unpredictability, and weak industry-academia collaboration. The result? Firms choose certainty over curiosity. Why invest in uncertain deep tech when regulatory arbitrage, market dominance, or financial engineering deliver low-hanging fruit? India rewards scale. Innovation rewards uncertainty. Any guess which one boards prefer?

Subsidies vs science

Here lies the political reality policymakers rarely say aloud. In a democracy, governments must spend on areas such as social welfare, poverty alleviation, disaster management, infrastructure, health, education, and various subsidies. These are not optional but democratic obligations. Expecting the government to dramatically increase R&D spending while shouldering these responsibilities is wishful thinking in a developing democracy.

Innovation cannot be funded only by taxpayers when corporations sit on huge idle capital. India does not have an R&D spending problem. It has a private-sector risk-appetite problem. And this threatens the notion of Viksit Bharat. Moreover, India loves the word jugaad. It celebrates frugal innovation, improvisation, and cost optimisation. However, frugality is not the same as innovative research. Jugaad produces incremental efficiency. R&D produces technological sovereignty.

Nations that invest and invent in futuristic fields such as AI, quantum computing, semiconductors, critical minerals, renewable energy, etc. will set the rules of trade, security, and geopolitics. Nations that do not will borrow the future. The transition from jugaad to genuine invention is the need of the hour.

The uncomfortable truth about Indian capitalism is that it has matured in a protected ecosystem characterised by high entry barriers in several sectors, market concentration in key industries, strong returns in infrastructure, finance, and services, and limited competition. In such an environment, the incentive to invest in risky R&D is low.

Competition drives innovation. Market power reduces the need for it. Until competition becomes the prime mover of corporate growth, research will remain peripheral.

India does not need mere slogans about innovation, but incentives aligned with invention. This necessitates paradigm shifts, such as making R&D financially rational through stronger tax incentives tied to actual research output, public procurement that prioritises domestic innovation, and faster IP enforcement and patent processing.

Moreover, it is worthwhile to make risk culturally acceptable by encouraging corporate venture funding for deep tech, rewarding long-term R&D in stock-market valuations, and reforming the bankruptcy stigma associated with failed innovation ventures. Additionally, universities and academic institutions should be groomed as engines of industry by incentivising industry-funded research chairs, permitting flexible hiring and pay structures in research institutions, and creating shared industry-academic laboratories. Innovation ecosystems are not built by policy documents alone, but by aligned incentives.

India is a fast-growing economy, but growth without innovation has limits. An economy can grow by adding labour, capital, and productivity. India has relied heavily on the first two, but sustained prosperity depends on the third. Without innovation, growth eventually slows.

Without invention, incomes stagnate and strategic autonomy weakens. The demographic dividend will not last forever, and cheap labour is not a permanent advantage. Innovation is the only long-term multiplier. The 20th century exhorted India to become independent; the 21st century asks it to become inventive. Government labs, start-ups, and academia cannot achieve this alone.

Corporate India must decide whether it wants to be merely wealthy or truly consequential for Viksit Bharat. Nations that stop inventing eventually start importing their destiny, and history rarely remembers those who only bought the future.

The writer is an alumnus of NESA, Washington, DC, and IIT (ISM) Dhanbad, and is associated with the Indian Institute of Public Administration (IIPA), New Delhi, as Registrar; Views presented are personal.