India must increase investment in research and development to achieve its Viksit Bharat dream

Summary

It is a misconception that America's tech leadership is purely the product of private enterprise. Many of its key innovations originated from strategic public investment. For India to fulfil its potential, it needs a decisive policy shift in its approach to R&D.

In the 1970s, a small, low-cost manufacturing economy made an unusual choice; it would invest in semiconductors, one of the most complex and capital-intensive technologies of its time. Private industry hesitated in the face of immense risk, but the government stepped in as both investor and enabler, building the capabilities required to seed an entirely new sector.

That country was Taiwan. Today, it produces nearly 90% of the world's most advanced chips and is on track to bring in about $300 billion in revenue this year.

It is a common misconception that America's technological leadership is purely the product of private enterprise. In reality, many of the foundational innovations underpinning its dominance, from semiconductors and the internet to mRNA vaccines and lithium ion batteries, originated from strategic public investment.

Government funding enabled high-risk exploration that private industry later scaled into global businesses. Even Google's PageRank algorithm, the cornerstone of a $4 trillion company employing over 190,000 people, was born of a modest government grant.

India, under the leadership of Prime Minister Narendra Modi, has made significant strides in promoting entrepreneurship over the past decade. It is now the world's third-largest startup ecosystem, with more than $160 billion raised during this period.

Yet venture capital and startups, while essential, cannot substitute for foundational research and development (R&D). They typically build on breakthroughs that are often seeded by public funding.

As India aspires to achieve its Viksit Bharat vision by 2047 and emerge as the world's third-largest economy, it must significantly increase its investment in R&D. India's R&D expenditure remains an order of magnitude lower than China's, at $76 billion compared with $786 billion in 2024. Bridging this gap is essential if India is to compete at the frontiers of technology.

To its credit, India has laid important groundwork in recent years. National missions in artificial intelligence (AI), semiconductors and quantum technologies have been launched, alongside the creation of the Anusandhan National Research Foundation.

These initiatives are supported by a broad institutional ecosystem spanning agencies such as the department of science and technology, ministry of electronics and information technology and Defence Research and Development Organisation.

The next phase must build on this institutional foundation with significantly higher and more sustained funding. Consider this: the five-year budget of the India AI Mission is less than what a leading AI company like OpenAI spends on research in a single month. The comparison highlights both the scale of the challenge and the magnitude of the opportunity.

A coordinated national effort to scale funding for fundamental and frontier research is now essential. To maximize the return on every rupee invested, three systemic shifts must accompany this expansion.

First, breakthroughs require ecosystems. When ideas move from the laboratory to real-world application, private capital is more likely to follow. The US offers a compelling model through its tightly integrated 'triangle of innovation' linking government, academia and industry.

India, by contrast, ranks 91st among 139 economies in collaboration between universities and industry. While steps have been taken to better align incentives across stakeholders, translating intent into outcomes will require a far more coordinated and accelerated push.

Second, breakthroughs require speed. India's patenting activity has grown rapidly in the past five years, yet the time to reach a final decision on a patent application averages 37 months, more than twice as long as in China. Similarly, government grants can take more than three to six months to reach researchers after approval. In an era where technological cycles are rapidly compressing, reducing these delays will yield immediate and measurable gains.

Third, breakthroughs require a culture of risk-taking. To transition from a service economy to a global innovation hub, India must shift from execution-driven labour to curiosity-led discovery. Researchers need both the freedom and the resources to pursue bold ideas, while funders must develop a greater tolerance for uncertainty.

Although private sector participation in R&D has grown to account for roughly half of total spending, Indian industry has traditionally excelled at optimization rather than high-risk, long-term bets. Cultivating a stronger appetite for such investments will be critical if India is to evolve from a consumer of technology into a creator.

For more than a decade, India's innovation output has consistently exceeded expectations for an economy at its income level. Today, it stands at the threshold of becoming a global leader in this knowledge-driven industrial revolution. Realizing this potential will require a decisive shift in how the country approaches research and development.

This is not merely desirable. It is imperative.

The authors are, respectively, a venture capital investor known as 'Father of the Pentium chip'; and CEO of Exception Raised.