Investment in Research and development and Research Intensity

Since World War I, the United States has maintained global leadership thanks to an innovative culture supported by a strong research and development foundation (R&D). Based on technology and innovation, China is challenging US leadership. If India wants to be a Vishwa guru, it must invest in research and development.

Innovation and missing R&D Investment

  • Growth engine: Innovation is rightly recognized as a driver of economic growth.
  • The government launched the Atal Innovation Mission (AIM) in 2016 to create an ecosystem to promote innovation and entrepreneurship in the country.
  • Actual expenditure is lower: All of these are positive steps, but the foundation of all of this is how much India actually spends on R&D, both in absolute terms and as a percentage of GDP, in comparison to other G20 countries.
  • Sustainable Goal: SDG Target 9.5 encourages nations to encourage innovation and significantly increase the number of researchers, as well as public and private R&D spending. The proposed aggregate to quantify a country’s commitment to R&D is gross domestic expenditure on R&D (GERD).

What is the global R&D investment scenario?

  • UIS (University Institute of Statistics): According to the latest report from UNESCO’s Institute for Statistics (UIS), the G20 nations accounted for 90.6 percent of global GERD (current, PPP$) in 2018.
  • R&D spending has increased to a record high of approximately 2.2 trillion current PPP$ (2018), while Research Intensity (R&D expenditure as a percentage of GDP) has gradually increased from 1.43 percent in 1998 to 1.72 percent in 2018.
  • Investment in PPP terms is misleading: Though spending in PPP terms is a reasonable metric for measuring economic welfare when it comes to technological prowess in high-end R&D activities, it all comes down to measuring hard currency in US dollars.

G20 countries’ R&D investment

  • G20 investment leader: The G20 countries, which will account for 86.2 percent of the global GDP and more than 60 percent of the global population in 2021, are the leaders in every way.
  • The United States spends the most on research and development (R&D), followed by the European Union ($323 billion) and China ($297.3 billion) in 2018.
  • India spends nothing: India lags far behind, with a pitiful R&D expenditure of only $17.6 billion in 2018. In terms of their relative shares of G20 R&D expenditure, the US leads with 36%, followed by the EU (20%), and China (3%). (18 percent). In dollar terms, India accounts for less than 1% of G20 R&D expenditure.

Connections between Research Intensity and Expenditure on R&D

  • Percentage to GDP: While absolute R&D expenditure provides a sense of scale, the percentage to GDP provides research intensity (RI).
  • South Korea has the highest RI: It is worth noting that, according to the most recent data, South Korea has the highest RI at 4.43 percent, followed by Japan (3.21 percent), Germany (3.09 percent), the United States (2.83 percent), France (2.19 percent), China (2.14 percent), and the European Union (2.14 percent) (2.02 percent). With a RI of 0.65%, India is ranked 17th in the G20 (see infographics).
  • Israel as an example: Israel is a non-G20 country with the highest RI of more than 5% despite having an R&D expenditure of only $18.6 billion, a population of only 9.3 million, and a per capita income of around $51,430. It’s no surprise that Israel is known for its innovations, whether in defense or agriculture.

Lessons from Israel

  • Growth and competition in innovation: Israel’s innovation system is a key driver of its economic growth and competitiveness.
  • The government has taken an active role in financing innovation, particularly in SMEs, as well as in providing well-functioning frameworks for innovation, such as venture capital (VC), incubators, strong science-industry links, and high-quality university education.
  • India can learn from Israel: Israel makes a strong case that, despite being a smaller country, sustainable growth can be achieved by prioritizing R&D investments. A lesson that India can take.

@the end

India has demonstrated global leadership in the information technology and digital worlds. If it can demonstrate similar breakthroughs in other sectors, it will be able to realize its dream of becoming a Vishwa guru.

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