India Needs to Raise R&D Spending to 2% of GDP by 2035 to Boost Manufacturing: Report
India’s manufacturing sector is growing, but a new report warns that low spending on research and development is holding it back. The country currently spends only 0.6% of its gross domestic product on R&D. This is far below the levels seen in other major manufacturing nations. To compete globally, India must increase this spending to 2% of GDP by 2035, according to the report.
The report highlights a clear problem. Without more investment in innovation, Indian manufacturers will struggle to move up the value chain. They will remain stuck making low-tech goods. This limits their profits and their ability to compete with countries like China, South Korea, and Germany. These nations spend much more on R&D, often between 2% and 4% of their GDP.
Why Low R&D Spending Hurts Manufacturing
Manufacturing today is not just about making things cheaply. It is about making things smarter. Products like electric vehicles, advanced electronics, and medical devices require constant innovation. Companies that invest in R&D can create better designs, use more efficient processes, and develop new materials. This gives them a strong edge in global markets.
India’s current R&D spending is mostly done by the government. Private companies contribute very little. In advanced economies, the private sector funds the majority of R&D. For example, in the United States, businesses pay for over 70% of all R&D. In India, that number is much lower. This means fewer new products and processes come from Indian factories.
Consider the automotive industry. India makes many cars, but most are for the domestic market or are low-cost models. To become a hub for electric vehicle production, Indian companies need to develop new battery technology and software. That requires heavy R&D investment. Without it, they will depend on foreign technology.
The Target: 2% of GDP by 2035
The report sets a clear goal. India must raise its R&D spending to 2% of GDP by 2035. This is a big jump from the current 0.6%. It means spending roughly three times more money on research and development every year. To achieve this, the government cannot do it alone. Private companies must step up.
Greater private sector involvement is essential. Businesses need to see R&D as an investment, not a cost. They must build their own labs, hire scientists, and partner with universities. The government can help by offering tax breaks and grants. It can also create stronger innovation ecosystems. These are networks of startups, research institutes, and large companies that work together on new ideas.
Building Stronger Innovation Ecosystems
An innovation ecosystem is like a garden. It needs the right soil, water, and sunlight to grow. In India, the soil is the talent pool of engineers and scientists. The water is funding from government and private sources. The sunlight is a business environment that rewards risk-taking.
Currently, India’s ecosystem has gaps. Many good ideas never become products because there is not enough support for early-stage research. Universities often work in isolation from industry. Startups struggle to find long-term funding. The report says these gaps must be closed. India needs more research parks, more industry-academia partnerships, and more venture capital for deep-tech startups.
For example, a company making advanced sensors for factories needs help from university labs to test its designs. It also needs investors who understand the long timeline of hardware innovation. Without these supports, the company may fail or move abroad.
The Path to Innovation-Driven Manufacturing
The report calls this shift a transition to innovation-driven manufacturing. It is not just about making more things. It is about making better things. This transition is crucial for India’s long-term global competitiveness. If India succeeds, it can become a leader in high-tech fields like semiconductors, pharmaceuticals, and renewable energy equipment.
If it fails, India will remain a low-cost assembly hub. Other countries with stronger R&D will capture the high-value parts of the supply chain. The choice is clear. India must invest more in R&D, involve the private sector, and build strong innovation ecosystems. The target of 2% of GDP by 2035 is ambitious, but it is necessary for the country’s manufacturing future.
