In a major boost to the research and innovation ecosystem in India, Finance Minister Nirmala Sitharaman announced a corpus of INR 1 lakh crore to provide interest-free loans for up to 50 years to the private sector for pursuing research and development in sunrise sectors. This is expected to enhance the competitiveness and productivity of the Indian economy and create new opportunities for the tech-savvy youth.
What are sunrise sectors?
Sunrise sectors are those that have high growth potential and can generate large-scale employment and income in the future. Some examples of sunrise sectors in India are biotechnology, renewable energy, electric vehicles, artificial intelligence, digital health, e-commerce, fintech, etc. These sectors require constant innovation and upgradation to meet the changing needs and preferences of the customers and to cope with the global competition.
Why is this corpus important?
The corpus of INR 1 lakh crore is a significant step towards addressing the gap in research and development (R&D) spending in India, which is much lower than that of the developed countries and some of the emerging economies. According to the World Bank data, India’s gross expenditure on R&D as a percentage of GDP was 0.65% in 2018, compared to 2.84% for China, 2.79% for the US, 3.26% for Japan, and 4.25% for South Korea.
One of the main reasons for this low spending is the lack of adequate funding and incentives for the private sector, which accounts for only about 37% of the total R&D expenditure in India, as per the Economic Survey 2019-20. In contrast, the private sector contributes more than 60% of the R&D spending in countries like China, Israel, Japan, South Korea, etc.
The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates to the private sector for undertaking R&D projects in sunrise sectors. This will encourage more investment and innovation from the private players, especially the startups and MSMEs, who often face difficulties in accessing credit from the formal sources due to high interest rates, collateral requirements, and regulatory hurdles.
The corpus will also complement the efforts of the National Research Foundation (NRF), which was set up last year with an allocation of INR 50,000 crore over five years to fund research projects across disciplines and domains. The NRF aims to improve the quality and quantity of research output from India and foster collaboration between academia, industry, and government. More than 70% of the NRF funding is envisaged to come from the private sector.
What are the expected benefits?
The corpus is expected to have multiple benefits for the Indian economy and society. Some of them are:
- It will enhance the innovation capacity and competitiveness of India in the global market by supporting cutting-edge research and development in emerging technologies and domains.
- It will create new avenues for employment generation and income growth by fostering entrepreneurship and innovation in sunrise sectors.
- It will enable India to address its social and environmental challenges by promoting research and innovation in areas such as health care, education, energy, agriculture, etc.
- It will attract more foreign direct investment (FDI) and collaboration from global players who are looking for innovative solutions and partners in India.
- It will inspire more young talent to pursue careers in science, technology, engineering, and mathematics (STEM) fields by creating a conducive environment for research and innovation.