Embed innovation in industrial policy

India risks remaining a consumer of technology rather than becoming a creator unless it embeds capability-building into every layer of industrial policy

- ADITYA SINHA

IN 1957, the Soviet Union's launch of Sputnik catalyzed a significant strategic response from the US. Within months, NASA was established, federal science funding doubled, and educational curricula saw an overhaul. Ironically, in 2025, the US is witnessing a contraction in federal R&D outlays, citing fiscal prudence and administrative efficiency. This reversal in the global innovation epicenter presents a rare opportunity for emerging economies like India. As Joseph Schumpeter observed, innovation flourishes in moments of disruption. India must recognize this juncture not merely as a chance to catch up but as an inflection point to lead, provided it can embed innovation at the heart of its industrial policy.

India has taken commendable initial steps. The establishment of the Anusandhan National Research Foundation, a proposed ₹1-lakh crore Research and Innovation Fund, and recent department of expenditure circulars easing global procurement of scientific equipment collectively reflect a nascent commitment to reposition India as an innovation-driven economy. These reforms, while necessary, are insufficient. India's private sector investment in R&D remains stagnant at under 0.3% of GDP, and overall gross expenditure on R&D (GERD) has hovered around 0.64% for over a decade. Structural inertia, fiscal fragmentation, and institutional silos continue to dilute the potential of these interventions. The real question, thus, is not if India is doing enough to support innovation, but whether innovation is structurally integrated into its industrial development strategy.