Research Ready

Can India's $12 billion R&D fund kickstart a revolution? Experts say what matters most is how the money is spent

- By MANU BALACHANDRAN, SAMIDHA JAIN & ANUBHUTI MATTA

A few years ago, Aditya Sharma, the head of process solutions for German multinational Merck Life Sciences, was on a visit to Hyderabad, home to some of the country's largest pharmaceutical companies.

He happened to visit an incubator, a facility that provides support to early-stage startups, helping them develop their business model prototypes and prepare them for growth. “It was one of the plug-and-play labs,” Sharma tells Forbes India.

It is often at these incubators that many of the world’s most renowned startups and billion-dollar companies have been founded, including Airbnb and Dropbox. Inevitably, that means they also serve as a hub for research and development (R&D), both from a commercial and strategic point of view for a country. Sharma, however, was in for a surprise in Hyderabad. “Some of them [startups] told me that they are not even able to afford the rent, and some had already moved out,” he says.

In many ways, that’s also the dark side of India’s R&D story, one where entrepreneurs and scientists often find themselves in despair, having to wind down their work for lack of funds after making early progress. India’s R&D expenditure as a percentage of GDP remains paltry, ranging between 0.6 percent and 0.7 percent, much lower than countries such as China, the US and Israel. Israel, a global startup hub, spends 5.4 percent of its GDP on R&D, while the US, the world’s largest economy, spends 3.5 percent of its GDP.

Acknowledging this reality, the Narendra Modi government is attempting a shakeup with a new policy with a staggering corpus of ₹1 lakh crore ($12 billion) to bolster the movement from research to products. The new scheme looks to provide financing or refinancing with long tenors at low or nil interest rates to spur private sector investment in R&D.