Why Indian industry economises on R&D

India's challenge is not a lack of talent: It is a lack of sustained competitive pressure that is necessary to convince manufacturers to raise standards

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R&D flourishes when survival demands it — when firms must meet the standards of the world's most competitive markets. It thrives under relentless competition and minimal protection.

There is constant talk about the need for higher research and development (R&D) spending in India. Industrialist Naushad Forbes has long advocated it. The government exhorts industry to innovate. Corporate leaders promise action. Yet little changes. Why?

I will argue it is because of Indian democracy and the Indian consumer. Let me take a historical detour to explain.

When the British left India, they did so hastily. Exhausted by World War II and pressured by a powerful freedom movement, they departed with minimal transition planning and with little care as to what happened after they had gone. Partition displaced over 14 million people and killed more than a million. Country boundaries were drawn in distant offices without understanding social or geographic realities.

The British left a country drained by 150 years of colonial extraction, with low literacy, weak infrastructure, and deep poverty. Yet it started as an independent nation with universal adult franchise, something even Switzerland did not have.

In the early years, the moral authority of the Independence movement gave leaders clarity and autonomy. Jawaharlal Nehru supported a parliamentary democracy combined with socialist economic principles. He embedded democracy, scientific temper, and nonalignment but also adopted an import-substituting industrialisation (ISI) economic strategy that assigned the commanding heights of the economy to the State. With limited private capital and technical capability, the government built heavy industries and nurtured infant sectors. Institutions such as the IITs were established, and dams and steel plants became symbols of national ambition. Arguably, this strategy was unavoidable.