RDIF as engine of knowledge economy

THIS YEAR'S ECONOMICS Nobel Prize awarded to Philippe Aghion, Peter Howitt, and Joel Mokyr underscores the principle that sustained productivity gains stem not from capital deepening alone but from frontier innovation, the systematic generation and diffusion of new technologies that displace obsolete ones through creative destruction.

- ASHISH DHAWAN VARUN AGGARWAL

The 1-lakh crore Research, Development and Innovation Fund (RDIF) operationalises this principle by addressing a longstanding structural gap in India’s innovation system, i.e. absence of an institutionalised financing mechanism for commercialising research to create deeptech products. While the Anusandhan National Research Foundation (ANRF) supports upstream research (Technology Readiness Levels, TRL 1-6), THE RDIF provides the downstream capital intensity and risk absorption necessary for late-stage validation, prototyping, and demonstration (TRL 7-9). This is important as innovation accelerates when public investment de-risks private R&D and when competition, intellectual property,and financial depth reinforce one another.

The RDIF’s funding mechanism has been structured to address financing barriers that constrain private sector-led R&D and innovation. It aims to provide long-term financing or refinancing with extended tenors at low or nil interest rates, enabling companies to undertake high-risk, high-impact research in sunrise and strategic sectors. The RDIF adopts a two-tier funding model for efficient resource management. A special purpose fund (SPF) within the ANRF will serve as primary custodian, channelling capital to second-level fund managers who will extend long-term concessional loans to high-potential R&D projects aimed at technology advancement and commercialisation.

Funding may also be provided in the form of equity, particularly for startups and innovation-driven enterprises where traditional loan structures are insufficient to absorb risk.