Are we on track for tech advancement?

Public support for innovation must shift towards radical improvement in higher education and financial support for startups and new innovators

- NITIN DESAI

India wants to move from being a lower middle-income country to a high-income developed nation by 2047—the target year for Viksit Bharat. To achieve this, and to avoid the middle-income trap, technological dynamism and an improved quality of its workforce will be crucial. It is not just factor accumulation, but factor productivity—driven by technological advancement—that will matter most for sustained growth performance.

One can attribute improvements in capital quality and factor productivity to advances in technology. According to the reliable KLEMS (capital, labour, energy, materials, and services) calculation of total factor productivity (TFP), the sum of improvements in capital quality and TFP value growth from 1990-91 to 2022-23 averaged just 0.9 per cent per year for the economy. For manufacturing, the average was zero per cent per year. Clearly, we are not on track when it comes to technological advancement in our production systems.

When it comes to support for technology development in India, the striking feature is the low percentage of Research & Development (R&D) expenditure in gross domestic product (GDP). According to World Bank data, the share of R&D in GDP in India was 0.64 per cent in 1996, rose to 0.86 per cent by 2008, and has steadily fallen since, reaching 0.65 per cent in 2020.

The same database shows a steady rise in China—from 0.56 per cent of GDP in 1996 to 2.56 per cent in 2022. The Viksit Bharat aim requires that India's GDP growth rate average 8 per cent for the 25 years to 2047 to reach just the base level of the high-income category. Its R&D expenditure would need to reach at least 3 per cent of GDP, which would require an annual growth rate in R&D spending of 16 per cent.