R&D: RBI article flags low R&D spend, could hurt India’s transition to next phase of manufacturing


India’s investment in the Research and Development (R&D) segment lags behind advanced economies substantially despite its increasing impact on the manufacturing sector.

Unfortunately, India has been slow to start stepping up its investments in research and development (R&D) activities. India’s R&D intensity- measured as expenditure on R&D as a percentage of GDP- remains less than 1% as of 2018.

According to a RBI article, India’s R&D intensity remains 0.7% (as of 2018) in comparison to other countries where the number is somewhere near 3%.

This low number can be attributed to less investment by Indian companies in setting up their R&D centres. India has been receiving billions of dollars in capital from outside markets (MNCs) on the back of access to the English-speaking engineers and experts living here who cost a fraction of what they would back at home. However, Indian companies are still not contributing much in strengthening the R&D segment which, in turn, is hitting the growth of the manufacturing sector of the country.

With the roll out of 5G networks, the R&D industry might witness a sharp increase owing to more innovations in the industry. The decision to allow private networks tries to address the speed of 5G rollout by shifting the onus on enterprises that stand to benefit from the Internet of Things (IoT) and artificial intelligence (AI).

“To harness opportunities in IR-4, concerted actions are required to channelize India’s strength in digital technologies to develop smart manufacturing. A pre-requisite for this transition is investment in R&D and strengthening the knowledge base of human capital,” stated the RBI article.

The transformation in various sectors including agriculture, manufacturing and services might result in boosting economic productivity on an unprecedented scale.

Industry 4.0 is an initiative with focus on developing an interconnectivity between physical and digital space through IoT. It aims towards making the IoT concept more familiar, available and affordable for the domestic markets and industries. Currently, IoT is used in supply chain management, customer engagement, virtual meetings, etc.

“This positive development will enable enterprises to implement use cases in campus 5G deployments like massive machine type communications for Industry 4.0, ultra-reliable low latency communications for transportation use cases and enhanced mobile broadband for AR/VR use cases,” said Ashutosh Sharma, VP & research director at Forrester.



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