Private sector firms must invest more in R&D to spur growth: Top official
New Delhi, Aug 7
Private sector investment is witnessing steady and sustained growth, driven by the government's continued push on capital expenditure, but these companies need to invest more in R&D, Economic Affairs Secretary Anuradha Thakur said on Friday.
Addressing the National Council of Applied Economic Research's India Policy Forum 2026 event here, she said that the government's capital expenditure has increased more than five-fold over the last decade from Rs 2 lakh crore in 2014-15 to Rs 10.7 lakh crore in 2025-26 as public investment continues to play a catalytic role by crowding in private investment.
Thakur said that a CII survey shows that private sector investment is moving upwards at a steady and stable pace.
However, she noted that private enterprise today accounts for 41 pe rcent of gross R&D in India, which falls short of the corresponding figure for advanced economies in which they account for nearly 75 to 79 per cent of gross R&D. "India's corporate ecosystem holds immense headroom to lead national innovation. Industrial dynamism ultimately will depend on the willingness of private enterprises to invest, innovate, and scale," she pointed out.
"Economic growth is increasingly driven by knowledge and technology rather than just the accumulation of labour and capital alone," she said.
The next stage of development requires stronger investment in research and development, greater collaboration between universities and industries, which should be the focus going ahead, the Secretary said.
"Our long-term growth story will be determined not only by the amount of capital we mobilise, but also by how effectively that capital is deployed to create productive assets, globally competitive industries, quality jobs, and transformative innovations. We are on that path," she further stated.
India's long-term growth will be determined by how effectively public and private capital is deployed to create productive assets, globally competitive industries, quality jobs and transformative innovations, she pointed out.
"Equally important is improving access to finance, particularly for micro, small and medium enterprises, which remain the backbone for manufacturing," Thakur said.
She also highlighted that despite a very challenging global environment, India continued to keep up its strong growth with stability.
The Indian economy has clocked an average growth rate of 7 per cent over the last three years, amid geopolitical tensions, energy market volatility, and fragmented trade patterns, on the back of strong domestic demand, she added.
— IANS
Reader Comments
41% vs 75-79% in advanced economies - the gap is massive. But honestly, can we blame private firms? R&D is risky and expensive. Our patent laws and approval processes are so slow. Even tax incentives for innovation are not that attractive. Government needs to create an ecosystem where companies WANT to invest in R&D, not just tell them to do it.
One concern though - our government's own R&D spending as % of GDP is only around 0.7%. China spends 2.4%, US close to 3%. If public research institutions like ISRO, DRDO and CSIR are also underfunded, how can we expect private sector to do better? Need a holistic strategy where public and private R&D complement each other.
Actually, there are many Indian startups doing impressive R&D - think of the space-tech sector, AI startups in Bengaluru, biotech companies in Hyderabad. The problem is scale. Global companies have war chests to invest in long-term research. Indian firms, especially MSMEs, are just trying to survive. The government's focus on improving access to finance for MSMEs is crucial.
Good to see India's economic leadership thinking this way. I work in tech in the US and I see how much Indian talent contributes to American innovation. The real question is: how do you get those people to build these things in India instead? More university-industry collaboration would help bridge this gap.
The 7% average growth is impressive given global conditions! But I'm slightly worried about the quality
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