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The Indian government's recent approval of a $12 billion Research, Development, and Innovation (RDI) scheme marks a significant step towards transforming the nation's technology and electronics sectors. This ambitious initiative, aimed at bolstering indigenous innovation and reducing reliance on foreign technologies, addresses a long-standing need for India to move beyond mere assembly of consumer devices and cultivate its own foundational technology. The scheme, operating under the Anusandhan National Research Foundation (ANRF), proposes to finance R&D budgets of companies through a 'special purpose fund'. An investment committee, managed by ANRF's executive council, will oversee the allocation of funds, with a group of secretaries under the Cabinet secretary ensuring efficient management and distribution. This structured approach aims to provide targeted support to companies engaged in developing cutting-edge technologies, thereby fostering a robust ecosystem for innovation in India. The scope of the scheme is broad, encompassing companies working on diverse technological solutions, including green energy, biotechnology devices, pharmaceuticals, medical devices, artificial intelligence, and technologies catering to agriculture, health, and education. Furthermore, the scheme extends support to digital economy stakeholders such as financial services, deeptech applications like quantum computing, robotics, and space, and strategic technologies crucial for national security and public utilities. This comprehensive coverage reflects the government's commitment to fostering innovation across a wide spectrum of sectors, ensuring that India remains at the forefront of technological advancements. The necessity for such a scheme stems from India's current position as a secondary layer player in the global technology landscape. While India has made significant strides in building applications in AI, robotics, and other sectors, these applications often rely on foundational technologies patented by companies in the US, China, Japan, Korea, and the European Union. This dependence on foreign intellectual property leaves India vulnerable to economic sanctions and cyber warfare, as highlighted by the 2020 cyber-attack on Maharashtra's power grid during the Galwan Valley skirmish with China. The RDI scheme seeks to address this vulnerability by incentivizing the development of core patents and critical technology infrastructure within India, thereby strengthening the nation's technological sovereignty.
The inadequacy of R&D investment in India compared to global counterparts further underscores the need for the RDI scheme. While companies like Google invest almost 15% of their quarterly revenue in R&D, and private companies in China and Japan invest up to 5%, the median level of R&D investment in the Indian private sector is a paltry 0.6%. Even Tata Consultancy Services, India's largest technology firm, invests only 1.1% of its yearly revenue in R&D. The RDI scheme aims to rectify this imbalance by offering low-interest loans of up to 50 years to boost the R&D budgets of Indian private companies. This financial support is expected to catalyze a significant increase in R&D investment, leading to the development of innovative technologies and the creation of valuable intellectual property. The scheme's potential to transform India's electronics industry is immense. While companies like Dixon Technologies, Bhagwati Products, Kaynes Technology, Amber, and Bharat Foxconn International Holdings have been assembling electronic devices in India at scale, and Tata Electronics is expected to produce its first demonstrator chip by the end of next year, these activities primarily involve secondary innovation layers. India currently lacks ownership of semiconductor intellectual property (IP) and relies on US companies like AMD, Intel, Nvidia, and Qualcomm for chip reference designs. The RDI scheme aims to address this gap by encouraging the development of patented foundational technologies that are ready for domestic and international usage. These core electronics designs power not only consumer devices but also critical networking hardware, financial services, connected cars, power grids, smart oil rigs, and industrial infrastructure. By fostering the development of indigenous technologies, the RDI scheme will enhance India's resilience to potential conflicts and ensure the security of its critical infrastructure.
The RDI scheme's long-term goal is to replace technology infrastructure sourced from other countries with an indigenous stack. This indigenization process will take time, as building patents requires years of investing in research and creating technologies that are fundamentally unique and do not infringe upon existing IP. Furthermore, India will need to build the scale necessary to compete with the US and China in terms of manufacturing costs. However, the government's commitment to promoting indigenous technology development is evident in the RDI scheme's comprehensive approach, which includes financial support, streamlined regulations, and a focus on key sectors. The scheme is expected to create a vibrant ecosystem for innovation, attracting talent, fostering collaboration between industry and academia, and ultimately transforming India into a global technology powerhouse. The success of the RDI scheme hinges on effective execution. The government must ensure that the funds are allocated efficiently and transparently, and that the scheme is accessible to a wide range of companies, including startups and small and medium-sized enterprises (SMEs). Furthermore, the government must create a supportive regulatory environment that encourages innovation and protects intellectual property. By addressing these challenges, the RDI scheme can unlock India's immense potential for technological innovation and drive economic growth. The emphasis on interoperability with global tech infrastructure ensures that Indian technologies will not operate in isolation but will integrate seamlessly with the global technology ecosystem. This approach will enable India to leverage its strengths in software and services to develop innovative solutions that can be deployed globally. In conclusion, the RDI scheme represents a bold and ambitious initiative that has the potential to transform India's technology and electronics sectors. By fostering indigenous innovation, reducing reliance on foreign technologies, and creating a vibrant ecosystem for R&D, the scheme will strengthen India's technological sovereignty and drive economic growth.
Source: Mint Primer | How a $12 bn R&D scheme could change the way India makes technology