Last week, Mint reported a Planning Commission proposal to get Indian industry to spend more on research and development. The aim is to get industry to double its share of R&D spending by the end of the 12th Five-Year Plan (2012-17). Officials said the measures include agreements where industry conceives and funds R&D projects and the government matches the investment financially. It will leverage government grants and other forms of funding to secure private financial flows and support a demand-driven R&D path, incentivizing industry to invest at least 2% of sales in research and facilitating foreign direct investment (FDI) in related activity.
India contributes around $15 billion annually (around Rs75,000 crore) to civilian research programmes and has a total R&D expenditure that’s less than that of several smaller Asian countries. Singapore spends more than 2% and South Korea 3% of gross domestic product on R&D. All of these seem well-intentioned, except that nothing seems to suggest if these measures will be different from failed attempts to establish a vibrant semiconductor industry or even a world-class, globally competitive electronics company. At the very core of innovative policy measures to stoke R&D ought to be a clear identification by the government of the kind of risks that it is ready to take on untested technologies and untried companies. Several scientists have pointed to the Antrix-Devas deal to show how minor bureaucratic infractions may have been aggregated to inflate an illusory “scam”. Though it is well within government’s prerogative to be suspicious of the antecedents of Devas, it has now effectively blocked any other firm from trying out similar technology using satellite spectrum by earmarking it for for “strategic and national” purposes.
Several entrepreneurs have frightening tales of being lost in the labyrinthine maze of the so-called general finance rules, which dictate how government loans and grants ought to be spent and accounted for. It isn’t surprising that while we may read of several enterprising ‘innovators’ and gifted engineers, almost all of our entrepreneurial successes are service-sector parvenus. Engineered products almost never grow beyond pupal promise and unless the government’s intention to take more risks and push its entrepreneurs is well laid out, the Planning Commission’s vision document will remain little more than glossy paper.
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