India’s Research And Development Conundrum : Historical Approach Analysis
India is far behind in research and development ( R and D ) activities. India’s R and D is just 0.7% of the Gross Domestic Product ( GDP ). USA, Israel, and South Korea, each having R and D more than 3% of their GDP.
Normally most global companies spend 3% on R and D against their sale. It is a global practice. But there are a few exceptions to it like Google, Apple and Samsung which spend more than 15% on R and D against their sales.
In the Indian scenario, there are only a few companies which spend 3% or more on their research activities. Most Indian companies spend on their R and D activities is less than 1% of their sales.
So, how will we explain this niggardness of Indian companies spending on R and D ? Are they have a shortage of funds to spend on R and D?
It has appeared that Indian companies do not have a shortage of funds to finance R and D activities. We can guess the surplus of funds with the companies through their balance sheet. So, we have to find the answer somewhere else. So, what could be the answer?
The first reason may be the risks associated with the R and D activities. When a company invest in R and D activities, there is no surety whether that investment will be paid off or not. So, R and D activities are always related to a huge investment loss. As Indian companies are mostly risk aversive, they do not take calls of risky investments of R and D.
The second reason may be that most of the present big businesses listed on the share market were earlier owned by trading people or communities. In trading, there are comparatively fewer risks. So, through generations, these trading people were habitual to avoid the risks. This is also reflected in the present-day generations’ business also.
To conclude, R and D is the issue of mindset and not the shortage of funds.