Governance
RDI Scheme for Private Sector R&D
- 03 Jul 2025
- 11 min read
For Prelims: Anusandhan National Research Foundation, Deep Tech, Intellectual Property, Semiconductor, Atal Innovation Mission, National Research Foundation, Corporate Social Responsibility, STEM Education, AI, IoT, Blockchain.
For Mains: Provisions of Research Development and Innovation (RDI) scheme, Role of private sector in R&D, associated challenges and ways to address them.
Why in News?
The Union Cabinet approved a Rs 1-lakh crore Research Development and Innovation (RDI) scheme that aims to incentivise the private sector to invest in basic research that would translate into innovative products and technologies.
What is the Research Development and Innovation (RDI) Scheme?
- About: It is an initiative of the Ministry of Science and Technology to boost private sector investment in basic and applied research to drive the development of innovative technologies and products.
- This is an exclusive fund designed for the private sector, in contrast to the Anusandhan National Research Foundation (ANRF), which primarily provides grants to academic institutions.
- Scope: It promotes R&D in sunrise and strategic sectors by reducing risk and providing concessional funding to private players. The funds will be utilized in four key ways:
- Promoting private R&D and innovation, especially in sunrise sectors such as biotechnology, robotics, drones, and climate change;
- Financing transformative projects aimed at achieving a higher level of technology readiness;
- Supporting the acquisition of critical or strategically important technologies; and
- Establishing a Deep Tech Fund of Funds as an alternative financing channel for startups in the deep tech sector.
- Administration & Governance: The Governing Board of the ANRF, chaired by the Prime Minister, will provide the overall strategic direction for the RDI Scheme, while the Department of Science and Technology will act as the nodal department for its implementation.
- A Special Purpose Fund (SPF) within the ANRF will serve as the custodian of funds, distributing mainly long-term concessional loans to second-level fund managers.
- These managers will finance R&D projects through low or zero-interest loans, offer equity support for start-ups, and may contribute to Deep-Tech or other RDI-focused Funds of Funds (FoFs).
- A Special Purpose Fund (SPF) within the ANRF will serve as the custodian of funds, distributing mainly long-term concessional loans to second-level fund managers.
- Funding Structure: The funds will be allocated through the Union Budget as a 50-year interest-free loan to the ANRF, which will be leveraged to create a multiplier effect.
- Funds will be provided only to products with a certain level of development and market potential, including high-risk TRL-4 (Technological Readiness Level -4) projects that often lack financial support.
Note
- India’s Gross Expenditure on R&D (GERD) increased from Rs 60,196 crore in 2011 to Rs 1.27 lakh crore in 2021, but remains low at 0.64% of GDP.
- The goal is for India’s private sector to eventually surpass government funding in basic research, as seen in advanced tech nations.
- India ranks 6th globally in patent filings, with 64,480 applications in 2023, a rise from 42,951 in 2013–14.
What are the Challenges Facing Private Sector Participation in R&D in India?
- Low R&D Spending by Private Sector: India’s industry invests only 0.2% of GDP in R&D, far below the US (2.7%), South Korea (3.9%), and UK (2.1%), as many businesses prioritise short-term gains over long-term research.
- Weak Industry-Academia Collaboration: Collaboration between academia and industry is hindered by a lack of trust and alignment, with universities often focused on theoretical research while businesses seek market-ready solutions.
- Additionally, disputes over Intellectual Property (IP) ownership further impede effective partnerships.
- Market & Funding Challenges: Low commercial viability, particularly in early-stage or deep-tech innovations, deters corporate investment.
- The “valley of death” phase (Technological Readiness Level 3–6)—when technologies move from lab to market—is often underfunded and abandoned.
- There is also an over-reliance on public funding (e.g., DST, MeitY schemes), while private firms face entry barriers in defense and strategic R&D, largely dominated by DRDO.
- Inadequate IP Protection & Enforcement: Lengthy patent approvals (3–6 years) and high litigation costs deter innovation, while weak enforcement causes revenue losses in sectors like pharma generics and software piracy.
- Shortage of Skilled R&D Talent: Brain drain continues as top researchers move abroad for better opportunities, while skill mismatch in areas like AI and advanced materials limit domestic R&D capacity.
- Additionally, the high cost of setting up advanced labs (e.g., semiconductor fabs, biotech labs) and limited access to government-funded infrastructure (e.g., CSIR labs) further restrict private sector R&D.
- Low-risk Appetite: Cultural barriers such as a fear of failure and hierarchical workplaces discourage risk-taking and stifle researcher creativity.
How can the Private Sector Spur Research and Innovation in India?
- Increased R&D Investment: India’s R&D spending is significantly lower than advanced economies like the US (3.46%), Japan (3.30%), Israel (5.56%), and South Korea (4.93%).
- Public-Private Partnerships (PPPs): Corporates can promote joint innovation funds in collaboration with the government (e.g., Atal Innovation Mission, National Research Foundation) to drive R&D.
- They can also support startups by investing in technology incubators (e.g., T-Hub, C-CAMP) and partnering with corporate accelerators (e.g., Microsoft for Startups, Google Launchpad).
- Corporate Venture Capital (CVC): Corporates can invest in deep-tech startups (AI, biotech, quantum, space tech) and provide mentorship, funding, and global market access to accelerate innovation and scale.
- Incentivizing Innovation: Corporates can incentivize innovation by establishing in-house innovation labs focused on disruptive technologies, and by encouraging employees to file patents, following examples like Wipro, HCL, and Biocon in IP creation.
- Mandate a portion of Corporate Social Responsibility (CSR) funds for STEM education, rural innovation, and grassroots R&D.
- Adoption of Emerging Technologies: Private sector can promote the adoption of emerging technologies like AI, IoT, and Blockchain in key sectors (e.g., agriculture, healthcare, logistics).
Conclusion
The Rs 1-lakh crore RDI Scheme is a transformative initiative to bridge India’s innovation gap by incentivising private R&D. With strategic funding, deep-tech focus, and institutional support, it aims to catalyse a research-driven economy. Private sector participation, however, must be reinforced through reforms, partnerships, and an innovation-friendly ecosystem.
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Drishti Mains Question: Q. What is the role of the private sector in achieving India’s innovation goals? Examine in the context of the RDI Scheme. |
UPSC Civil Services Examination, Previous Year Question (PYQ)
Prelims
Q. Which of the following statements is/are correct regarding National Innovation Foundation-India (NIF)? (2015)
- NIF is an autonomous body of the Department of Science and Technology under the Central Government.
- NIF is an initiative to strengthen the highly advanced scientific research in India’s premier scientific institutions in collaboration with highly advanced foreign scientific institutions.Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (a)
Mains
Q. Scientific research in Indian universities is declining, because a career in science is not as attractive as are business professions, engineering or administration, and the universities are becoming consumer-oriented. Critically comment. (2014)
